1: Introduction to Economics

1. Which of the following is not a factor of production?
a) Labour
b) Capital
c) Natural resources
d) Money

Answer: d) Money

2. Which of the following is not a basic economic problem?
a) What to produce?
b) How to produce?
c) When to produce?
d) For whom to produce?

Answer: c) When to produce?

3. Opportunity cost is:
a) The cost of producing one more unit of a good
b) The cost of producing one unit of a good in terms of another good
c) The cost of producing one unit of a good in terms of money
d) The cost of producing one unit of a good in terms of time

Answer: b) The cost of producing one unit of a good in terms of another good

4. The law of demand states that:
a) As price increases, quantity demanded also increases
b) As price decreases, quantity demanded also decreases
c) As price increases, quantity demanded decreases
d) As price decreases, quantity demanded increases

Answer: d) As price decreases, quantity demanded increases

5. Which of the following is not a determinant of demand?
a) Income
b) Price of the good itself
c) Price of related goods
d) Cost of production

Answer: d) Cost of production

6. Which of the following is a characteristic of a market economy?
a) Government control of prices
b) Private ownership of resources
c) Central planning
d) Limited consumer choice

Answer: b) Private ownership of resources

7. Which of the following is a characteristic of a command economy?
a) Private ownership of resources
b) Consumer sovereignty
c) Central planning
d) Competition among firms

Answer: c) Central planning

8. Which of the following is not a goal of macroeconomic policy?
a) Full employment
b) Price stability
c) Economic growth
d) Profit maximization

Answer: d) Profit maximization

9. The circular flow diagram shows that:
a) Firms supply goods and services to households
b) Households supply goods and services to firms
c) Firms and households are completely independent of each other
d) The government plays no role in the economy

Answer: a) Firms supply goods and services to households

10. Which of the following is not a factor that affects the level of economic development in a country?
a) Natural resources
b) Education and training
c) Political stability
d) Population density

Answer: d) Population density