Economics Chap 1,2,3 MCQS

ECONOMICS
CHAPTER 1
Question 1
Which of the following statements about factors of production is false?

a) The term 'factors of production' is another term for resources.
b) The factor of production termed labour means human resources.
c) The factor or production termed land means natural resources.
d) The factor of production termed capital means the money which the owners
of firms need in order to set their firms up.
Question 2
Which of the following statements about the use of resources is not one of the key
questions in economics?
a) How are resources used?
b) Where are resources used?
c) For what are resources used?
d) For whom are resources used?
Question 3
Which of the following statements about producers is false?

a) Households produce many goods and services for themselves
b) People set up some producers who do not aim to make profits.
c) All the goods and services consumed in any country are produced by its
own producers.
d) Governments arrange the production of some goods and services.
Question 4
Which of the following statements is true?
a) Despite the problem of scarcity, people do not always want producers to

use the most efficient production methods.
b) The problem of scarcity would disappear if the world's population grew to
ensure more labour was available.
c) A producer who uses no more resources than it needs must display
productive efficiency.
d) The world's economies were as integrated 50 years ago as they are today
Question 5
What is meant by intermediate goods and services?
a) The same as capital goods, such as plant, buildings, vehicles and

machinery.
b) Products which one firm buys off another and then uses up in its own
products.
c) All inputs bought by firms, including labour and raw materials.
d) Imports.
Question 6
What is meant by the term final goods and services?
a) The same as the term intermediate goods and services.

b) The same as the term consumer goods and services.
c) All goods and services except those traded second hand.
d) Goods and services which are finished as far as the economy is
concerned.
Question 7
Which of the following statements is false?

a) Purchases of capital goods are called investment
b) GDP equals the total value of wages received by households.
c) In a simple economy with just households and firms, the value of
investment equals the value of saving.
d) In a simple economy with just households and firms, the value of
investment plus consumers' expenditure equals GDP.
Question 8

a) GDP measures the value of all the goods and services produced in the
economy.
b) GDP stands for gross domestic product.
c) GDP excludes intermediate goods and services.
d) GDP equals wages plus trading profits.
Question 9
a) Microeconomics is concerned chiefly with the economy as a whole.

b) Macroeconomics is concerned chiefly with individual markets.
c) Governments have no influence over market prices.
d) When economists study the price in a market, their chief aims are to
understand why the price is what it is and why it may change.
Question 10

a) An economic model is a theory based on key variables and expressed in
formal terms.
b) An economic model is tested by seeing how accurate its predictions are.
c) Testing economic models is rarely tricky.
d) The words 'ceteris paribus' mean other things remaining the same.
CHAPTER 2
Question 1
Which of the following is not required for a country to be producing at a point on its
production possibility frontier?
a) Full employment of labour.
b) All producers using the latest technology.
c) Stable prices.
d) All producers having productive efficiency.
Question 2
a) The production possibility frontier is steeper at the right end than the left
because some resources are better suited to making some products than
others.
b) The production possibility frontier is straight because some resources are
better suited to making some products than others.
c) The production possibility frontier is steeper at the left end than the right
because some resources are better suited to making some products than
others.
d) The production possibility passes the point which represents total wants in
the economy.
Question 3
Which of the following will not shift a country's production possibility frontier?
a) A fall in unemployment.
b) An increase in the age at which people retire.
c) The introduction of improved technology.
d) Purchases of new capital by firms.
Question 4
Which of the following types of economy describes the economy of the UK?
a) A command economy.
b) A market economy.
c) A mixed economy.
d) A planned economy.
Question 5
All the following government policies are likely to increase the quantity of some
products that are produced. But with one policy, this effect is a side-effect rather than
the aim. Which policy is that?
a) A policy intended to improve efficiency.

b) The introduction of subsidies on some products.
c) A policy intended to reduce unemployment.
d) The introduction of taxes on the rich and transfers to the poor.
Question 6
Which of the following policies would increase production by taking it to a point closer
to the production possibility frontier, but would not shift the frontier?
a) A policy that encouraged firms to buy more industrial plant.

b) A policy that encouraged firms to develop and introduce improved
technology.
c) A policy that encouraged firms to buy more machinery.
d) A policy that encouraged firms to adopt better technologies that are already
available.
Question 7
Suppose a country is currently producing at a point on its production possibility

frontier, and undertakes no trade with other countries. Then trade is opened up. Which
of the following would not occur as a direct result?
a) Its production possibility frontier would shift.
b) Its production would shift to another point on its production possibility
frontier.
c) The pattern of products that the country produced would differ from the
pattern that its consumers consumed.
d) Consumers would be able to consume at a point outside the production
possibility frontier.
Question 8
Which of the following policies is not classed as a stabilization policy?

a) A policy aimed at reducing unemployment.
b) A policy aimed at reducing the number of people in poverty.
c) A policy aimed at reducing the rate of inflation.
d) A policy aimed at shifting the production possibility frontier outwards.
Question 9
Which of the following statements is a positive statement?
a) Bankers' bonuses should be taxed.

b) The eurozone ought to allow member countries in difficulty to stop using
the euro and use currencies of their own instead.
c) One of the largest industries in the UK is the financial services industry.
d) The UK government ought to split up some of the largest UK banks to
promote more competition in the banking industry.
Question 10
Suppose you buy Economics by David King. What is the opportunity cost of your
purchase?
a) The money you paid for the book.
b) Whatever you would have spent the money on if you had not bought the
book.
c) The cost of producing the book.
d) The time you spend studying the book.
CHAPTER 3
Question 1
The supply and demand model applies when three of the following four conditions are
met. Which condition is not required?
a) There must be many buyers.
b) There must be many sellers.
c) The buyers and sellers must trade an identical item.
d) The item traded must be a product.
Question 2
Which of the following predictions is not made by the supply and demand model?
a) If there is excess demand, the price will rise.
b) If there is excess supply, the price will fall.
c) If there is no excess demand or excess supply, the market will be in
equilibrium.
d) A market which is out of equilibrium will always move rapidly to the
equilibrium,
Question 3
Suppose there is excess supply in a market and the price decreases. Which of the
following combinations of events will occur?
a) There will be a fall in quantity supplied and a rise in quantity demanded.

b) There will be a fall in quantity supplied and a rise in demand.
c) There will be a fall in supply and a rise in quantity demanded.
d) There will be a fall in supply and a rise in demand.
Question 4
Suppose there is a decrease in supply in a market where the supply curve slopes
upwards and the demand curve slopes downwards. Which of the following
would not occur?
a) An excess supply.
b) A fall in price.
c) A fall in supply.
d) A fall in the equilibrium level of expenditure.
Question 5
Suppose a market is in equilibrium, and then the demand increases. Which of the
following would be shown on a graph that illustrated the effects?
a) An excess demand at the initial equilibrium price.

b) An excess demand at the new equilibrium price.
c) An excess supply at the initial equilibrium price.
d) An excess supply at the new equilibrium price.
Question 6
Suppose there is an increase in demand in a market where the supply curve slopes
upwards and the demand curve slopes downwards. Which of the following
might not occur?
a) An excess supply.
b) A fall in price.
c) A rise in the quantity traded.
d) A fall in the equilibrium level of expenditure.
Question 7
Which of the following might not lead to an increase in the demand for a product that
can be stored?
a) A fall in the price of a complement.
b) A rise in consumer incomes.
c) An increase in the number of buyers.
d) An expected rise in price.
Question 8
Which of the following might not lead to a decrease in the demand for a type of labour?
a) A decrease in the number of firms using the labour.
b) An increase in the productivity of the labour.
c) A fall in the price of a substitute input.
d) A decrease in the demand for the produce or products which the labour is
used to produce.
Question 9
Which of the following would not lead to a decrease in the supply of a product that can
be stored?
a) An increase in the demand for a joint product.
b) A rise in the price of another input.
c) A decrease in the number of firms supplying the product.
d) An expected rise in the price of the product.
Question 10
Which of the following could not lead to an increase in price combined with an increase
in the quantity traded?
a) An increase in demand combined with unchanged supply.
b) An increase in demand combined with a decrease in supply.
c) A decrease in demand combined with an increase in supply.
d) An increase in demand combined with an increase in supply.

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ECONOMICS

Which of the following statements about factors of production is false?

Which of the following statements about producers is false?

Which of the following statements is true?

a) Despite the problem of scarcity, people do not always want producers to

a) The same as capital goods, such as plant, buildings, vehicles and

What is meant by the term final goods and services?

a) The same as the term intermediate goods and services.

Which of the following statements is false?

Which of the following statements is false?

Which of the following statements is true?

a) Microeconomics is concerned chiefly with the economy as a whole.

Which of the following statements is false?

Which of the following statements is true?

a) A policy intended to improve efficiency.

a) A policy that encouraged firms to buy more industrial plant.

Suppose a country is currently producing at a point on its production possibility

Which of the following policies is not classed as a stabilization policy?

Which of the following statements is a positive statement?

a) Bankers' bonuses should be taxed.

a) There will be a fall in quantity supplied and a rise in quantity demanded.

a) An excess demand at the initial equilibrium price.

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