D089 ECON 2000
Principles of Economics
Comprehensive OA Review (Qns & Ans)
2025
1. Which of the following best describes the concept of
opportunity cost?
- A) The total cost of producing goods and services
- B) The value of the next best alternative foregone
- C) The cost of labor and materials
- D) The cost of capital investment
- ANS: B) The value of the next best alternative foregone
- Rationale: Opportunity cost represents the benefits an
individual, investor, or business misses out on when choosing one
alternative over another.
©2024/2025
,2. What is the primary purpose of fiscal policy?
- A) To control inflation
- B) To regulate interest rates
- C) To manage government spending and taxation
- D) To control the money supply
- ANS: C) To manage government spending and taxation
- Rationale: Fiscal policy involves government spending and
taxation decisions to influence the economy.
3. Which of the following is NOT a characteristic of a perfectly
competitive market?
- A) Many buyers and sellers
- B) Homogeneous products
- C) Barriers to entry
- D) Perfect information
- ANS: C) Barriers to entry
- Rationale: A perfectly competitive market has no barriers to
entry, allowing free entry and exit of firms.
Fill-in-the-Blank Questions
©2024/2025
, 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 in an economy at different price
levels.
5. In economics, the __________ effect refers to the change in
consumption resulting from a change in real income.
- ANS: Income
- Rationale: The income effect describes how changes in real
income influence consumer spending.
6. The __________ rate is the interest rate at which commercial
banks lend reserves to each other overnight.
- ANS: Federal funds
- Rationale: The federal funds rate is the rate at which banks
lend reserves to each other overnight.
True/False Questions
7. True or False: In the short run, at least one factor of
production is fixed.
- ANS: True
©2024/2025
Principles of Economics
Comprehensive OA Review (Qns & Ans)
2025
1. Which of the following best describes the concept of
opportunity cost?
- A) The total cost of producing goods and services
- B) The value of the next best alternative foregone
- C) The cost of labor and materials
- D) The cost of capital investment
- ANS: B) The value of the next best alternative foregone
- Rationale: Opportunity cost represents the benefits an
individual, investor, or business misses out on when choosing one
alternative over another.
©2024/2025
,2. What is the primary purpose of fiscal policy?
- A) To control inflation
- B) To regulate interest rates
- C) To manage government spending and taxation
- D) To control the money supply
- ANS: C) To manage government spending and taxation
- Rationale: Fiscal policy involves government spending and
taxation decisions to influence the economy.
3. Which of the following is NOT a characteristic of a perfectly
competitive market?
- A) Many buyers and sellers
- B) Homogeneous products
- C) Barriers to entry
- D) Perfect information
- ANS: C) Barriers to entry
- Rationale: A perfectly competitive market has no barriers to
entry, allowing free entry and exit of firms.
Fill-in-the-Blank Questions
©2024/2025
, 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 in an economy at different price
levels.
5. In economics, the __________ effect refers to the change in
consumption resulting from a change in real income.
- ANS: Income
- Rationale: The income effect describes how changes in real
income influence consumer spending.
6. The __________ rate is the interest rate at which commercial
banks lend reserves to each other overnight.
- ANS: Federal funds
- Rationale: The federal funds rate is the rate at which banks
lend reserves to each other overnight.
True/False Questions
7. True or False: In the short run, at least one factor of
production is fixed.
- ANS: True
©2024/2025
