ECS1501 – ECONOMICS 1A: 150 PRACTICE QUESTIONS WITH SOLUTIONS
TOPIC 1: THE ECONOMIC PROBLEM, SCARCITY & CHOICE (Questions 1–25)
1. What does economics study?
A) How to make money
B) How to allocate scarce resources
C) How to avoid choice
D) How to print money
Answer: B – Economics is the study of how scarce resources are allocated to satisfy
unlimited wants.
2. What is scarcity?
A) Unlimited resources
B) Limited resources vs unlimited wants
C) No wants
D) All wants met
Answer: B – Scarcity arises because resources are limited while human wants are
unlimited.
3. What is opportunity cost?
A) Money cost
B) Next best alternative foregone
C) Total cost
D) Fixed cost
Answer: B – Opportunity cost is the value of the next best alternative sacrificed when a
choice is made.
,4. Scarcity exists:
A) When things are available only in small quantities
B) When resources are insufficient to produce all desired goods and services
C) Only among poor people
D) Only in underdeveloped countries
Answer: B – Scarcity is the fundamental condition where resources cannot satisfy all wants
simultaneously.
5. Economists work on the premise that:
A) Resources are unlimited but wants are limited
B) Resources are limited but wants are unlimited
C) Both resources and wants are unlimited
D) Both resources and wants are limited
Answer: B – This is the core economic problem.
6. The four main categories of resources (factors of production) are:
A) Labour, land, money, and capital
B) Entrepreneurship, land, raw materials, and labour
C) Raw materials, money, labour, and capital
D) Land, capital, labour, and entrepreneurship
Answer: D – The four factors of production are land, labour, capital, and entrepreneurship.
7. As an economic concept, scarcity applies to:
A) Neither the poor nor the rich
B) The poor but not the rich
,C) The rich but not the poor
D) Both the poor and the rich
Answer: D – Scarcity affects everyone regardless of wealth; it is not the same as poverty.
8. Due to scarcity of resources:
A) The government must decide how to allocate available resources
B) Some members of society must live in poverty
C) Every society must choose among competing uses of available resources
D) Every society must undertake central planning
Answer: C – Scarcity forces all societies to make choices about resource allocation.
9. Which of the following is a normative economic statement?
A) The inflation rate is 5%
B) Households are the primary source of saving
C) Senior citizens deserve an income that will allow them to live in comfort
D) Unemployment increased last quarter
Answer: C – Normative statements are value judgments ("deserve") that cannot be proven
by facts.
10. Which of the following is a positive economic statement?
A) Government should not redistribute income
B) Businesses ought to contribute more to charities
C) Households are the primary source of saving
D) The foreign sector should be more tightly controlled
Answer: C – Positive statements are objective and can be verified with factual data.
, 11. A production possibility curve shows:
A) Maximum combinations of two goods that can be produced
B) Minimum combinations
C) Price level
D) Demand only
Answer: A – The PPC illustrates the maximum attainable combinations given full and
efficient use of resources.
12. If a society is producing on its production possibilities curve, it:
A) Has minimised its opportunity cost
B) Has maximised its opportunity cost
C) Is using all available resources efficiently
D) Has eliminated scarcity
Answer: C – Points on the PPC represent full and efficient resource utilisation.
13. Ceteris paribus means:
A) All changing
B) Other things equal
C) Nothing equal
D) All equal
Answer: B – This Latin phrase means "all other factors held constant".
14. Microeconomics studies:
A) The whole economy
B) Individual units like a firm or consumer
C) Inflation
TOPIC 1: THE ECONOMIC PROBLEM, SCARCITY & CHOICE (Questions 1–25)
1. What does economics study?
A) How to make money
B) How to allocate scarce resources
C) How to avoid choice
D) How to print money
Answer: B – Economics is the study of how scarce resources are allocated to satisfy
unlimited wants.
2. What is scarcity?
A) Unlimited resources
B) Limited resources vs unlimited wants
C) No wants
D) All wants met
Answer: B – Scarcity arises because resources are limited while human wants are
unlimited.
3. What is opportunity cost?
A) Money cost
B) Next best alternative foregone
C) Total cost
D) Fixed cost
Answer: B – Opportunity cost is the value of the next best alternative sacrificed when a
choice is made.
,4. Scarcity exists:
A) When things are available only in small quantities
B) When resources are insufficient to produce all desired goods and services
C) Only among poor people
D) Only in underdeveloped countries
Answer: B – Scarcity is the fundamental condition where resources cannot satisfy all wants
simultaneously.
5. Economists work on the premise that:
A) Resources are unlimited but wants are limited
B) Resources are limited but wants are unlimited
C) Both resources and wants are unlimited
D) Both resources and wants are limited
Answer: B – This is the core economic problem.
6. The four main categories of resources (factors of production) are:
A) Labour, land, money, and capital
B) Entrepreneurship, land, raw materials, and labour
C) Raw materials, money, labour, and capital
D) Land, capital, labour, and entrepreneurship
Answer: D – The four factors of production are land, labour, capital, and entrepreneurship.
7. As an economic concept, scarcity applies to:
A) Neither the poor nor the rich
B) The poor but not the rich
,C) The rich but not the poor
D) Both the poor and the rich
Answer: D – Scarcity affects everyone regardless of wealth; it is not the same as poverty.
8. Due to scarcity of resources:
A) The government must decide how to allocate available resources
B) Some members of society must live in poverty
C) Every society must choose among competing uses of available resources
D) Every society must undertake central planning
Answer: C – Scarcity forces all societies to make choices about resource allocation.
9. Which of the following is a normative economic statement?
A) The inflation rate is 5%
B) Households are the primary source of saving
C) Senior citizens deserve an income that will allow them to live in comfort
D) Unemployment increased last quarter
Answer: C – Normative statements are value judgments ("deserve") that cannot be proven
by facts.
10. Which of the following is a positive economic statement?
A) Government should not redistribute income
B) Businesses ought to contribute more to charities
C) Households are the primary source of saving
D) The foreign sector should be more tightly controlled
Answer: C – Positive statements are objective and can be verified with factual data.
, 11. A production possibility curve shows:
A) Maximum combinations of two goods that can be produced
B) Minimum combinations
C) Price level
D) Demand only
Answer: A – The PPC illustrates the maximum attainable combinations given full and
efficient use of resources.
12. If a society is producing on its production possibilities curve, it:
A) Has minimised its opportunity cost
B) Has maximised its opportunity cost
C) Is using all available resources efficiently
D) Has eliminated scarcity
Answer: C – Points on the PPC represent full and efficient resource utilisation.
13. Ceteris paribus means:
A) All changing
B) Other things equal
C) Nothing equal
D) All equal
Answer: B – This Latin phrase means "all other factors held constant".
14. Microeconomics studies:
A) The whole economy
B) Individual units like a firm or consumer
C) Inflation
