D089 ECON 2000
Principles of Economics
Final Assessment (Qns & Ans)
2025
1. Which of the following best describes the concept of
'opportunity cost'?
- A. The monetary cost of an item
- B. The value of the next best alternative foregone
- C. The cost of production
- D. The cost of labor
- ANS: B. The value of the next best alternative foregone
©2024/2025
, - 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 taxes
- D. To regulate international trade
- ANS: A. To control inflation
- Rationale: The primary goal of monetary policy is to
control inflation and stabilize the currency by managing interest
rates and the money supply.
3. Which of the following best describes the concept of
'elasticity of demand'?
- A. The responsiveness of quantity demanded to a change in
price
- B. The total revenue generated from sales
- C. The fixed cost of production
- D. The supply curve's slope
- ANS: A. The responsiveness of quantity demanded to a
change in price
©2024/2025
, - Rationale: Elasticity of demand measures how much the
quantity demanded of a good responds to a change in the price of
that good.
Fill-in-the-Blank Questions
4. The __________ curve shows the relationship between the
price level and the quantity of goods and services that firms are
willing to supply.
- ANS: Aggregate Supply
- Rationale: The aggregate supply curve represents the total
supply of goods and services that firms in an economy are willing
to produce at different price levels.
5. __________ is the study of how individuals and societies
allocate scarce resources to satisfy unlimited wants.
- ANS: Economics
- Rationale: Economics is the social science that studies the
production, distribution, and consumption of goods and services.
6. The __________ effect occurs when a change in the price of a
good affects the purchasing power of consumers' income.
- ANS: Income
©2024/2025
, - Rationale: The income effect describes how changes in the
price of a good can affect the real income of consumers and their
purchasing power.
True/False Questions
7. True or False: A perfectly competitive market is characterized
by a large number of buyers and sellers, homogeneous products,
and free entry and exit.
- ANS: True
- Rationale: A perfectly competitive market has many buyers
and sellers, identical products, and no barriers to entry or exit.
8. True or False: In the short run, at least one factor of
production is fixed.
- ANS: True
- Rationale: In the short run, at least one factor of production,
such as capital, is fixed, while other factors, like labor, can vary.
9. True or False: The law of diminishing marginal returns states
that as more units of a variable input are added to a fixed input,
the additional output produced will eventually decrease.
- ANS: True
©2024/2025
Principles of Economics
Final Assessment (Qns & Ans)
2025
1. Which of the following best describes the concept of
'opportunity cost'?
- A. The monetary cost of an item
- B. The value of the next best alternative foregone
- C. The cost of production
- D. The cost of labor
- ANS: B. The value of the next best alternative foregone
©2024/2025
, - 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 taxes
- D. To regulate international trade
- ANS: A. To control inflation
- Rationale: The primary goal of monetary policy is to
control inflation and stabilize the currency by managing interest
rates and the money supply.
3. Which of the following best describes the concept of
'elasticity of demand'?
- A. The responsiveness of quantity demanded to a change in
price
- B. The total revenue generated from sales
- C. The fixed cost of production
- D. The supply curve's slope
- ANS: A. The responsiveness of quantity demanded to a
change in price
©2024/2025
, - Rationale: Elasticity of demand measures how much the
quantity demanded of a good responds to a change in the price of
that good.
Fill-in-the-Blank Questions
4. The __________ curve shows the relationship between the
price level and the quantity of goods and services that firms are
willing to supply.
- ANS: Aggregate Supply
- Rationale: The aggregate supply curve represents the total
supply of goods and services that firms in an economy are willing
to produce at different price levels.
5. __________ is the study of how individuals and societies
allocate scarce resources to satisfy unlimited wants.
- ANS: Economics
- Rationale: Economics is the social science that studies the
production, distribution, and consumption of goods and services.
6. The __________ effect occurs when a change in the price of a
good affects the purchasing power of consumers' income.
- ANS: Income
©2024/2025
, - Rationale: The income effect describes how changes in the
price of a good can affect the real income of consumers and their
purchasing power.
True/False Questions
7. True or False: A perfectly competitive market is characterized
by a large number of buyers and sellers, homogeneous products,
and free entry and exit.
- ANS: True
- Rationale: A perfectly competitive market has many buyers
and sellers, identical products, and no barriers to entry or exit.
8. True or False: In the short run, at least one factor of
production is fixed.
- ANS: True
- Rationale: In the short run, at least one factor of production,
such as capital, is fixed, while other factors, like labor, can vary.
9. True or False: The law of diminishing marginal returns states
that as more units of a variable input are added to a fixed input,
the additional output produced will eventually decrease.
- ANS: True
©2024/2025
