Economics is the study of how individuals, businesses, and governments use limited resources to satisfy unlimited human wants. It helps students understand production, distribution, consumption, and decision-making in society. This economics quiz is designed to test your knowledge of basic economic concepts and improve your preparation for examinations.
Economics Quiz (60 Questions)
1. Economics is best defined as the study of:
A. Money only
B. Wealth only
C. Scarcity and choice
D. Banking
2. Scarcity means:
A. Resources are unlimited
B. Wants are limited
C. Resources are limited in relation to wants
D. Goods are free
3. Opportunity cost is:
A. Cost of production
B. Cost of labour
C. Value of the next best alternative
D. Price of goods
4. The basic economic problem is:
A. Inflation
B. Poverty
C. Scarcity
D. Unemployment
5. Demand refers to:
A. Desire for goods
B. Ability to buy goods
C. Willingness and ability to buy goods at a given price
D. Supply of goods
Economics Quiz
6. Supply means:
A. Production only
B. Total stock of goods
C. Quantity of goods producers are willing to sell at a given price
D. Storage of goods
7. The law of demand states that:
A. Demand rises with price
B. Demand falls as price rises
C. Price falls as demand falls
D. Demand is constant
8. The law of supply states that:
A. Supply falls with price
B. Supply rises as price rises
C. Price is constant
D. Supply is fixed
9. Inflation means:
A. Fall in prices
B. Rise in general price level
C. Stability of prices
D. Increase in wages
10. Deflation refers to:
A. Increase in prices
B. Stability of prices
C. Fall in general price level
D. Increase in money supply
Economics Quiz
11. A market is best described as:
A. A physical place only
B. A shopping mall
C. Any arrangement for buying and selling
D. A warehouse
12. Production means:
A. Buying goods
B. Selling goods
C. Creation of utility
D. Advertising goods
13. Capital in economics refers to:
A. Money only
B. Tools and machines used for production
C. Land
D. Labour
14. Labour refers to:
A. All workers
B. Physical effort only
C. Human effort used in production
D. Employers
15. Land as a factor of production means:
A. Farmland only
B. Natural resources
C. Buildings
D. Roads
Economics Quiz
16. Entrepreneurship is the ability to:
A. Teach students
B. Organize production and take risks
C. Provide labour
D. Supply land
17. Public goods are goods that are:
A. Sold in markets
B. Consumed by individuals only
C. Provided by government for all
D. Imported
18. A budget is:
A. A law
B. A financial plan
C. A market system
D. A bank rule
19. Savings means:
A. Spending all income
B. Keeping money for future use
C. Paying tax
D. Borrowing money
20. A monopoly is a market where there is:
A. Many sellers
B. Few sellers
C. One seller
D. Many buyers
Advanced Economics Quiz
21. Oligopoly is a market dominated by
A. One seller
B. Few sellers
C. Many sellers
D. Many buyers
22. Price elasticity of demand measures
A. How supply responds to price changes
B. How quantity demanded responds to price changes
C. How income affects supply
D. How demand is constant
23. A mixed economy is one that
A. Is controlled entirely by government
B. Is entirely private
C. Combines private and public ownership
D. Has no government involvement
24. Marginal cost refers to
A. Total cost of production
B. Extra cost of producing one more unit
C. Cost of labor only
D. Price of goods
25. Marginal revenue is the
A. Revenue from all sales
B. Extra revenue from selling one more unit
C. Cost of production
D. Profit only
Advanced Economics Quiz
26. Inflation can be caused by
A. Increase in money supply
B. Fall in demand
C. Reduction in wages
D. Deflation
27. Deflation occurs when
A. Prices rise rapidly
B. Prices fall generally
C. Demand increases
D. Money supply increases
28. Consumer surplus is
A. Extra price paid by consumers
B. Difference between what consumers are willing to pay and what they actually pay
C. Loss incurred by consumers
D. Total income of producers
29. Producer surplus is
A. Difference between price received and minimum price producers are willing to accept
B. Total revenue of government
C. Loss in production
D. Total cost of production
30. Gross Domestic Product (GDP) measures
A. Total income of a country in a year
B. Total population
C. Price of goods
D. Money supply
Advanced Economics Quiz
31. Nominal GDP differs from real GDP because
A. Nominal includes inflation
B. Real includes inflation
C. Both are the same
D. Nominal measures only money supply
32. Unemployment refers to
A. People who have jobs
B. People without jobs but actively seeking work
C. Students
D. Retired people
33. Fiscal policy involves
A. Government borrowing and spending
B. Private investments only
C. Central bank lending
D. Price control by businesses
34. Monetary policy involves
A. Government setting wages
B. Central bank controlling money supply and interest rates
C. Trade restrictions
D. Taxes only
35. A budget deficit occurs when
A. Government revenue equals expenditure
B. Expenditure exceeds revenue
C. Revenue exceeds expenditure
D. Money supply is low
36. A budget surplus occurs when
A. Expenditure exceeds revenue
B. Revenue exceeds expenditure
C. Government prints money
D. Prices fall
37. The law of diminishing returns states that
A. Adding more of a factor increases total output indefinitely
B. Adding more of a factor eventually increases output at a decreasing rate
C. Production is fixed
D. Output decreases immediately
38. Specialization in production leads to
A. Lower efficiency
B. Increased efficiency and productivity
C. Reduced output
D. Higher costs
39. Division of labor is
A. Working alone
B. Breaking production into smaller tasks for efficiency
C. Hiring fewer workers
D. Selling products
40. Trade between countries is called
A. Home trade
B. Foreign trade
C. Retail trade
D. Wholesale trade
Advanced Economics Quiz
41. Balance of trade measures
A. Difference between imports and exports
B. Total production of a country
C. Government revenue
D. Prices of goods
42. Tariff is a
A. Tax on imports or exports
B. Subsidy
C. Price control
D. Wage
43. Quota refers to
A. Limit on quantity of goods imported or exported
B. Total imports
C. Subsidy
D. Tax
44. Exchange rate is
A. Price of one country’s currency in terms of another
B. Bank interest rate
C. Cost of imports
D. Wage level
45. Demand-pull inflation occurs when
A. Prices fall
B. Aggregate demand exceeds aggregate supply
C. Supply increases
D. Government controls prices
46. Cost-push inflation occurs when
A. Prices rise due to increase in production costs
B. Prices fall
C. Demand decreases
D. Government prints money
47. Real income refers to
A. Income measured in money terms
B. Income adjusted for inflation
C. Total revenue of producers
D. Budget surplus
48. Disposable income is
A. Total income of a country
B. Income available to households after taxes
C. Profit of firms
D. Government revenue
49. Externalities are
A. Costs or benefits affecting third parties not involved in a transaction
B. Total costs
C. Prices of goods
D. Money supply
50. Positive externality refers to
A. Cost to society
B. Benefit to third parties
C. Loss to producer
D. Price rise
Advanced Economics Quiz
51. Negative externality refers to
A. Benefit to society
B. Cost to third parties
C. Profit to producer
D. Government revenue
52. Market equilibrium occurs when
A. Quantity demanded equals quantity supplied
B. Supply exceeds demand
C. Demand exceeds supply
D. Prices are fixed
53. Surplus in a market occurs when
A. Quantity demanded exceeds quantity supplied
B. Quantity supplied exceeds quantity demanded
C. Prices fall
D. Prices rise
54. Shortage in a market occurs when
A. Quantity demanded exceeds quantity supplied
B. Quantity supplied exceeds quantity demanded
C. Prices are fixed
D. Prices rise
55. Elastic demand means
A. Demand changes a lot with price change
B. Demand is constant
C. Demand decreases slowly
D. Supply changes
Advanced Economics Quiz
56. Inelastic demand means
A. Demand changes little with price change
B. Demand increases rapidly
C. Supply changes
D. Prices are constant
57. Perfect competition is characterized by
A. Many sellers and identical products
B. One seller
C. Few sellers
D. Differentiated products
58. Monopoly is characterized by
A. One seller
B. Many sellers
C. Few sellers
D. Perfect information
59. Oligopoly is characterized by
A. Few sellers
B. One seller
C. Many sellers
D. Perfect competition
60. Public expenditure refers to
A. Spending by households
B. Spending by government on goods and services
C. Private investment
D. Imports only
Answers and Explanations
Advanced Economics Quiz answers and explanations:
1. C – Scarcity and choice
Economics studies how people and societies make choices because resources are limited while human wants are unlimited. It explains how individuals decide what to produce, consume, and distribute to achieve maximum satisfaction.
2. C – Resources are limited in relation to wants
Scarcity exists because available resources cannot satisfy all human needs. This forces individuals and governments to make careful choices about how to use resources effectively.
3. C – Value of the next best alternative
Opportunity cost refers to what is given up when one choice is made instead of another. It helps people understand the real cost of their decisions.
4. C – Scarcity
The basic economic problem is scarcity. Since resources are limited, societies must decide what to produce, how to produce, and for whom to produce.
5. C – Willingness and ability to buy goods
Demand involves both desire and purchasing power. A person who wants a product but cannot afford it does not create effective demand.
6. C – Quantity producers are willing to sell
Supply refers to the amount of goods producers are ready to offer for sale at various prices within a given period.
7. B – Demand falls as price rises
According to the law of demand, consumers buy less when prices rise and more when prices fall, assuming other factors remain constant.
8. B – Supply rises as price rises
Producers are encouraged to supply more goods when prices increase because higher prices bring higher profits.
9. B – Rise in general price level
Inflation is a continuous increase in prices of goods and services. It reduces the purchasing power of money over time.
10. C – Fall in general price level
Deflation is a general decrease in prices. It can discourage production and investment because profits become uncertain.
11. C – Any arrangement for buying and selling
A market does not have to be a physical place. It includes all systems through which buyers and sellers communicate and exchange goods.
12. C – Creation of utility
Production means creating usefulness in goods and services. This includes making, transporting, storing, and selling products.
13. B – Tools and machines
Capital refers to artificial goods used in production, such as machines, equipment, and factories, not money itself.
14. C – Human effort used in production
Labour includes both physical and mental efforts used in producing goods and services.
15. B – Natural resources
Land refers to all natural gifts such as soil, rivers, forests, and minerals used in production.
16. B – Organize production and take risks
Entrepreneurs combine other factors of production and take risks in business to make profits.
17. C – Provided by government for all
Public goods are enjoyed by everyone and cannot be restricted to individuals, such as roads, security, and street lighting.
18. B – A financial plan
A budget shows expected income and expenditure for a period. It helps individuals and governments manage resources wisely.
19. B – Keeping money for future use
Savings involve setting aside part of income for future needs, emergencies, or investment purposes.
20. C – One seller
A monopoly exists when one firm controls the supply of a product. This allows it to influence prices in the market.
21. B. Few sellers – Oligopoly is a market dominated by a small number of sellers, each of whom can influence prices and market outcomes.
22. B. How quantity demanded responds to price changes – Price elasticity of demand measures the responsiveness of the quantity demanded when the price of a good changes.
23. C. Combines private and public ownership – A mixed economy includes both government intervention and private enterprise in production and distribution.
24. B. Extra cost of producing one more unit – Marginal cost is the additional cost incurred by producing one additional unit of a good or service.
25. B. Extra revenue from selling one more unit – Marginal revenue is the additional income a firm earns from selling an extra unit of output.
26. A. Increase in money supply – Inflation can be caused by excessive money in circulation relative to available goods and services.
27. B. Prices fall generally – Deflation occurs when the general level of prices in an economy decreases over time.
28. B. Difference between what consumers are willing to pay and what they actually pay – Consumer surplus represents the extra benefit or satisfaction consumers receive from paying less than they are willing to pay.
29. A. Difference between price received and minimum price producers are willing to accept – Producer surplus measures the benefit producers get by selling at a higher price than the minimum they would accept.
30. A. Total income of a country in a year – GDP measures the total monetary value of all final goods and services produced within a country over a specific period.
31. A. Nominal includes inflation – Nominal GDP is measured at current prices without adjusting for inflation, whereas real GDP is adjusted for price changes.
32. B. People without jobs but actively seeking work – Unemployment refers to the portion of the labor force that is willing and able to work but cannot find employment.
33. A. Government borrowing and spending – Fiscal policy involves government decisions on taxation and spending to influence economic activity.
34. B. Central bank controlling money supply and interest rates – Monetary policy uses tools like interest rates and reserve requirements to manage the economy’s money supply.
35. B. Expenditure exceeds revenue – A budget deficit happens when a government spends more than it earns in revenue.
36. B. Revenue exceeds expenditure – A budget surplus occurs when government revenue is greater than expenditure.
37. B. Adding more of a factor eventually increases output at a decreasing rate – The law of diminishing returns states that after a certain point, adding more of a variable input yields progressively smaller increases in output.
38. B. Increased efficiency and productivity – Specialization allows workers or firms to focus on specific tasks, increasing productivity and efficiency.
39. B. Breaking production into smaller tasks for efficiency – Division of labor involves assigning specific tasks to workers to increase efficiency and output.
40. B. Foreign trade – Trade between countries, involving exports and imports, is called foreign trade.
41. A. Difference between imports and exports – Balance of trade measures whether a country exports more than it imports (surplus) or imports more than it exports (deficit).
42. A. Tax on imports or exports – A tariff is a government-imposed tax on imported or exported goods to regulate trade and protect domestic industries.
43. A. Limit on quantity of goods imported or exported – A quota restricts the amount of a product that can be traded internationally, often to protect local industries.
44. A. Price of one country’s currency in terms of another – The exchange rate determines how much one country’s currency is worth relative to another’s.
45. B. Aggregate demand exceeds aggregate supply – Demand-pull inflation happens when overall demand in the economy exceeds total supply, pushing prices up.
46. A. Prices rise due to increase in production costs – Cost-push inflation occurs when rising costs of production lead firms to increase prices.
47. B. Income adjusted for inflation – Real income shows the purchasing power of income after removing the effects of inflation.
48. B. Income available to households after taxes – Disposable income is the amount households can spend or save after paying taxes.
49. A. Costs or benefits affecting third parties not involved in a transaction – Externalities are unintended side effects (positive or negative) on third parties from economic activities.
50. B. Benefit to third parties – Positive externalities provide advantages to society or third parties, such as education or vaccination programs.
51. B. Cost to third parties – Negative externalities impose costs on others not involved in the production or consumption, such as pollution.
52. A. Quantity demanded equals quantity supplied – Market equilibrium is the point where demand and supply balance, and there is no tendency for price to change.
53. B. Quantity supplied exceeds quantity demanded – A surplus occurs when producers supply more than consumers are willing to buy at a given price.
54. A. Quantity demanded exceeds quantity supplied – A shortage occurs when demand exceeds supply, often causing prices to rise.
55. A. Demand changes a lot with price change – Elastic demand means consumers are highly responsive to price changes.
56. A. Demand changes little with price change – Inelastic demand indicates that price changes have little effect on the quantity demanded.
57. A. Many sellers and identical products – Perfect competition is characterized by numerous sellers offering homogeneous goods with no single seller able to influence price.
58. A. One seller – Monopoly exists when a single firm controls the entire supply of a product in the market.
59. A. Few sellers – Oligopoly describes a market dominated by a small number of firms whose actions affect each other.
60. B. Spending by government on goods and services – Public expenditure refers to government spending aimed at providing services and promoting economic welfare.
RELATED ARTICLES