University of California — ECON 1
Economics — Common Final Exam
150+ Practice Questions with Answers &
Rationales
PART I: MICROECONOMICS — FOUNDATIONS &
SUPPLY/DEMAND (Questions 1-40)
1. Economics is best defined as the study of:
• A) How to make money in financial markets
• B) How individuals and societies allocate scarce
resources to satisfy unlimited wants
• C) How governments regulate businesses
• D) How to eliminate poverty
• E) How to maximize production
Answer: B
Rationale: Economics is fundamentally the study of
,how individuals and societies allocate scarce
resources to satisfy unlimited wants. Scarcity is the
central problem that economics addresses.
2. The opportunity cost of an action is:
• A) The monetary cost of the action
• B) The value of the next best alternative
foregone
• C) The total cost of production
• D) Always less than the monetary cost
• E) The same for everyone
Answer: B
Rationale: Opportunity cost is the value of the next
best alternative that must be given up when making
a choice. It is not just the monetary cost but
includes all foregone benefits.
3. Scarcity exists because:
, • A) Human wants exceed the resources available
to satisfy them
• B) Some people are poor while others are rich
• C) Governments create artificial shortages
• D) Resources are unlimited
• E) People are inherently greedy
Answer: A
Rationale: Scarcity is the fundamental economic
problem—human wants are unlimited, but the
resources available to satisfy them are limited.
4. Which of the following is a normative statement?
• A) The unemployment rate is 5.2%
• B) The government should increase spending to
reduce unemployment
• C) Inflation is currently running at 2.1%
• D) GDP grew by 3% last quarter
, • E) The federal budget deficit is $1.5 trillion
Answer: B
Rationale: Normative statements express opinions
about what "ought to be" and are subjective. They
cannot be tested or verified with evidence. The
other options are positive statements (factual and
testable).
5. Which of the following is a positive statement?
• A) The government ought to provide free
healthcare
• B) Taxes on the wealthy are too high
• C) The unemployment rate in the United States
is 4.5%
• D) We should reduce carbon emissions
immediately
• E) Minimum wage should be increased
Economics — Common Final Exam
150+ Practice Questions with Answers &
Rationales
PART I: MICROECONOMICS — FOUNDATIONS &
SUPPLY/DEMAND (Questions 1-40)
1. Economics is best defined as the study of:
• A) How to make money in financial markets
• B) How individuals and societies allocate scarce
resources to satisfy unlimited wants
• C) How governments regulate businesses
• D) How to eliminate poverty
• E) How to maximize production
Answer: B
Rationale: Economics is fundamentally the study of
,how individuals and societies allocate scarce
resources to satisfy unlimited wants. Scarcity is the
central problem that economics addresses.
2. The opportunity cost of an action is:
• A) The monetary cost of the action
• B) The value of the next best alternative
foregone
• C) The total cost of production
• D) Always less than the monetary cost
• E) The same for everyone
Answer: B
Rationale: Opportunity cost is the value of the next
best alternative that must be given up when making
a choice. It is not just the monetary cost but
includes all foregone benefits.
3. Scarcity exists because:
, • A) Human wants exceed the resources available
to satisfy them
• B) Some people are poor while others are rich
• C) Governments create artificial shortages
• D) Resources are unlimited
• E) People are inherently greedy
Answer: A
Rationale: Scarcity is the fundamental economic
problem—human wants are unlimited, but the
resources available to satisfy them are limited.
4. Which of the following is a normative statement?
• A) The unemployment rate is 5.2%
• B) The government should increase spending to
reduce unemployment
• C) Inflation is currently running at 2.1%
• D) GDP grew by 3% last quarter
, • E) The federal budget deficit is $1.5 trillion
Answer: B
Rationale: Normative statements express opinions
about what "ought to be" and are subjective. They
cannot be tested or verified with evidence. The
other options are positive statements (factual and
testable).
5. Which of the following is a positive statement?
• A) The government ought to provide free
healthcare
• B) Taxes on the wealthy are too high
• C) The unemployment rate in the United States
is 4.5%
• D) We should reduce carbon emissions
immediately
• E) Minimum wage should be increased
