ECON 203 REAL EXAM QUESTIONS AND ANWERS | 100%
VERIFIED 2025/2026
QUESTION: Opportunity costs exist because
A. the decision to engage in one activity means forgoing some other activity.
B. wants are scarce relative to resources.
C. households and businesses make rational decisions.
D. most decisions do not involve sacrifices or trade-offs. ✓✓ Correct Ans- A
QUESTION: In deciding whether to study for an economics quiz or go to a concert, one is confronted
by the idea(s) of
A. scarcity and opportunity costs.
B. money and real capital.
C. complementary economic goals.
D. full production. ✓✓ Correct Ans- A
QUESTION: Macroeconomics explains the behavior of individual households and business firms;
microeconomics is concerned with the behavior of aggregates or the economy as a whole. (T/F) ✓✓
Correct Ans- False
QUESTION: Marginal analysis means that decision makers compare the extra benefits with the extra
costs of a specific choice. (T/F) ✓✓ Correct Ans- True
QUESTION: The process by which capital goods are accumulated is known as investment. (T/F) ✓✓
Correct Ans- True
QUESTION: An increase in immigration would shift the production possibilities curve to the left. (T/F)
✓✓ Correct Ans- False
QUESTION: Which of the following is a distinguishing feature of laissez-faire capitalism?
A. public ownership of all capital
1|Page
,B. central planning
C. minimal government intervention
D. a circular flow of goods, resources, and money ✓✓ Correct Ans- C
QUESTION: Specialization in production is important primarily because it
A. results in greater total output.
B. allows society to avoid the coincidence-of-wants problem.
C. allows society to trade by barter.
D. allows society to have fewer capital goods. ✓✓ Correct Ans- A
QUESTION: Economics may best be defined as the
A. interaction between macro and micro considerations.
B. social science concerned with how individuals, institutions, and society make optimal choices
under conditions of scarcity.
C. empirical testing of value judgments through the use of logic.
D. study of why people are rational. ✓✓ Correct Ans- B
QUESTION: The fundamental economic problem faced by a society is that productive resources are
so varied and versatile that it is hard to decide what to do with them. (T/F) ✓✓ Correct Ans- False
QUESTION: The main mechanism that regulates the market system is
A. self-interest.
B. private property.
C. competition.
D. freedom of enterprise and choice. ✓✓ Correct Ans- C
QUESTION: The market system's answer to the fundamental question "What will be produced?" is
essentially
A. "Goods and services that are profitable."
B. "Low-cost goods and services."
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,C. "Goods and services that can be produced using large amounts of capital."
D. "Goods and services that possess lasting value." ✓✓ Correct Ans- A
QUESTION: The wants of consumers are expressed in the product market with "dollar votes." (T/F)
✓✓ Correct Ans- True
QUESTION: In the circular flow model of the market system, households' major role is to
A. buy both products and resources.
B. sell both products and resources.
C. buy products and sell resources.
D. sell products and buy resources. ✓✓ Correct Ans- C
QUESTION: The law of demand states that, other things equal,
A. price and quantity demanded are inversely related.
B. the larger the number of buyers in a market, the lower will be product price.
C. price and quantity demanded are directly related.
D. consumers will buy more of a product at high prices than at low prices. ✓✓ Correct Ans- A
QUESTION: Graphically, the market demand curve is
A. steeper than any individual demand curve that is part of it.
B. greater than the sum of the individual demand curves.
C. the horizontal sum of individual demand curves.
D. the vertical sum of individual demand curves. ✓✓ Correct Ans- C
QUESTION: The relationship between quantity supplied and price is _____, and the relationship
between quantity demanded and price is _____.
A. direct; inverse
B. inverse; direct
C. inverse; inverse
D. direct; direct ✓✓ Correct Ans- A
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, QUESTION: When the price of a product increases, a consumer is able to buy less of it with a given
money income. This describes the
A. cost effect.
B. inflationary effect.
C. income effect.
D. substitution effect. ✓✓ Correct Ans- C
QUESTION: Because successive units of a good produce less and less additional satisfaction, the
price must fall to encourage a buyer to purchase more units of the good. This statement is most
consistent with which explanation for the law of demand?
A. diminishing marginal utility
B. the rationing function of prices
C. the substitution effect
D. the income effect ✓✓ Correct Ans- A
QUESTION: Which of the following is most likely to be an inferior good?
A. gold watches
B. ocean cruises
C. used clothing
D. steak ✓✓ Correct Ans- C
QUESTION: A shift to the right in the demand curve for product A can be most reasonably explained
by saying that
A. consumer incomes have declined, and consumers now want to buy less of A at each possible
price.
B. the price of A has increased and, as a result, consumers want to purchase less of it.
C. consumer preferences have changed in favor of A so that they now want to buy more at each
possible price.
D. the price of A has declined and, as a result, consumers want to purchase more of it. ✓✓ Correct
Ans- C
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VERIFIED 2025/2026
QUESTION: Opportunity costs exist because
A. the decision to engage in one activity means forgoing some other activity.
B. wants are scarce relative to resources.
C. households and businesses make rational decisions.
D. most decisions do not involve sacrifices or trade-offs. ✓✓ Correct Ans- A
QUESTION: In deciding whether to study for an economics quiz or go to a concert, one is confronted
by the idea(s) of
A. scarcity and opportunity costs.
B. money and real capital.
C. complementary economic goals.
D. full production. ✓✓ Correct Ans- A
QUESTION: Macroeconomics explains the behavior of individual households and business firms;
microeconomics is concerned with the behavior of aggregates or the economy as a whole. (T/F) ✓✓
Correct Ans- False
QUESTION: Marginal analysis means that decision makers compare the extra benefits with the extra
costs of a specific choice. (T/F) ✓✓ Correct Ans- True
QUESTION: The process by which capital goods are accumulated is known as investment. (T/F) ✓✓
Correct Ans- True
QUESTION: An increase in immigration would shift the production possibilities curve to the left. (T/F)
✓✓ Correct Ans- False
QUESTION: Which of the following is a distinguishing feature of laissez-faire capitalism?
A. public ownership of all capital
1|Page
,B. central planning
C. minimal government intervention
D. a circular flow of goods, resources, and money ✓✓ Correct Ans- C
QUESTION: Specialization in production is important primarily because it
A. results in greater total output.
B. allows society to avoid the coincidence-of-wants problem.
C. allows society to trade by barter.
D. allows society to have fewer capital goods. ✓✓ Correct Ans- A
QUESTION: Economics may best be defined as the
A. interaction between macro and micro considerations.
B. social science concerned with how individuals, institutions, and society make optimal choices
under conditions of scarcity.
C. empirical testing of value judgments through the use of logic.
D. study of why people are rational. ✓✓ Correct Ans- B
QUESTION: The fundamental economic problem faced by a society is that productive resources are
so varied and versatile that it is hard to decide what to do with them. (T/F) ✓✓ Correct Ans- False
QUESTION: The main mechanism that regulates the market system is
A. self-interest.
B. private property.
C. competition.
D. freedom of enterprise and choice. ✓✓ Correct Ans- C
QUESTION: The market system's answer to the fundamental question "What will be produced?" is
essentially
A. "Goods and services that are profitable."
B. "Low-cost goods and services."
2|Page
,C. "Goods and services that can be produced using large amounts of capital."
D. "Goods and services that possess lasting value." ✓✓ Correct Ans- A
QUESTION: The wants of consumers are expressed in the product market with "dollar votes." (T/F)
✓✓ Correct Ans- True
QUESTION: In the circular flow model of the market system, households' major role is to
A. buy both products and resources.
B. sell both products and resources.
C. buy products and sell resources.
D. sell products and buy resources. ✓✓ Correct Ans- C
QUESTION: The law of demand states that, other things equal,
A. price and quantity demanded are inversely related.
B. the larger the number of buyers in a market, the lower will be product price.
C. price and quantity demanded are directly related.
D. consumers will buy more of a product at high prices than at low prices. ✓✓ Correct Ans- A
QUESTION: Graphically, the market demand curve is
A. steeper than any individual demand curve that is part of it.
B. greater than the sum of the individual demand curves.
C. the horizontal sum of individual demand curves.
D. the vertical sum of individual demand curves. ✓✓ Correct Ans- C
QUESTION: The relationship between quantity supplied and price is _____, and the relationship
between quantity demanded and price is _____.
A. direct; inverse
B. inverse; direct
C. inverse; inverse
D. direct; direct ✓✓ Correct Ans- A
3|Page
, QUESTION: When the price of a product increases, a consumer is able to buy less of it with a given
money income. This describes the
A. cost effect.
B. inflationary effect.
C. income effect.
D. substitution effect. ✓✓ Correct Ans- C
QUESTION: Because successive units of a good produce less and less additional satisfaction, the
price must fall to encourage a buyer to purchase more units of the good. This statement is most
consistent with which explanation for the law of demand?
A. diminishing marginal utility
B. the rationing function of prices
C. the substitution effect
D. the income effect ✓✓ Correct Ans- A
QUESTION: Which of the following is most likely to be an inferior good?
A. gold watches
B. ocean cruises
C. used clothing
D. steak ✓✓ Correct Ans- C
QUESTION: A shift to the right in the demand curve for product A can be most reasonably explained
by saying that
A. consumer incomes have declined, and consumers now want to buy less of A at each possible
price.
B. the price of A has increased and, as a result, consumers want to purchase less of it.
C. consumer preferences have changed in favor of A so that they now want to buy more at each
possible price.
D. the price of A has declined and, as a result, consumers want to purchase more of it. ✓✓ Correct
Ans- C
4|Page
