Basic Economic Concepts Quiz

What is the basic economic problem concerned with?

• How to increase production of goods

• How to allocate scarce resources to satisfy unlimited needs and wants

• How to reduce government spending

• How to maximize profits for businesses

Who are considered economic agents?

• Only government officials

• Only private companies

• Households and firms in the private sector, and the government

• Only international organizations

What is the main aim of the private sector?

• To provide public services

• To earn profit for its owners

• To regulate the economy

• To reduce unemployment

What are goods?

• Non-physical items like services

• Physical items such as tables, cars, toothpaste, and pencils

• Digital products like software

• Only luxury items

What is opportunity cost?

• The cost of producing a good

• The value of the next best alternative foregone

• The total cost of all resources used

• The profit made from a decision

What is the definition of market disequilibrium?

• When the price for a product is too high or too low, resulting in excess supply or demand.

• When the market is perfectly balanced with no excess supply or demand.

• When the demand for a product is equal to its supply.

• When the price mechanism fails to allocate resources.

How does the price mechanism function in a market?

• By relying on market forces of demand and supply to allocate resources.

• By setting fixed prices for all goods and services.

• By government intervention to control prices.

• By ensuring all products are sold at a loss.

What happens during a contraction in demand?

• The quantity demanded falls following an increase in price.

• The quantity demanded increases following a decrease in price.

• The supply of the product increases.

• The market reaches equilibrium.

What is the result of excess demand in a market?

• A shortage occurs because the price is below the equilibrium price.

• A surplus occurs because the price is above the equilibrium price.

• The market reaches equilibrium.

• The supply exceeds the demand.

What should a firm do to earn more revenue if the demand for a product is elastic?

• Lower the price.

• Raise the price.

• Keep the price constant.

• Increase production costs.