1|Page
ECN 211 ASU Exam Preparation With Complete
Questions And Correct Answers With Rationales
Already Graded A+ Brand New Version!!
Question 1
Which of the following is the fundamental economic problem that all
societies face?
A) Inflation
B) Unemployment
C) Scarcity
D) Inequality
Answer: C) Scarcity
Explanation: Scarcity is the basic economic problem that arises because
human wants are unlimited, but the resources needed to satisfy those
wants are limited. This forces individuals and societies to make choices
about how to allocate their finite resources. Inflation, unemployment,
and inequality are significant economic issues, but they are
consequences of, or related to, scarcity and the choices made in its
presence, rather than the fundamental problem itself.
,2|Page
Question 2
The concept of "opportunity cost" is best defined as:
A) The total cost of producing a good, including both explicit and
implicit costs.
B) The value of the next-best alternative that is forgone when a choice
is made.
C) The monetary expense incurred when a firm purchases new
equipment.
D) The benefit received from the best alternative that is chosen.
Answer: B) The value of the next-best alternative that is forgone when a
choice is made.
Explanation: Opportunity cost is a core concept in economics
representing the value of the trade-off that must be made. It is not
simply the monetary cost, but the value of the best alternative you give
up. When you make a choice, the opportunity cost is the benefit you
would have received from the next-best option that you did not choose.
Option A describes total economic cost. Option C is explicit cost. Option
D is the benefit of the chosen option, not the cost of the foregone one.
Question 3
Which of the following is NOT one of the four categories of economic
resources (factors of production)?
A) Land
,3|Page
B) Labor
C) Capital
D) Money
Answer: D) Money
Explanation: The four factors of production are land (natural resources),
labor (human effort), capital (produced goods used to make other
goods, like machinery), and entrepreneurship (the ability to innovate
and take risks). Money is not a factor of production; it is a medium of
exchange that facilitates the purchase of factors of production. It is not
itself used directly to produce goods and services.
Question 4
Microeconomics is primarily concerned with the study of:
A) The overall performance of the national economy.
B) The behavior of individual consumers, firms, and markets.
C) Government fiscal and monetary policy.
D) International trade and global finance.
Answer: B) The behavior of individual consumers, firms, and markets.
Explanation: Microeconomics focuses on the smaller units within the
economy. It examines how individual consumers make decisions about
what to buy, how firms decide what and how much to produce, and
how these decisions interact in specific markets to determine prices and
quantities. Macroeconomics (Option A and C) looks at the economy as a
, 4|Page
whole, while international economics (Option D) is often a separate
field.
Question 5
A production possibilities frontier (PPF) that is bowed outward (concave
to the origin) illustrates the concept of:
A) Constant opportunity costs.
B) Increasing opportunity costs.
C) Decreasing opportunity costs.
D) Technological unemployment.
Answer: B) Increasing opportunity costs.
Explanation: A bowed-outward PPF, also known as a concave PPF,
reflects the law of increasing opportunity costs. As you produce more
and more of one good, you must give up increasing amounts of the
other good. This is because resources are not perfectly adaptable to the
production of both goods; as you allocate more resources to one good,
you start using resources that are less and less efficient in its
production, forcing you to sacrifice more of the other good. Constant
opportunity costs are represented by a straight-line PPF.
Question 6
If an economy is producing at a point inside its production possibilities
frontier, this indicates:
A) The economy is using its resources efficiently.
ECN 211 ASU Exam Preparation With Complete
Questions And Correct Answers With Rationales
Already Graded A+ Brand New Version!!
Question 1
Which of the following is the fundamental economic problem that all
societies face?
A) Inflation
B) Unemployment
C) Scarcity
D) Inequality
Answer: C) Scarcity
Explanation: Scarcity is the basic economic problem that arises because
human wants are unlimited, but the resources needed to satisfy those
wants are limited. This forces individuals and societies to make choices
about how to allocate their finite resources. Inflation, unemployment,
and inequality are significant economic issues, but they are
consequences of, or related to, scarcity and the choices made in its
presence, rather than the fundamental problem itself.
,2|Page
Question 2
The concept of "opportunity cost" is best defined as:
A) The total cost of producing a good, including both explicit and
implicit costs.
B) The value of the next-best alternative that is forgone when a choice
is made.
C) The monetary expense incurred when a firm purchases new
equipment.
D) The benefit received from the best alternative that is chosen.
Answer: B) The value of the next-best alternative that is forgone when a
choice is made.
Explanation: Opportunity cost is a core concept in economics
representing the value of the trade-off that must be made. It is not
simply the monetary cost, but the value of the best alternative you give
up. When you make a choice, the opportunity cost is the benefit you
would have received from the next-best option that you did not choose.
Option A describes total economic cost. Option C is explicit cost. Option
D is the benefit of the chosen option, not the cost of the foregone one.
Question 3
Which of the following is NOT one of the four categories of economic
resources (factors of production)?
A) Land
,3|Page
B) Labor
C) Capital
D) Money
Answer: D) Money
Explanation: The four factors of production are land (natural resources),
labor (human effort), capital (produced goods used to make other
goods, like machinery), and entrepreneurship (the ability to innovate
and take risks). Money is not a factor of production; it is a medium of
exchange that facilitates the purchase of factors of production. It is not
itself used directly to produce goods and services.
Question 4
Microeconomics is primarily concerned with the study of:
A) The overall performance of the national economy.
B) The behavior of individual consumers, firms, and markets.
C) Government fiscal and monetary policy.
D) International trade and global finance.
Answer: B) The behavior of individual consumers, firms, and markets.
Explanation: Microeconomics focuses on the smaller units within the
economy. It examines how individual consumers make decisions about
what to buy, how firms decide what and how much to produce, and
how these decisions interact in specific markets to determine prices and
quantities. Macroeconomics (Option A and C) looks at the economy as a
, 4|Page
whole, while international economics (Option D) is often a separate
field.
Question 5
A production possibilities frontier (PPF) that is bowed outward (concave
to the origin) illustrates the concept of:
A) Constant opportunity costs.
B) Increasing opportunity costs.
C) Decreasing opportunity costs.
D) Technological unemployment.
Answer: B) Increasing opportunity costs.
Explanation: A bowed-outward PPF, also known as a concave PPF,
reflects the law of increasing opportunity costs. As you produce more
and more of one good, you must give up increasing amounts of the
other good. This is because resources are not perfectly adaptable to the
production of both goods; as you allocate more resources to one good,
you start using resources that are less and less efficient in its
production, forcing you to sacrifice more of the other good. Constant
opportunity costs are represented by a straight-line PPF.
Question 6
If an economy is producing at a point inside its production possibilities
frontier, this indicates:
A) The economy is using its resources efficiently.
