Q1. Economics is best described as the study of:
A. How money circulates in an economy
B. How businesses earn profits
C. How scarce resources are allocated among competing uses
D. How governments collect taxes

Q2. The statement “Microeconomics is the foundation of macroeconomics” means that:
A. Macroeconomics is less important
B. Government policies are set at micro level
C. Aggregate economic outcomes result from individual decisions
D. Microeconomics studies inflation and unemployment

Q3. Scarcity arises in an economy because:
A. Resources are poorly managed
B. Human wants exceed available resources
C. Prices are too high
D. Production is inefficient

Q4. Which situation best illustrates opportunity cost?
A. Buying a product at a discount
B. Choosing to study economics instead of watching a movie
C. Paying tax on income
D. Receiving a salary increase

Q5. In a market economy, prices mainly function to:
A. Increase profits of firms
B. Create competition
C. Signal scarcity and guide resource allocation
D. Reduce government intervention

Q6. Which of the following statements represents positive economics?
A. The government should control prices
B. Higher wages increase production costs
C. Income inequality is unjust
D. Workers deserve higher wages

Q7. A market is best defined as:
A. A physical place where goods are sold
B. A group of producers only
C. An interaction of buyers and sellers determining price
D. A government-regulated institution

Q8. The bowed-out shape of the Production Possibilities Frontier (PPF) shows that:
A. Resources are unlimited
B. Opportunity cost remains constant
C. Resources are perfectly adaptable
D. Opportunity cost increases as production expands

Q9. Which change would cause an outward shift of the PPF?
A. Increase in unemployment
B. Inefficient use of resources
C. Technological progress
D. Inflation

Q10. Which factor of production involves organizing resources and taking business risk?
A. Labor
B. Human capital
C. Physical capital
D. Entrepreneurship

ANSWER KEY

1. C

2. C

3. B

4. B

5. C

6. B

7. C

8. D

9. C

10. D