Fundamentals of Economics:
IVY SOFTWARE MBA PREPWORKS - FUNDAMENTALS OF ECONOMICS |
EXAM QUESTIONS AND CORRECT ANSWERS | LATEST VERSION
2026/2027
Ivy Software Mba Prepworks Fundamentals Of Economics
MBA FOUNDATIONS PROGRAM
FUNDAMENTALS OF ECONOMICS
1. Economics is best described as the study of:
A. How individuals and societies allocate scarce resources among
competing uses
B. How to make money in the stock market
C. How governments print and distribute currency
D. How firms set prices to maximize revenue
A. How individuals and societies allocate scarce resources among
competing uses
Scarcity forces choices, and economics studies how those choices about
limited resources are made.
Page 1 of 82
, Fundamentals of Economics:
2. The fundamental economic problem faced by every society is:
A. Government debt
B. Inflation
C. Scarcity
D. Unemployment
C. Scarcity
Wants are unlimited while resources are limited, so every society faces
scarcity regardless of its wealth.
3. Maria gives up a job paying $40,000 a year to attend a full-time MBA
program costing $30,000 in tuition. Ignoring other costs, the
opportunity cost of one year in the program is:
A. $10,000
B. $40,000
C. $70,000
D. $30,000
C. $70,000
Opportunity cost includes both the explicit tuition and the forgone salary:
$30,000 + $40,000.
4. Opportunity cost is defined as:
A. The value of the next best alternative given up when a choice is made
B. The cost of producing one additional unit of output
C. The price paid for a good in the market
D. The total monetary cost of all alternatives available
A. The value of the next best alternative given up when a choice is
made
Only the single next best forgone alternative counts, not the sum of every
alternative.
Page 2 of 82
, Fundamentals of Economics:
5. Which of the following is a normative economic statement?
A. The government should raise the minimum wage to reduce poverty
B. A rise in the minimum wage increases labor costs for firms
C. Unemployment rose by 0.5 percent last quarter
D. Higher gasoline prices reduce the quantity of gasoline demanded
A. The government should raise the minimum wage to reduce
poverty
Normative statements express value judgments about what ought to be
and cannot be tested with data.
6. Which of the following is a positive economic statement?
A. The government ought to subsidize coffee farmers
B. Coffee is too expensive and its price should be capped
C. An increase in the price of coffee will reduce the quantity of coffee
purchased
D. It is unfair that coffee growers earn low wages
C. An increase in the price of coffee will reduce the quantity of coffee
purchased
Positive statements describe cause and effect and can be checked against
evidence.
7. Microeconomics focuses mainly on:
A. The national unemployment rate
B. The behavior of individual households, firms and markets
C. The overall price level in an economy
D. Total output of the economy
B. The behavior of individual households, firms and markets
Microeconomics looks at decision-making units and individual markets
rather than economy-wide aggregates.
Page 3 of 82
, Fundamentals of Economics:
8. Which topic is studied in macroeconomics?
A. How a firm decides how many workers to hire
B. The causes of inflation in the national economy
C. The price of apples in a local market
D. A consumer's choice between two brands of cereal
B. The causes of inflation in the national economy
Inflation is an economy-wide phenomenon, placing it in macroeconomics.
9. The four factors of production are:
A. Capital, money, technology and labor
B. Land, labor, capital and entrepreneurship
C. Land, labor, stocks and bonds
D. Money, labor, machines and land
B. Land, labor, capital and entrepreneurship
Money and financial assets are not factors of production;
entrepreneurship organizes the other three.
10. In economics, the term capital refers to:
A. Natural resources such as oil and timber
B. Manufactured goods used to produce other goods and services
C. Money held in a bank account
D. Shares of stock owned by investors
B. Manufactured goods used to produce other goods and services
Economic capital means physical tools, machinery and buildings, not
financial money.
11. A production possibilities frontier (PPF) shows:
A. The prices at which consumers will buy two goods
B. The combinations of goods that consumers prefer most
C. The maximum combinations of two goods an economy can produce
with given resources and technology
D. How much output a single worker can produce
C. The maximum combinations of two goods an economy can
produce with given resources and technology
Points on the PPF represent efficient use of all available resources and
current technology.
Page 4 of 82
IVY SOFTWARE MBA PREPWORKS - FUNDAMENTALS OF ECONOMICS |
EXAM QUESTIONS AND CORRECT ANSWERS | LATEST VERSION
2026/2027
Ivy Software Mba Prepworks Fundamentals Of Economics
MBA FOUNDATIONS PROGRAM
FUNDAMENTALS OF ECONOMICS
1. Economics is best described as the study of:
A. How individuals and societies allocate scarce resources among
competing uses
B. How to make money in the stock market
C. How governments print and distribute currency
D. How firms set prices to maximize revenue
A. How individuals and societies allocate scarce resources among
competing uses
Scarcity forces choices, and economics studies how those choices about
limited resources are made.
Page 1 of 82
, Fundamentals of Economics:
2. The fundamental economic problem faced by every society is:
A. Government debt
B. Inflation
C. Scarcity
D. Unemployment
C. Scarcity
Wants are unlimited while resources are limited, so every society faces
scarcity regardless of its wealth.
3. Maria gives up a job paying $40,000 a year to attend a full-time MBA
program costing $30,000 in tuition. Ignoring other costs, the
opportunity cost of one year in the program is:
A. $10,000
B. $40,000
C. $70,000
D. $30,000
C. $70,000
Opportunity cost includes both the explicit tuition and the forgone salary:
$30,000 + $40,000.
4. Opportunity cost is defined as:
A. The value of the next best alternative given up when a choice is made
B. The cost of producing one additional unit of output
C. The price paid for a good in the market
D. The total monetary cost of all alternatives available
A. The value of the next best alternative given up when a choice is
made
Only the single next best forgone alternative counts, not the sum of every
alternative.
Page 2 of 82
, Fundamentals of Economics:
5. Which of the following is a normative economic statement?
A. The government should raise the minimum wage to reduce poverty
B. A rise in the minimum wage increases labor costs for firms
C. Unemployment rose by 0.5 percent last quarter
D. Higher gasoline prices reduce the quantity of gasoline demanded
A. The government should raise the minimum wage to reduce
poverty
Normative statements express value judgments about what ought to be
and cannot be tested with data.
6. Which of the following is a positive economic statement?
A. The government ought to subsidize coffee farmers
B. Coffee is too expensive and its price should be capped
C. An increase in the price of coffee will reduce the quantity of coffee
purchased
D. It is unfair that coffee growers earn low wages
C. An increase in the price of coffee will reduce the quantity of coffee
purchased
Positive statements describe cause and effect and can be checked against
evidence.
7. Microeconomics focuses mainly on:
A. The national unemployment rate
B. The behavior of individual households, firms and markets
C. The overall price level in an economy
D. Total output of the economy
B. The behavior of individual households, firms and markets
Microeconomics looks at decision-making units and individual markets
rather than economy-wide aggregates.
Page 3 of 82
, Fundamentals of Economics:
8. Which topic is studied in macroeconomics?
A. How a firm decides how many workers to hire
B. The causes of inflation in the national economy
C. The price of apples in a local market
D. A consumer's choice between two brands of cereal
B. The causes of inflation in the national economy
Inflation is an economy-wide phenomenon, placing it in macroeconomics.
9. The four factors of production are:
A. Capital, money, technology and labor
B. Land, labor, capital and entrepreneurship
C. Land, labor, stocks and bonds
D. Money, labor, machines and land
B. Land, labor, capital and entrepreneurship
Money and financial assets are not factors of production;
entrepreneurship organizes the other three.
10. In economics, the term capital refers to:
A. Natural resources such as oil and timber
B. Manufactured goods used to produce other goods and services
C. Money held in a bank account
D. Shares of stock owned by investors
B. Manufactured goods used to produce other goods and services
Economic capital means physical tools, machinery and buildings, not
financial money.
11. A production possibilities frontier (PPF) shows:
A. The prices at which consumers will buy two goods
B. The combinations of goods that consumers prefer most
C. The maximum combinations of two goods an economy can produce
with given resources and technology
D. How much output a single worker can produce
C. The maximum combinations of two goods an economy can
produce with given resources and technology
Points on the PPF represent efficient use of all available resources and
current technology.
Page 4 of 82
