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Economics MCQs with Answers

Economics MCQs

Welcome to the Economics MCQs with Answers. In this post, we have shared a Economics Online Test for different competitive exams. Find practice questions with answers of the Economics test online multiple choice questions with answers here. Each question offers a chance to enhance your knowledge regarding Economics.

Which of the following is considered a factor of production?
a) Money
b) Labor
c) Technology
d) Infrastructure

Answer
b) Labor

What does GDP stand for?
a) Gross Domestic Product
b) Global Development Plan
c) Gross Domestic Pricing
d) General Domestic Product

Answer
a) Gross Domestic Product

What is the primary function of the Central Bank?
a) To print money
b) To regulate the stock market
c) To manage the nation’s monetary policy
d) To collect taxes

Answer
c) To manage the nation’s monetary policy

The law of demand states that, other things being equal:
a) As price increases, demand increases
b) As price decreases, demand decreases
c) As price increases, demand decreases
d) Price and demand are unrelated

Answer
c) As price increases, demand decreases

What is inflation?
a) A general decrease in prices
b) A general increase in prices
c) An increase in the value of currency
d) A decrease in the supply of money

Answer
b) A general increase in prices

What is the opportunity cost?
a) The cost of an alternative that must be forgone
b) The cost of producing a good
c) The cost of labor
d) The cost of raw materials

Answer
a) The cost of an alternative that must be forgone

What is the main purpose of a tariff?
a) To increase exports
b) To protect domestic industries
c) To balance the budget
d) To reduce inflation

Answer
b) To protect domestic industries

In a perfectly competitive market, the products sold by different firms are:
a) Heterogeneous
b) Unique
c) Identical
d) Differentiated

Answer
c) Identical

What is a monopoly?
a) A market with many sellers
b) A market with one seller
c) A market with one buyer
d) A market with many buyers

Answer
b) A market with one seller

What does ‘marginal cost’ refer to?
a) The cost of producing one additional unit of a good
b) The cost of the first unit produced
c) The average cost of all units produced
d) The cost of raw materials

Answer
a) The cost of producing one additional unit of a good

Which of the following is a characteristic of a mixed economy?
a) Only private ownership
b) Only government ownership
c) Both private and government ownership
d) No ownership

Answer
c) Both private and government ownership

What is a budget deficit?
a) When government revenues exceed expenditures
b) When government expenditures exceed revenues
c) When government revenues equal expenditures
d) When the government borrows money

Answer
b) When government expenditures exceed revenues

What is the purpose of fiscal policy?
a) To control inflation
b) To manage the money supply
c) To regulate taxes and government spending
d) To control interest rates

Answer
c) To regulate taxes and government spending

Which of the following is an example of a public good?
a) A private car
b) National defense
c) A restaurant meal
d) A television set

Answer
b) National defense

What does the term ‘elasticity’ in economics refer to?
a) The flexibility of prices
b) The responsiveness of quantity demanded or supplied to changes in price
c) The stability of demand
d) The growth of the economy

Answer
b) The responsiveness of quantity demanded or supplied to changes in price

What is a progressive tax?
a) A tax that takes a larger percentage from low-income earners
b) A tax that takes the same percentage from all income levels
c) A tax that takes a larger percentage from high-income earners
d) A tax that takes a fixed amount from everyone

Answer
c) A tax that takes a larger percentage from high-income earners

What is the purpose of monetary policy?
a) To control government spending
b) To regulate the money supply and interest rates
c) To increase taxes
d) To reduce unemployment

Answer
b) To regulate the money supply and interest rates

What does the term ‘aggregate demand’ refer to?
a) The total demand for a specific good
b) The total demand for goods and services in an economy
c) The demand for public goods
d) The demand from a single consumer

Answer
b) The total demand for goods and services in an economy

Which of the following is an example of an oligopoly?
a) The agricultural market
b) The automobile industry
c) The retail market
d) The oil industry

Answer
b) The automobile industry

What is meant by ‘perfect competition’?
a) A market with no competition
b) A market with only one seller
c) A market with many sellers offering identical products
d) A market with a few large firms

Answer
c) A market with many sellers offering identical products

What is the meaning of ‘demand curve’?
a) It shows the relationship between price and quantity demanded
b) It shows the relationship between supply and demand
c) It shows the relationship between price and supply
d) It shows the relationship between cost and profit

Answer
a) It shows the relationship between price and quantity demanded

What is ‘consumer surplus’?
a) The difference between what consumers are willing to pay and what they actually pay
b) The excess supply in the market
c) The total revenue of sellers
d) The profit earned by producers

Answer
a) The difference between what consumers are willing to pay and what they actually pay

What does ‘laissez-faire’ economics advocate?
a) Government intervention in the market
b) Free market with minimal government intervention
c) Government control of all economic activity
d) A mixed economy

Answer
b) Free market with minimal government intervention

What is ‘fiscal policy’?
a) The use of government spending and taxation to influence the economy
b) The regulation of the money supply
c) The control of interest rates
d) The management of public debt

Answer
a) The use of government spending and taxation to influence the economy

What is a ‘recession’?
a) A period of rapid economic growth
b) A period of temporary economic decline
c) A period of high inflation
d) A period of high employment

Answer
b) A period of temporary economic decline

What is ‘comparative advantage’?
a) The ability of a country to produce more of a good than another country
b) The ability of a country to produce a good at a lower opportunity cost than another country
c) The advantage a country has in trade negotiations
d) The ability of a country to produce goods at a higher quality

Answer
b) The ability of a country to produce a good at a lower opportunity cost than another country

What is the primary goal of a firm in a market economy?
a) To produce goods and services
b) To maximize profit
c) To create jobs
d) To minimize costs

Answer
b) To maximize profit

What does the term ‘monopolistic competition’ describe?
a) A market with only one seller
b) A market with a few large firms
c) A market with many sellers offering differentiated products
d) A market with many sellers offering identical products

Answer
c) A market with many sellers offering differentiated products

What is the ‘law of supply’?
a) As price decreases, supply decreases
b) As price increases, supply decreases
c) As price increases, supply increases
d) Price and supply are unrelated

Answer
c) As price increases, supply increases

What is meant by ‘price elasticity of demand’?
a) The sensitivity of quantity demanded to changes in price
b) The sensitivity of supply to changes in price
c) The flexibility of prices
d) The stability of demand

Answer
a) The sensitivity of quantity demanded to changes in price

Which of the following is an example of a regressive tax?
a) Income tax
b) Sales tax
c) Property tax
d) Corporate tax

Answer
b) Sales tax

What is a ‘trade deficit’?
a) When a country exports more than it imports
b) When a country imports more than it exports
c) When a country’s currency is devalued
d) When a country has no international trade

Answer
b) When a country imports more than it exports

What does ‘gross national product’ (GNP) include?
a) The value of all goods and services produced within a country
b) The value of all goods and services produced by a country’s residents, regardless of location
c) The total value of exports
d) The value of government spending

Answer
b) The value of all goods and services produced by a country’s residents, regardless of location

What is ‘hyperinflation’?
a) A slow increase in prices
b) A rapid and out-of-control increase in prices
c) A period of falling prices
d) A situation where prices remain stable

Answer
b) A rapid and out-of-control increase in prices

What is a ‘capital good’?
a) A good that is consumed by individuals
b) A good used in the production of other goods and services
c) A financial asset
d) A good that is sold internationally

Answer
b) A good used in the production of other goods and services

What is ‘economic equilibrium’?
a) A situation where supply exceeds demand
b) A situation where demand exceeds supply
c) A situation where supply equals demand
d) A situation where prices are falling

Answer
c) A situation where supply equals demand

What is ‘depreciation’ in economics?
a) The increase in the value of an asset
b) The decrease in the value of an asset over time
c) The loss of economic productivity
d) The reduction in the supply of money

Answer
b) The decrease in the value of an asset over time

What does ‘marginal utility’ refer to?
a) The total satisfaction received from consuming a good
b) The additional satisfaction received from consuming one more unit of a good
c) The satisfaction received from producing a good
d) The utility of the last unit consumed

Answer
b) The additional satisfaction received from consuming one more unit of a good

What is ‘gross profit’?
a) Total revenue minus total costs
b) Total revenue minus variable costs
c) Total revenue minus fixed costs
d) Total revenue minus cost of goods sold

Answer
d) Total revenue minus cost of goods sold

What does the term ‘economies of scale’ mean?
a) The cost advantages that a business obtains due to expansion
b) The increase in costs due to business growth
c) The reduction in total revenue
d) The loss of profitability in a business

Answer
a) The cost advantages that a business obtains due to expansion

What is ‘structural unemployment’?
a) Unemployment due to seasonal work
b) Unemployment due to the business cycle
c) Unemployment due to technological change or other structural changes in the economy
d) Unemployment due to voluntary job changes

Answer
c) Unemployment due to technological change or other structural changes in the economy

What is ‘nominal GDP’?
a) GDP adjusted for inflation
b) GDP measured at current market prices
c) GDP of a nominal economy
d) GDP of a developing economy

Answer
b) GDP measured at current market prices

What is ‘frictional unemployment’?
a) Unemployment caused by the time taken to find a new job
b) Unemployment due to economic downturn
c) Unemployment due to changes in industry structure
d) Unemployment caused by automation

Answer
a) Unemployment caused by the time taken to find a new job

What is ‘perfectly inelastic demand’?
a) Demand that does not change with price
b) Demand that increases with price
c) Demand that decreases with price
d) Demand that fluctuates with supply

Answer
a) Demand that does not change with price

What is ‘derived demand’?
a) Demand for a good that is derived from the demand for another good
b) Demand that is artificially created
c) Demand that is inelastic
d) Demand for a non-essential good

Answer
a) Demand for a good that is derived from the demand for another good

What does ‘price ceiling’ mean?
a) The minimum price set by the government for a good or service
b) The maximum price set by the government for a good or service
c) The equilibrium price in a market
d) The natural price of a good or service

Answer
b) The maximum price set by the government for a good or service

What is a ‘transfer payment’?
a) A payment made by the government to individuals without any goods or services being received in return
b) A payment for goods or services provided
c) A loan from the government
d) A payment made by businesses to government

Answer
a) A payment made by the government to individuals without any goods or services being received in return

What is ‘income elasticity of demand’?
a) The responsiveness of demand to changes in income
b) The responsiveness of supply to changes in income
c) The flexibility of prices due to changes in income
d) The relationship between demand and supply

Answer
a) The responsiveness of demand to changes in income

What is ‘market equilibrium’?
a) A situation where supply exceeds demand
b) A situation where demand exceeds supply
c) A situation where supply equals demand at a certain price
d) A situation where prices are falling

Answer
c) A situation where supply equals demand at a certain price

What does ‘monopsony’ describe?
a) A market with many sellers
b) A market with only one buyer
c) A market with a few large buyers
d) A market with identical products

Answer
b) A market with only one buyer

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