Principles of Economics/Practice Problems

Multiple Choice Questions

Question 1

Which of the following is a fundamental economic principle?

* A. Unlimited resources

* B. People face trade-offs

* C. Perfect information

* D. No government intervention

Question 2

The concept of "opportunity cost" refers to:

* A. The monetary cost of a decision

* B. The time spent making a decision

* C. The value of the next best alternative forgone

* D. The psychological cost of a decision

Question 3

The principle of diminishing marginal utility suggests that:

* A. As consumption increases, the additional satisfaction derived from each additional unit decreases

* B. As consumption increases, the total satisfaction derived from consumption increases

* C. As consumption decreases, the total satisfaction derived from consumption decreases

* D. As consumption decreases, the additional satisfaction derived from each additional unit increases

Question 4

The concept of "efficiency" in economics refers to:

* A. Fair distribution of resources

* B. Maximizing output from a given input

* C. Minimizing the cost of production

* D. All of the above

Question 5

The trade-off between "guns and butter" illustrates the concept of:

* A. Scarcity of resources

* B. Opportunity cost

* C. Diminishing marginal utility

* D. Market equilibrium