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web.groovymark@gmail.com
- December 7, 2024
Question 01
What is the marginal cost?
a) The cost of producing one more unit of a good
b) The total cost divided by the quantity of output
c) The cost of all inputs used in production
d) The difference between fixed and variable costs
Answer: a) The cost of producing one more unit of a good
Explanation: Marginal cost is the additional cost incurred when producing one more unit of a good, calculated by the change in total cost divided by the change in output.
Question 02
What is the definition of opportunity cost?
a) The monetary cost of a decision
b) The value of the next best alternative foregone when making a choice
c) The total cost of all possible alternatives
d) The amount of money saved by making a particular decision
Answer: b) The value of the next best alternative foregone when making a choice
Explanation: Opportunity cost refers to the benefits or value that must be given up to choose one option over another.
Question 03
What is the meaning of inelastic demand?
a) Demand is highly responsive to price changes
b) Demand remains unchanged regardless of price changes
c) Demand is relatively unresponsive to price changes
d) Demand fluctuates with changes in income
Answer: c) Demand is relatively unresponsive to price changes
Explanation: Inelastic demand means that consumers' quantity demanded does not change significantly when prices change, often because the good is a necessity or has few substitutes.
Question 04
What is a price ceiling?
a) A legal minimum price for a good or service
b) A government-imposed limit on how high a price can be charged for a good or service
c) The price that clears the market
d) A maximum price set by the producer
Answer: b) A government-imposed limit on how high a price can be charged for a good or service
Explanation: Price ceilings prevent prices from rising above a certain level, often used to make essential goods more affordable but can lead to shortages.
Question 05
What does the law of diminishing returns state?
a) As more of a variable input is added to a fixed input, the additional output will increase at a constant rate
b) As more of a variable input is added to a fixed input, the additional output will eventually decrease
c) Output will always increase when more inputs are used
d) Output remains unchanged regardless of input levels
Answer: b) As more of a variable input is added to a fixed input, the additional output will eventually decrease
Explanation: The law of diminishing returns suggests that adding more of one input, while keeping others constant, will eventually result in smaller increases in output.
Question 06
What is the difference between short-run and long-run in economics?
a) In the short-run, all factors of production are variable, while in the long-run, only labor is variable
b) In the short-run, only some factors of production are variable, while in the long-run, all factors of production are variable
c) In the long-run, firms face no competition
d) In the short-run, firms face no fixed costs
Answer: b) In the short-run, only some factors of production are variable, while in the long-run, all factors of production are variable
Explanation: In the short run, at least one factor of production is fixed (e.g., capital), while in the long run, all inputs can be adjusted.
Question 07
What does the term “ceteris paribus” mean in economics?
a) The relationship between price and quantity supplied
b) The law of increasing opportunity costs
c) Holding all other variables constant while examining one specific variable
d) A situation where all factors of production are utilized
Answer: c) Holding all other variables constant while examining one specific variable
Explanation: Ceteris paribus is a Latin phrase meaning "all other things being equal," used to isolate the effect of one variable while holding others constant.
Question 08
What is an externality?
a) A cost or benefit that affects parties who are not involved in a transaction
b) A tax imposed on goods and services
c) A government policy that regulates supply
d) A company’s external audit of financial statements
Answer: a) A cost or benefit that affects parties who are not involved in a transaction
Explanation: Externalities occur when a third party is affected by an economic activity, such as pollution from a factory impacting local residents.
Question 09
What is the natural rate of unemployment?
a) The unemployment rate during periods of economic recession
b) The level of unemployment consistent with stable inflation
c) The rate of unemployment caused by cyclical downturns
d) The unemployment rate when inflation is zero
Answer: b) The level of unemployment consistent with stable inflation
Explanation: The natural rate of unemployment includes frictional and structural unemployment, reflecting the long-term equilibrium in the labor market.
Question 10
What is the primary purpose of the World Trade Organization (WTO)?
a) To regulate currency exchange rates
b) To promote free trade and resolve trade disputes between countries
c) To control international oil prices
d) To lend money to developing nations
Answer: b) To promote free trade and resolve trade disputes between countries
Explanation: The WTO facilitates global trade by helping countries negotiate trade agreements and resolve disputes that arise in international commerce.
Question 11
What is meant by human capital?
a) The total number of workers in an economy
b) The physical capital used in production
c) The knowledge, skills, and experience possessed by workers
d) The amount of money invested in a business
Answer: c) The knowledge, skills, and experience possessed by workers
Explanation: Human capital refers to the education, skills, and expertise that workers bring to their jobs, which can improve productivity and economic growth.
Question 12
What is fiscal policy?
a) Government policy that involves changes in interest rates
b) Government spending and tax policies used to influence the economy
c) Policies aimed at reducing the money supply
d) Regulations that control international trade
Answer: b) Government spending and tax policies used to influence the economy
Explanation: Fiscal policy refers to the use of government spending and taxation to influence the economy, often to control inflation, reduce unemployment, or stimulate growth.
Question 13
What is a progressive tax?
a) A tax that decreases as income increases
b) A tax where everyone pays the same percentage of their income
c) A tax that increases as income increases
d) A tax on the sale of goods and services
Answer: c) A tax that increases as income increases
Explanation: In a progressive tax system, higher-income individuals pay a larger percentage of their income in taxes compared to lower-income individuals.
Question 14
What is the function of the Federal Reserve?
a) To regulate trade with foreign countries
b) To manage the money supply and control inflation
c) To set tax rates for businesses and individuals
d) To make fiscal policy decisions
Answer: b) To manage the money supply and control inflation
Explanation: The Federal Reserve, the central bank of the United States, uses tools like interest rates and open market operations to regulate the money supply and control inflation.
Question 15
What is the difference between nominal and real GDP?
a) Nominal GDP is adjusted for inflation, while real GDP is not
b) Nominal GDP includes exports, while real GDP does not
c) Real GDP is adjusted for inflation, while nominal GDP is not
d) Real GDP only measures goods, while nominal GDP measures services
Answer: c) Real GDP is adjusted for inflation, while nominal GDP is not
Explanation: Real GDP accounts for changes in price levels by adjusting for inflation, giving a more accurate measure of an economy's output over time.
Question 16
What is the purpose of an import tariff?
a) To decrease the price of imported goods
b) To protect domestic industries by making foreign goods more expensive
c) To encourage exports to foreign markets
d) To increase the quantity of imports
Answer: b) To protect domestic industries by making foreign goods more expensive
Explanation: Import tariffs are taxes on imported goods designed to make foreign products more expensive, helping to protect domestic producers from competition.
Question 17
What is perfect competition?
a) A market structure where many firms produce identical products, and no single firm has market control
b) A market dominated by one seller that controls prices
c) A market where a few firms control the majority of market share
d) A market where consumers set the prices of goods
Answer: a) A market structure where many firms produce identical products, and no single firm has market control
Explanation: In perfect competition, many firms sell identical products, and all firms are price takers with no ability to influence the market price.
Question 18
What happens to the equilibrium price when demand increases and supply remains constant?
a) The equilibrium price decreases
b) The equilibrium price remains the same
c) The equilibrium price increases
d) The equilibrium price fluctuates unpredictably
Answer: c) The equilibrium price increases
Explanation: When demand increases and supply remains constant, the equilibrium price rises as more consumers are willing to pay higher prices for the same quantity of goods.
Question 19
What is an oligopoly?
a) A market structure where many firms compete with identical products
b) A market structure dominated by a few large firms that control prices
c) A market where one firm controls the entire supply
d) A market where consumers have complete control over prices
Answer: b) A market structure dominated by a few large firms that control prices
Explanation: In an oligopoly, a small number of large firms dominate the market, often leading to price setting and reduced competition.
Question 20
What is inflation?
a) A general decrease in the price level of goods and services
b) A steady increase in wages over time
c) A sustained increase in the overall price level of goods and services
d) A temporary fluctuation in prices due to supply shocks
Answer: c) A sustained increase in the overall price level of goods and services
Explanation: Inflation is the rate at which the general level of prices for goods and services rises, eroding purchasing power over time.
