CFA Level I Economics curriculum
1. Which of the following best describes the fundamental economic problem? a) How to
increase the money supply to stimulate growth. b) How to allocate scarce resources to satisfy
unlimited wants. c) How to reduce inflation while maintaining full employment. d) How to
ensure fair distribution of income among all citizens. Answer: b)
2. The concept of opportunity cost refers to: a) The monetary cost of a decision. b) The total
cost, including both explicit and implicit costs. c) The value of the next best alternative forgone
when making a choice. d) The cost of production plus a normal profit. Answer: c)
3. A point inside the production possibilities frontier (PPF) indicates: a) Efficient use of all
resources. b) Unattainable levels of production. c) Inefficient or underutilized resources. d)
Technological advancement. Answer: c)
4. Which of the following will cause a rightward shift in the demand curve for a normal good?
a) A decrease in the price of the good. b) An increase in the price of a substitute good. c) A
decrease in consumer income. d) An expectation of a fall in the future price of the good.
Answer: b)
5. The price elasticity of demand measures the responsiveness of: a) Quantity supplied to a
change in price. b) Price to a change in quantity demanded. c) Quantity demanded to a change
in price. d) Consumer income to a change in price. Answer: c)
, 6. If the price elasticity of demand for a good is 0.5, the demand is said to be: a) Perfectly
elastic. b) Elastic. c) Unit elastic. d) Inelastic. Answer: d)
7. Which of the following goods is most likely to have an inelastic demand? a) Luxury cars. b)
Restaurant meals. c) Prescription medication. d) Movie tickets. Answer: c)
8. Cross-price elasticity of demand is positive for: a) Inferior goods. b) Complementary goods.
c) Substitute goods. d) Normal goods. Answer: c)
9. Income elasticity of demand is negative for: a) Normal goods. b) Luxury goods. c) Inferior
goods. d) Necessity goods. Answer: c)
10. Which of the following will cause a rightward shift in the supply curve? a) An increase in
the price of the good. b) A decrease in the cost of production. c) An increase in consumer
income. d) A decrease in the price of a substitute in production. Answer: b)
11. In a perfectly competitive market, the demand curve faced by an individual firm is: a)
Downward sloping. b) Upward sloping. c) Perfectly elastic. d) Perfectly inelastic. Answer: c)
12. Marginal cost is the change in total cost resulting from: a) Producing one more unit of
output. b) A change in fixed costs. c) A change in variable costs. d) Increasing all inputs by one
unit. Answer: a)
13. Average total cost (ATC) is calculated as: a) Total cost divided by marginal cost. b) Total
fixed cost plus total variable cost. c) Total cost divided by the quantity of output. d) Change in
total cost divided by change in quantity. Answer: c)
14. In the long run, all costs are: a) Fixed. b) Variable. c) Sunk. d) Marginal. Answer: b)
1. Which of the following best describes the fundamental economic problem? a) How to
increase the money supply to stimulate growth. b) How to allocate scarce resources to satisfy
unlimited wants. c) How to reduce inflation while maintaining full employment. d) How to
ensure fair distribution of income among all citizens. Answer: b)
2. The concept of opportunity cost refers to: a) The monetary cost of a decision. b) The total
cost, including both explicit and implicit costs. c) The value of the next best alternative forgone
when making a choice. d) The cost of production plus a normal profit. Answer: c)
3. A point inside the production possibilities frontier (PPF) indicates: a) Efficient use of all
resources. b) Unattainable levels of production. c) Inefficient or underutilized resources. d)
Technological advancement. Answer: c)
4. Which of the following will cause a rightward shift in the demand curve for a normal good?
a) A decrease in the price of the good. b) An increase in the price of a substitute good. c) A
decrease in consumer income. d) An expectation of a fall in the future price of the good.
Answer: b)
5. The price elasticity of demand measures the responsiveness of: a) Quantity supplied to a
change in price. b) Price to a change in quantity demanded. c) Quantity demanded to a change
in price. d) Consumer income to a change in price. Answer: c)
, 6. If the price elasticity of demand for a good is 0.5, the demand is said to be: a) Perfectly
elastic. b) Elastic. c) Unit elastic. d) Inelastic. Answer: d)
7. Which of the following goods is most likely to have an inelastic demand? a) Luxury cars. b)
Restaurant meals. c) Prescription medication. d) Movie tickets. Answer: c)
8. Cross-price elasticity of demand is positive for: a) Inferior goods. b) Complementary goods.
c) Substitute goods. d) Normal goods. Answer: c)
9. Income elasticity of demand is negative for: a) Normal goods. b) Luxury goods. c) Inferior
goods. d) Necessity goods. Answer: c)
10. Which of the following will cause a rightward shift in the supply curve? a) An increase in
the price of the good. b) A decrease in the cost of production. c) An increase in consumer
income. d) A decrease in the price of a substitute in production. Answer: b)
11. In a perfectly competitive market, the demand curve faced by an individual firm is: a)
Downward sloping. b) Upward sloping. c) Perfectly elastic. d) Perfectly inelastic. Answer: c)
12. Marginal cost is the change in total cost resulting from: a) Producing one more unit of
output. b) A change in fixed costs. c) A change in variable costs. d) Increasing all inputs by one
unit. Answer: a)
13. Average total cost (ATC) is calculated as: a) Total cost divided by marginal cost. b) Total
fixed cost plus total variable cost. c) Total cost divided by the quantity of output. d) Change in
total cost divided by change in quantity. Answer: c)
14. In the long run, all costs are: a) Fixed. b) Variable. c) Sunk. d) Marginal. Answer: b)
