Introduction to Economics and Basic Concepts MCQs 2026

Economics is best defined as the study of

1. A how scarce resources are allocated among competing uses ✓
2. B only how money is printed by banks ✓
3. C only stock market speculation ✓
4. D only government budget speeches ✓

Scarcity in economics means that

1. A all goods are free ✓
2. B resources are limited relative to unlimited wants ✓
3. C wants are always finite ✓
4. D production is always zero ✓

Opportunity cost is defined as

1. A the value of the next best alternative forgone ✓
2. B the accounting cost of raw materials only ✓
3. C the total of all past sunk costs ✓
4. D the market price of money ✓

A production possibility frontier (PPF) shows

1. A only consumer preferences ✓
2. B only money supply growth ✓
3. C only tax rates ✓
4. D maximum combinations of two goods that can be produced with given resources and technology ✓

A point inside the PPF indicates

1. A full employment and efficiency ✓
2. B unemployment or inefficient use of resources ✓
3. C impossible production ✓
4. D maximum growth always ✓

A point outside the PPF is

1. A unattainable with current resources and technology ✓
2. B always efficient ✓
3. C always preferred by consumers ✓
4. D the only equilibrium ✓

Movement along the PPF illustrates

1. A opportunity cost of producing more of one good ✓
2. B a change in tastes only ✓
3. C inflation of money ✓
4. D government deficits only ✓

An outward shift of the PPF can result from

1. A higher unemployment only ✓
2. B economic growth via more resources or better technology ✓
3. C a fall in labour force always ✓
4. D destruction of capital only ✓

Positive economics deals with

1. A what ought to be only ✓
2. B moral judgments only ✓
3. C political slogans only ✓
4. D what is — objective, testable statements about economic reality ✓

Normative economics involves

1. A only statistical measurement ✓
2. B only GDP accounting ✓
3. C only price indices ✓
4. D value judgments about what ought to be ✓

The statement "Unemployment is 6 percent" is

1. A a normative statement ✓
2. B neither positive nor normative ✓
3. C a positive statement ✓
4. D only a paradox ✓

The statement "Government should reduce inequality" is

1. A a positive fact only ✓
2. B an accounting identity ✓
3. C a PPF shift ✓
4. D a normative statement ✓

Microeconomics primarily studies

1. A national income aggregates only ✓
2. B exchange rates only ✓
3. C individual markets, firms and households ✓
4. D central bank balance sheets only ✓

Macroeconomics primarily studies

1. A a single firm's cost curve only ✓
2. B one consumer's indifference map only ✓
3. C aggregate variables such as GDP, inflation and unemployment ✓
4. D a single product's elasticity only ✓

The four classical factors of production are

1. A money, banks, bonds and shares ✓
2. B imports, exports, tariffs and quotas ✓
3. C wages, rent, interest and only taxes ✓
4. D land, labour, capital and entrepreneurship ✓

Land as a factor of production includes

1. A only factory buildings ✓
2. B natural resources and gifts of nature ✓
3. C only bank deposits ✓
4. D only patents ✓

Capital in economics refers to

1. A only cash in wallets ✓
2. B only government bonds ✓
3. C produced means of production such as machinery and buildings ✓
4. D only consumer food ✓

Entrepreneurship involves

1. A organizing factors and bearing risk for profit ✓
2. B only wage labour without risk ✓
3. C only owning land passively ✓
4. D only printing currency ✓

Ceteris paribus means

1. A other things remaining constant ✓
2. B prices always rise ✓
3. C demand always falls ✓
4. D markets never clear ✓

An economic good is characterized by

1. A unlimited free supply ✓
2. B scarcity and a positive opportunity cost ✓
3. C zero usefulness ✓
4. D no price ever ✓

A free good is one that

1. A is always taxed heavily ✓
2. B is not scarce and has zero opportunity cost ✓
3. C is produced only by monopolies ✓
4. D has infinite price ✓

The basic economic problem is

1. A unlimited resources ✓
2. B absence of wants ✓
3. C zero opportunity cost ✓
4. D scarcity requiring choice ✓

Choice is necessary in economics because of

1. A abundance of all goods ✓
2. B zero prices always ✓
3. C scarcity of resources ✓
4. D perfect foresight ✓

Trade-off means that

1. A having more of one thing requires having less of another ✓
2. B all goods can increase without limit ✓
3. C opportunity cost is always zero ✓
4. D PPF never exists ✓

Efficiency on the PPF means

1. A resources are fully and productively employed ✓
2. B resources are idle ✓
3. C production is impossible ✓
4. D only one good is made ✓

Increasing opportunity cost on a bowed-out PPF arises because

1. A resources are perfectly homogeneous ✓
2. B technology never changes ✓
3. C wants are finite ✓
4. D resources are not equally suited to all uses ✓

A linear PPF implies

1. A increasing opportunity cost ✓
2. B constant opportunity cost ✓
3. C decreasing returns always ✓
4. D zero trade-offs ✓

Deductive method in economics proceeds from

1. A only historical storytelling ✓
2. B only laboratory experiments on plants ✓
3. C general assumptions to particular conclusions ✓
4. D random guessing ✓

Inductive method emphasizes

1. A ignoring all data ✓
2. B generalizing from observed facts ✓
3. C only mathematical axioms without observation ✓
4. D banning statistics ✓

Wealth of Nations is associated with

1. A Karl Marx only ✓
2. B J.M. Keynes only ✓
3. C Alfred Marshall only ✓
4. D Adam Smith ✓

Alfred Marshall is closely associated with

1. A only Marxist surplus value ✓
2. B neoclassical microeconomics and Principles of Economics ✓
3. C only mercantilist bullionism ✓
4. D only modern DSGE models ✓

The central questions of an economy include

1. A only how to print money ✓
2. B only how to ban trade ✓
3. C what, how and for whom to produce ✓
4. D only how to fix one price forever ✓

A market economy relies mainly on

1. A central planning of all output ✓
2. B barter without money always ✓
3. C zero incentives ✓
4. D price signals and private property ✓

A command economy relies mainly on

1. A central planning directives ✓
2. B free price adjustment only ✓
3. C consumer sovereignty only ✓
4. D laissez-faire always ✓

A mixed economy combines

1. A only barter ✓
2. B market mechanisms with government intervention ✓
3. C only pure communism ✓
4. D only autarky ✓

Human wants are said to be

1. A always satiated ✓
2. B finite and fixed forever ✓
3. C unlimited ✓
4. D identical for all people ✓

The reward to labour is called

1. A rent ✓
2. B interest ✓
3. C profit only ✓
4. D wages ✓

The reward to capital is called

1. A wages ✓
2. B rent only ✓
3. C interest ✓
4. D land tax ✓

The reward to land is called

1. A wages ✓
2. B interest only ✓
3. C rent ✓
4. D dividends only ✓

Rational economic behaviour assumes agents

1. A compare costs and benefits to maximize objectives ✓
2. B ignore all incentives ✓
3. C never respond to prices ✓
4. D always act randomly ✓