1. The study of economics is best described as the
study of:
A. Money.
B. Profit and loss.
C. Choice under scarcity.
D. Production techniques.
Answer: C
Rationale: Economics examines how individuals and
societies allocate limited resources among competing
uses—essentially, how choices are made because
resources are scarce.
2. Opportunity cost is defined as:
A. The monetary cost of a decision.
B. The benefit of the option that is given up when making
a choice.
C. The cost incurred from error in judgment.
D. Any cost related to production.
Answer: B
Rationale: Opportunity cost is the value of the next best
alternative that must be foregone when a decision is
made.
,3. Scarcity exists because:
A. Human wants are unlimited while resources are limited.
B. There is an excess of resources relative to needs.
C. Technology restricts consumption.
D. Preferences change over time.
Answer: A
Rationale: The fundamental economic problem is that
resources are finite even though human wants are
potentially endless, which forces choices to be made.
4. Which of the following is an example of a
microeconomic issue?
A. The national unemployment rate.
B. Overall economic growth of a country.
C. The price of maize in a local market.
D. Inflation of a nation’s currency.
Answer: C
Rationale: Microeconomics examines individual markets
and decision‐making; the price of maize in a local market
is an example of a microeconomic issue.
5. Which of the following best represents a
macroeconomic issue?
A. A firm’s pricing strategy.
B. Consumer choice in a small market.
, C. The aggregate national production.
D. The pricing of a specific brand of tea.
Answer: C
Rationale: Macroeconomics focuses on aggregate
measures such as national income, overall production,
and economic growth.
6. Consumer equilibrium is achieved when:
A. Total utility is minimized.
B. The marginal utility per dollar spent is equal for all
goods purchased.
C. One good is consumed exclusively.
D. Some income is left unspent.
Answer: B
Rationale: Consumer equilibrium occurs when a
consumer allocates their income so that the last unit of
money spent on every good provides equal marginal
utility, maximizing total satisfaction.
7. The production possibility frontier (PPF) shows:
A. The maximum combination of outputs given available
resources and technology.
B. How consumer tastes change over time.
C. Total revenue possibilities of an economy.
D. The demand for inputs.
study of:
A. Money.
B. Profit and loss.
C. Choice under scarcity.
D. Production techniques.
Answer: C
Rationale: Economics examines how individuals and
societies allocate limited resources among competing
uses—essentially, how choices are made because
resources are scarce.
2. Opportunity cost is defined as:
A. The monetary cost of a decision.
B. The benefit of the option that is given up when making
a choice.
C. The cost incurred from error in judgment.
D. Any cost related to production.
Answer: B
Rationale: Opportunity cost is the value of the next best
alternative that must be foregone when a decision is
made.
,3. Scarcity exists because:
A. Human wants are unlimited while resources are limited.
B. There is an excess of resources relative to needs.
C. Technology restricts consumption.
D. Preferences change over time.
Answer: A
Rationale: The fundamental economic problem is that
resources are finite even though human wants are
potentially endless, which forces choices to be made.
4. Which of the following is an example of a
microeconomic issue?
A. The national unemployment rate.
B. Overall economic growth of a country.
C. The price of maize in a local market.
D. Inflation of a nation’s currency.
Answer: C
Rationale: Microeconomics examines individual markets
and decision‐making; the price of maize in a local market
is an example of a microeconomic issue.
5. Which of the following best represents a
macroeconomic issue?
A. A firm’s pricing strategy.
B. Consumer choice in a small market.
, C. The aggregate national production.
D. The pricing of a specific brand of tea.
Answer: C
Rationale: Macroeconomics focuses on aggregate
measures such as national income, overall production,
and economic growth.
6. Consumer equilibrium is achieved when:
A. Total utility is minimized.
B. The marginal utility per dollar spent is equal for all
goods purchased.
C. One good is consumed exclusively.
D. Some income is left unspent.
Answer: B
Rationale: Consumer equilibrium occurs when a
consumer allocates their income so that the last unit of
money spent on every good provides equal marginal
utility, maximizing total satisfaction.
7. The production possibility frontier (PPF) shows:
A. The maximum combination of outputs given available
resources and technology.
B. How consumer tastes change over time.
C. Total revenue possibilities of an economy.
D. The demand for inputs.
