D089 ECON 2000
Principles of Economics
Comprehensive FA Review (Qns & Ans)
2025
1. Which of the following best describes the concept of
opportunity cost?
- A) The cost of producing one more unit of a good
- B) The value of the next best alternative foregone
- C) The total cost of all resources used in production
- D) The cost of labor and capital combined
©2024/2025
, - ANS: B) The value of the next best alternative foregone
- Rationale: Opportunity cost represents the benefits an
individual, investor, or business misses out on when choosing one
alternative over another.
2. What is the primary goal of monetary policy?
- A) To control inflation
- B) To increase government spending
- C) To reduce unemployment
- D) To balance the budget
- ANS: A) To control inflation
- Rationale: Monetary policy primarily aims to control
inflation and stabilize the currency by managing interest rates and
the money supply.
3. Which of the following is a characteristic of a perfectly
competitive market?
- A) Few sellers
- B) Differentiated products
- C) Barriers to entry
- D) Many buyers and sellers
- ANS: D) Many buyers and sellers
©2024/2025
, - Rationale: A perfectly competitive market has many buyers
and sellers, with no single entity able to influence the market
price.
4. What does the term "elasticity of demand" refer to?
- A) The responsiveness of quantity demanded to a change in
price
- B) The total revenue generated from sales
- C) The fixed costs of production
- D) The supply of goods in the market
- ANS: A) The responsiveness of quantity demanded to a
change in price
- Rationale: Elasticity of demand measures how much the
quantity demanded of a good responds to changes in its price.
5. Which economic theory emphasizes the role of government
intervention in stabilizing the economy?
- A) Classical economics
- B) Keynesian economics
- C) Monetarism
- D) Supply-side economics
- ANS: B) Keynesian economics
©2024/2025
, - Rationale: Keynesian economics advocates for government
intervention to manage economic cycles and stabilize the
economy.
Fill-in-the-Blank Questions
6. The law of __________ states that, all else being equal, as the
price of a good increases, the quantity demanded decreases.
- ANS: Demand
- Rationale: The law of demand describes the inverse
relationship between price and quantity demanded.
7. __________ is the study of how individuals and societies
allocate scarce resources.
- ANS: Economics
- Rationale: Economics examines the allocation of scarce
resources to meet the needs and wants of individuals and
societies.
8. The __________ curve shows the relationship between the
price level and the quantity of goods and services that firms are
willing to produce.
- ANS: Aggregate supply
©2024/2025
Principles of Economics
Comprehensive FA Review (Qns & Ans)
2025
1. Which of the following best describes the concept of
opportunity cost?
- A) The cost of producing one more unit of a good
- B) The value of the next best alternative foregone
- C) The total cost of all resources used in production
- D) The cost of labor and capital combined
©2024/2025
, - ANS: B) The value of the next best alternative foregone
- Rationale: Opportunity cost represents the benefits an
individual, investor, or business misses out on when choosing one
alternative over another.
2. What is the primary goal of monetary policy?
- A) To control inflation
- B) To increase government spending
- C) To reduce unemployment
- D) To balance the budget
- ANS: A) To control inflation
- Rationale: Monetary policy primarily aims to control
inflation and stabilize the currency by managing interest rates and
the money supply.
3. Which of the following is a characteristic of a perfectly
competitive market?
- A) Few sellers
- B) Differentiated products
- C) Barriers to entry
- D) Many buyers and sellers
- ANS: D) Many buyers and sellers
©2024/2025
, - Rationale: A perfectly competitive market has many buyers
and sellers, with no single entity able to influence the market
price.
4. What does the term "elasticity of demand" refer to?
- A) The responsiveness of quantity demanded to a change in
price
- B) The total revenue generated from sales
- C) The fixed costs of production
- D) The supply of goods in the market
- ANS: A) The responsiveness of quantity demanded to a
change in price
- Rationale: Elasticity of demand measures how much the
quantity demanded of a good responds to changes in its price.
5. Which economic theory emphasizes the role of government
intervention in stabilizing the economy?
- A) Classical economics
- B) Keynesian economics
- C) Monetarism
- D) Supply-side economics
- ANS: B) Keynesian economics
©2024/2025
, - Rationale: Keynesian economics advocates for government
intervention to manage economic cycles and stabilize the
economy.
Fill-in-the-Blank Questions
6. The law of __________ states that, all else being equal, as the
price of a good increases, the quantity demanded decreases.
- ANS: Demand
- Rationale: The law of demand describes the inverse
relationship between price and quantity demanded.
7. __________ is the study of how individuals and societies
allocate scarce resources.
- ANS: Economics
- Rationale: Economics examines the allocation of scarce
resources to meet the needs and wants of individuals and
societies.
8. The __________ curve shows the relationship between the
price level and the quantity of goods and services that firms are
willing to produce.
- ANS: Aggregate supply
©2024/2025
