Basic Economics Trivia Quiz Questions!
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It’s time to get down to basics as we take a look at one of the more complex topics when it comes to business and finance; economics! It sounds easy on paper – it’s just the study of production, distribution, and consumption of goods and services – but it involves a lot of math and analysis you might not understand when starting out. What can you understand, however? Let’s take a look.
- 1.
If the CPI in 2000 is 100 and the CPI in 2008 is 110, there has been:
- A.
Slight inflation
- B.
Slight deflation
- C.
Extreme inflation
- D.
Extreme deflation
- E.
Stagflation
Correct Answer
A. Slight inflationExplanation
The given answer, "slight inflation," is correct because the Consumer Price Index (CPI) in 2008 is higher than the CPI in 2000. This indicates that the average price level of goods and services has increased slightly over the years, suggesting inflation.Rate this question:
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- 2.
Why are transfer payments not a component of GDP?
- A.
They are too large and would skew data
- B.
They are negligible in size and scope
- C.
They do not generate wealth
- D.
They only measure a producer's impact on GDP
- E.
They only measure the government's impact on GDP
Correct Answer
C. They do not generate wealthExplanation
Transfer payments are not considered a component of GDP because they do not generate wealth. Transfer payments are payments made by the government to individuals or other entities without any corresponding production of goods or services. These payments include welfare benefits, social security payments, and unemployment benefits, among others. While transfer payments can have an impact on individuals' purchasing power and overall economic well-being, they do not directly contribute to the production of goods and services, which is the primary focus of GDP measurement. Therefore, transfer payments are excluded from GDP calculations.Rate this question:
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- 3.
What is the effect of a price ceiling in the long run?
- A.
Equilibrium
- B.
Shortages
- C.
Surpluses
- D.
Inflation
- E.
Deflation
Correct Answer
B. ShortagesExplanation
A price ceiling is a government-imposed limit on how high a price can be charged for a particular good or service. In the long run, a price ceiling creates shortages. This is because when the price is set below the equilibrium level, the quantity demanded exceeds the quantity supplied. As a result, consumers are unable to purchase as much of the good or service as they desire, leading to a shortage.Rate this question:
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- 4.
You are an artist. It always takes you an hour to produce one work of art. In other words, 1 work takes 1 hour, two works takes 2 hours, and so forth. Time is your only cost. This violates the principle of
- A.
Demand
- B.
Supply
- C.
Ownership
- D.
Equilibrium
- E.
Diminishing marginal returns
Correct Answer
E. Diminishing marginal returnsExplanation
The principle of diminishing marginal returns states that as you continue to increase the input (in this case, the number of works of art produced), the additional output or benefit gained from each additional unit of input will eventually start to decrease. In this scenario, the artist is able to produce one work of art in one hour. However, if they were to continue producing more works of art, it is likely that the time required to produce each additional work would increase, indicating diminishing marginal returns.Rate this question:
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- 5.
Which of the following is not a component of demand?
- A.
Consumer spending
- B.
Investment
- C.
Government spending
- D.
Transfer payments
- E.
Exports
Correct Answer
D. Transfer paymentsExplanation
Transfer payments are not a component of demand because they do not directly contribute to the production of goods and services. Transfer payments refer to money or benefits given to individuals or households by the government without any corresponding production of goods or services. While consumer spending, investment, government spending, and exports all contribute to the overall demand for goods and services in an economy, transfer payments do not have a direct impact on demand as they do not result in the purchase of goods or services.Rate this question:
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- 6.
Which of the following would cause a supply shift?
- A.
A change in consumer tastes or preferences
- B.
New technology
- C.
Consumer taxes
- D.
Employment figures
- E.
None of the above
Correct Answer
B. New technologyExplanation
New technology can cause a supply shift because it can lead to an increase in productivity and efficiency in the production process. This can result in a larger quantity of goods or services being supplied at each price level. As a result, the supply curve will shift to the right, indicating an increase in supply.Rate this question:
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- 7.
You own a farm that generates $100 K per year. You discover it is sitting on top of an oil field that could generate $500 K per year. Your economic cost of continuing to farm on the land is:
- A.
$100 K
- B.
$400 K
- C.
$200 K
- D.
$500 K
- E.
$1000 K
Correct Answer
B. $400 KExplanation
The economic cost of continuing to farm on the land is $400 K. This is because the farm currently generates $100 K per year, but if the owner were to switch to extracting oil from the oil field, it could generate $500 K per year. Therefore, the opportunity cost of continuing to farm is the potential $400 K difference in income that could be gained from extracting oil.Rate this question:
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Our quizzes are rigorously reviewed, monitored and continuously updated by our expert board to maintain accuracy, relevance, and timeliness.
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Current Version
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Mar 22, 2023Quiz Edited by
ProProfs Editorial Team -
Jul 31, 2008Quiz Created by
Mals
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