Introduction to Economics and Basic Concepts MCQs 2026

A point outside the PPF is

1. Aunattainable with current resources and technology✓
2. Balways efficient✓
3. Calways preferred by consumers✓
4. Dthe only equilibrium✓

A point inside the PPF indicates

1. Afull employment and efficiency✓
2. Bunemployment or inefficient use of resources✓
3. Cimpossible production✓
4. Dmaximum growth always✓

Movement along the PPF illustrates

1. Aopportunity cost of producing more of one good✓
2. Ba change in tastes only✓
3. Cinflation of money✓
4. Dgovernment deficits only✓

An outward shift of the PPF can result from

1. Ahigher unemployment only✓
2. Beconomic growth via more resources or better technology✓
3. Ca fall in labour force always✓
4. Ddestruction of capital only✓

Positive economics deals with

1. Awhat ought to be only✓
2. Bmoral judgments only✓
3. Cpolitical slogans only✓
4. Dwhat is — objective, testable statements about economic reality✓

Normative economics involves

1. Aonly statistical measurement✓
2. Bonly GDP accounting✓
3. Conly price indices✓
4. Dvalue judgments about what ought to be✓

The statement "Unemployment is 6 percent" is

1. Aa normative statement✓
2. Bneither positive nor normative✓
3. Ca positive statement✓
4. Donly a paradox✓

The statement "Government should reduce inequality" is

1. Aa positive fact only✓
2. Ban accounting identity✓
3. Ca PPF shift✓
4. Da normative statement✓

Microeconomics primarily studies

1. Anational income aggregates only✓
2. Bexchange rates only✓
3. Cindividual markets, firms and households✓
4. Dcentral bank balance sheets only✓

Macroeconomics primarily studies

1. Aa single firm's cost curve only✓
2. Bone consumer's indifference map only✓
3. Caggregate variables such as GDP, inflation and unemployment✓
4. Da single product's elasticity only✓

The four classical factors of production are

1. Amoney, banks, bonds and shares✓
2. Bimports, exports, tariffs and quotas✓
3. Cwages, rent, interest and only taxes✓
4. Dland, labour, capital and entrepreneurship✓

Land as a factor of production includes

1. Aonly factory buildings✓
2. Bnatural resources and gifts of nature✓
3. Conly bank deposits✓
4. Donly patents✓

Capital in economics refers to

1. Aonly cash in wallets✓
2. Bonly government bonds✓
3. Cproduced means of production such as machinery and buildings✓
4. Donly consumer food✓

Entrepreneurship involves

1. Aorganizing factors and bearing risk for profit✓
2. Bonly wage labour without risk✓
3. Conly owning land passively✓
4. Donly printing currency✓

Ceteris paribus means

1. Aother things remaining constant✓
2. Bprices always rise✓
3. Cdemand always falls✓
4. Dmarkets never clear✓

An economic good is characterized by

1. Aunlimited free supply✓
2. Bscarcity and a positive opportunity cost✓
3. Czero usefulness✓
4. Dno price ever✓

A free good is one that

1. Ais always taxed heavily✓
2. Bis not scarce and has zero opportunity cost✓
3. Cis produced only by monopolies✓
4. Dhas infinite price✓

The basic economic problem is

1. Aunlimited resources✓
2. Babsence of wants✓
3. Czero opportunity cost✓
4. Dscarcity requiring choice✓

Choice is necessary in economics because of

1. Aabundance of all goods✓
2. Bzero prices always✓
3. Cscarcity of resources✓
4. Dperfect foresight✓

Trade-off means that

1. Ahaving more of one thing requires having less of another✓
2. Ball goods can increase without limit✓
3. Copportunity cost is always zero✓
4. DPPF never exists✓

Efficiency on the PPF means

1. Aresources are fully and productively employed✓
2. Bresources are idle✓
3. Cproduction is impossible✓
4. Donly one good is made✓

Increasing opportunity cost on a bowed-out PPF arises because

1. Aresources are perfectly homogeneous✓
2. Btechnology never changes✓
3. Cwants are finite✓
4. Dresources are not equally suited to all uses✓

A linear PPF implies

1. Aincreasing opportunity cost✓
2. Bconstant opportunity cost✓
3. Cdecreasing returns always✓
4. Dzero trade-offs✓

Deductive method in economics proceeds from

1. Aonly historical storytelling✓
2. Bonly laboratory experiments on plants✓
3. Cgeneral assumptions to particular conclusions✓
4. Drandom guessing✓

Inductive method emphasizes

1. Aignoring all data✓
2. Bgeneralizing from observed facts✓
3. Conly mathematical axioms without observation✓
4. Dbanning statistics✓

Wealth of Nations is associated with

1. AKarl Marx only✓
2. BJ.M. Keynes only✓
3. CAlfred Marshall only✓
4. DAdam Smith✓

Alfred Marshall is closely associated with

1. Aonly Marxist surplus value✓
2. Bneoclassical microeconomics and Principles of Economics✓
3. Conly mercantilist bullionism✓
4. Donly modern DSGE models✓

The central questions of an economy include

1. Aonly how to print money✓
2. Bonly how to ban trade✓
3. Cwhat, how and for whom to produce✓
4. Donly how to fix one price forever✓

A market economy relies mainly on

1. Acentral planning of all output✓
2. Bbarter without money always✓
3. Czero incentives✓
4. Dprice signals and private property✓

A command economy relies mainly on

1. Acentral planning directives✓
2. Bfree price adjustment only✓
3. Cconsumer sovereignty only✓
4. Dlaissez-faire always✓

A mixed economy combines

1. Aonly barter✓
2. Bmarket mechanisms with government intervention✓
3. Conly pure communism✓
4. Donly autarky✓

Human wants are said to be

1. Aalways satiated✓
2. Bfinite and fixed forever✓
3. Cunlimited✓
4. Didentical for all people✓

The reward to labour is called

1. Arent✓
2. Binterest✓
3. Cprofit only✓
4. Dwages✓

The reward to capital is called

1. Awages✓
2. Brent only✓
3. Cinterest✓
4. Dland tax✓

The reward to land is called

1. Awages✓
2. Binterest only✓
3. Crent✓
4. Ddividends only✓

Rational economic behaviour assumes agents

1. Acompare costs and benefits to maximize objectives✓
2. Bignore all incentives✓
3. Cnever respond to prices✓
4. Dalways act randomly✓

A production possibility frontier (PPF) shows

1. Aonly consumer preferences✓
2. Bonly money supply growth✓
3. Conly tax rates✓
4. Dmaximum combinations of two goods that can be produced with given resources and technology✓

Opportunity cost is defined as

1. Athe value of the next best alternative forgone✓
2. Bthe accounting cost of raw materials only✓
3. Cthe total of all past sunk costs✓
4. Dthe market price of money✓

Scarcity in economics means that

1. Aall goods are free✓
2. Bresources are limited relative to unlimited wants✓
3. Cwants are always finite✓
4. Dproduction is always zero✓

Economics is best defined as the study of

1. Ahow scarce resources are allocated among competing uses✓
2. Bonly how money is printed by banks✓
3. Conly stock market speculation✓
4. Donly government budget speeches✓