Economics Practice Test Questions And Answers
Hey, do you think yourself an economics expert? If yes, then here's a challenge for you. Take this Economics practice test quiz and see if you can score more than 80% on it. Economics is a very interesting subject. It helps us deal with the problem of resource scarcity and how to deal with it efficiently. People who are an expert in this subject study the economic condition of society and know-how to make the most of the resources that are available to us. Try this quiz and refresh your concepts today!
Questions and Answers
- 1.
What is the financial gain made in transactions?
- A.
Profit
- B.
Resource
- C.
Scarcity
- D.
Wage
Correct Answer
A. ProfitExplanation
Profit is the financial gain made in transactions. It represents the difference between the revenue earned from selling goods or services and the expenses incurred in producing or delivering them. Profit is a crucial aspect of business as it indicates the success and sustainability of the enterprise. It allows companies to reinvest in their operations, expand, and reward stakeholders. Profit is calculated by subtracting the total costs from the total revenue, and a positive value indicates a gain or profit.Rate this question:
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- 2.
What is an economic or productive factor required to accomplish an activity?
- A.
Specialization
- B.
Resource
- C.
Traditional system
- D.
Wage
Correct Answer
B. ResourceExplanation
An economic or productive factor required to accomplish an activity is referred to as a resource. Resources can include various inputs such as land, labor, capital, and entrepreneurship, which are essential for the production of goods and services. These resources are utilized in the production process to generate output and contribute to economic growth and development. Without resources, it would be impossible to carry out any economic activity effectively.Rate this question:
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- 3.
Name the economic system that relies on habit, custom, or ritual to decide questions of production and consumption of goods and services.
- A.
Capitalism
- B.
Socialism
- C.
Traditional system
- D.
Barter system
Correct Answer
C. Traditional systemExplanation
The correct answer is traditional system. This economic system relies on habit, custom, or ritual to make decisions regarding the production and consumption of goods and services. In this system, economic activities are based on traditions and cultural norms that have been passed down through generations. The production methods, distribution, and consumption patterns are determined by long-standing customs and rituals rather than individual choices or market forces. This system is often found in remote or isolated communities where modern economic systems have not yet been adopted.Rate this question:
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- 4.
The payment made by an employer to an employee is called _____.
- A.
Profit
- B.
Marginal
- C.
Interest
- D.
Wage
Correct Answer
D. WageExplanation
The payment made by an employer to an employee is called "wage". This term specifically refers to the compensation given to an employee for their work or services rendered. It is a common form of payment in various industries and is typically calculated based on an hourly, daily, or weekly rate. Other options such as profit, marginal, and interest do not accurately describe the payment made by an employer to an employee.Rate this question:
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- 5.
The formal organization of producers that agree to coordinate prices and production is called __________.
- A.
Cartel
- B.
Traditional system
- C.
Command system
- D.
Corporation
Correct Answer
A. CartelExplanation
A cartel is a formal organization or agreement among competing businesses or producers within a particular industry. The primary purpose is to coordinate and regulate certain aspects, such as pricing and production levels, often with the aim of maximizing profits for the member entities.Rate this question:
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- 6.
What are two goods that are bought and used together?
- A.
Monopolistic competition
- B.
Market system
- C.
Complementary goods
- D.
Efficiency
Correct Answer
C. Complementary goodsExplanation
Complementary goods are goods that are bought and used together because they enhance the value or utility of each other. For example, peanut butter and jelly are complementary goods because they are often used together to make a sandwich. When the price of one complementary good increases, the demand for the other complementary good may decrease because it becomes more expensive to use them together. Therefore, complementary goods have a close relationship in consumption and are often purchased together.Rate this question:
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- 7.
The legal entity owned by individual stockholders is termed as _______.
- A.
Capital
- B.
Free enterprise
- C.
Specialization
- D.
Corporation
Correct Answer
D. CorporationExplanation
A corporation is a legal entity owned by individual stockholders. This means that the ownership of the corporation is divided among multiple individuals who hold shares of stock. These stockholders have limited liability, meaning that their personal assets are protected in the event of the corporation's debts or legal issues. The corporation operates as a separate legal entity from its owners, allowing it to enter into contracts, own property, and engage in business activities.Rate this question:
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- 8.
The desire to own something and the ability to pay for it called __________.
- A.
Demand
- B.
Allocation
- C.
Capital
- D.
Opportunity cost
Correct Answer
A. DemandExplanation
The desire to own something refers to the demand for that particular item. The ability to pay for it indicates the willingness and purchasing power of the individual. Therefore, the correct answer is demand, as it encompasses both the desire and the ability to pay for a product or service.Rate this question:
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- 9.
The measure used to determine how consumers react to a change in price is termed as _______.
- A.
Elasticity
- B.
Marginal
- C.
Equilibrium price
- D.
Scarcity
Correct Answer
A. ElasticityExplanation
Elasticity is the measure used to determine how consumers react to a change in price. It measures the responsiveness of demand to changes in price. If demand is elastic, a small change in price will result in a large change in quantity demanded. If demand is inelastic, a change in price will have little impact on quantity demanded. Elasticity is an important concept in economics as it helps businesses and policymakers understand how changes in price will affect consumer behavior and overall market dynamics.Rate this question:
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- 10.
The point at which the quantity demanded and the quantity supplied are equal is called ________.
- A.
Elasticity
- B.
Efficiency
- C.
Equilibrium price
- D.
Production possibilites
Correct Answer
C. Equilibrium priceExplanation
The equilibrium price is the price at which the quantity demanded and the quantity supplied in a market are equal. It represents a balance between buyers and sellers, where the market clears and there is no excess supply or demand. At the equilibrium price, the market is in a state of balance, and there is no pressure for prices to change.Rate this question:
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- 11.
What is the study of economic behavior and decision makings of small units, such as individuals, families, and businesses called?
- A.
Macroeconomics
- B.
Microeconomics
- C.
Economics
- D.
Economic statistics
Correct Answer
B. MicroeconomicsExplanation
Microeconomics is the study of economic behavior and decision-making of small units, such as individuals, families, and businesses. It focuses on analyzing how these units make choices regarding the allocation of resources and the impacts of these choices on prices, production, and consumption. Microeconomics helps in understanding the behavior of individual economic agents and how their interactions shape the overall economy.Rate this question:
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- 12.
Name the market structure in which many companies sell products that are similar but not identical.
- A.
Monopoly
- B.
Traditional system
- C.
Oligopoly
- D.
Monopolistic competition
Correct Answer
D. Monopolistic competitionExplanation
Monopolistic competition is the market structure in which many companies sell products that are similar but not identical. In this type of market, each company has some control over the price of its product and can differentiate it from competitors through branding, advertising, or other means. However, there is still some level of competition as consumers have the option to choose between different products that offer slightly different features or attributes. This market structure allows for a certain degree of product differentiation and non-price competition among firms.Rate this question:
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- 13.
What economic principle explains the relationship between the scarcity of a resource and its value?
- A.
Law of Demand
- B.
Law of Supply
- C.
Law of Diminishing Returns
- D.
Law of Scarcity
Correct Answer
D. Law of ScarcityExplanation
The Law of Scarcity states that when a resource is rare (scarce), it becomes more valuable. This principle underpins much of economic theory, which asserts that scarce resources are typically worth more because the limited supply tends to increase demand, assuming the resource has a desirable utility. The other laws mentioned, such as the Law of Demand and Law of Supply, address different aspects of how prices and quantities are determined in the market but do not directly explain the intrinsic relationship between scarcity and value like the Law of Scarcity does. The Law of Diminishing Returns relates to the decrease in the marginal (incremental) output of a production process as more units of a variable input are added, and is also distinct from explaining the value of scarcity.Rate this question:
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- 14.
The machines and robots at the KIA plant are an example of ________.
- A.
Capital
- B.
Economic technology
- C.
Specialization
- D.
None of the above
Correct Answer
A. CapitalExplanation
The machines and robots at the KIA plant are an example of capital because they are physical assets that are used in the production process to create goods and services. Capital includes machinery, equipment, buildings, and other resources that are used to generate income. In this case, the machines and robots are essential for the production of KIA vehicles, making them a form of capital investment.Rate this question:
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- 15.
Which country represents a substantial degree of socialism?
- A.
Denmark
- B.
Canada
- C.
United Kingdom
- D.
Australia
Correct Answer
A. DenmarkExplanation
Denmark represents a substantial degree of socialism because it has a strong welfare state, high taxes, and a comprehensive social security system. The country provides universal healthcare, free education, and generous social benefits to its citizens. The government plays a significant role in regulating the economy and ensuring social equality. Denmark's social policies prioritize the well-being of its citizens and aim to reduce income inequality and provide a high standard of living for all.Rate this question:
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- 16.
Corporations are in business for ________.
- A.
Profit
- B.
Non-profit
- C.
Stockholders
- D.
Loss
Correct Answer
A. ProfitExplanation
Corporations are in business for profit. Profit is the financial gain that a company makes after deducting all expenses from its revenue. It is the primary goal of corporations to generate profit in order to sustain their operations, invest in growth, and provide returns to their shareholders. Profit allows corporations to expand their business, develop new products or services, and create employment opportunities. It is a key indicator of a company's success and financial health.Rate this question:
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- 17.
At full capacity, the KIA plant should produce ______ vehicles per year.
- A.
250,000,000
- B.
1 billion
- C.
300,000
- D.
2 billion
Correct Answer
C. 300,000Explanation
At full capacity, the KIA plant should produce 300,000 vehicles per year. This answer is the only reasonable option given the context of the question. The other options, such as 250,000,000 and 1 billion, are extremely high numbers that are unlikely to be achievable by a single plant. Similarly, the option of 2 billion is also too high and unrealistic. Therefore, the most plausible answer is 300,000 vehicles per year.Rate this question:
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- 18.
When a state agrees to lower a tax rate for one corporation so that the corporation builds a plant or factory in that state, it is an example of _____.
- A.
Capitalism
- B.
Monopolistic competition
- C.
Incentive
- D.
None of the above
Correct Answer
C. IncentiveExplanation
When a state agrees to lower a tax rate for one corporation so that the corporation builds a plant or factory in that state, it is an example of an incentive. This is because the state is providing a financial benefit or advantage to the corporation in order to encourage them to invest and create jobs in the state. By offering a lower tax rate, the state is incentivizing the corporation to choose their location over others, ultimately benefiting the state's economy.Rate this question:
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- 19.
What is financial compensation in exchange for labor called?
- A.
Profit
- B.
Wage
- C.
Capital
- D.
Loss
Correct Answer
B. WageExplanation
Financial compensation in exchange for labor is called a wage. A wage is the payment that an employer gives to an employee in return for their work or services. It is typically calculated based on the number of hours worked or the completion of specific tasks. Wages can vary depending on factors such as the type of job, skill level, and industry. Unlike profit, which refers to the earnings or income generated by a business, wages specifically pertain to the compensation received by an individual for their personal labor or effort.Rate this question:
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- 20.
When a consumer buys a car from a dealership, this is an example of ______.
- A.
Macroeconomics
- B.
Microeconomics
- C.
Home Economics
- D.
Statistics
Correct Answer
B. MicroeconomicsExplanation
When a consumer buys a car from a dealership, it falls under the domain of microeconomics. Microeconomics focuses on individual economic units such as households, consumers, and businesses. In this scenario, the purchase of a car by a consumer is a microeconomic decision that involves factors such as the consumer's income, preferences, and the price and availability of cars in the market. It does not involve the broader study of national or global economic factors, which would be covered under macroeconomics.Rate this question:
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Current Version
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Aug 18, 2024Quiz Edited by
ProProfs Editorial Team -
Aug 31, 2011Quiz Created by
Jessicaleague
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