Ivy Software MBA Prepworks Fundamentals of Economics
(2026) EXAM || MOCK EXAM QUESTIONS AND
CORRECT ANSWERS (VERIFIED) | FULL SET 1–100
1. If demand increases while supply remains constant, price rises (T/F)
ANSWER True
Higher demand with unchanged supply creates upward pressure on prices.
2. If supply increases while demand remains constant, price falls (T/F)
ANSWER True
More supply at the same demand lowers equilibrium price.
3. Opportunity cost refers to the next best alternative forgone (T/F)
ANSWER True
It measures what you give up when making a choice.
4. Scarcity implies unlimited resources (T/F)
ANSWER False
Scarcity means resources are limited.
5. A price ceiling above equilibrium is binding (T/F)
ANSWER False
Only ceilings below equilibrium are binding.
6. A price floor below equilibrium is binding (T/F)
ANSWER False
Only floors above equilibrium are binding.
7. Normal goods have positive income elasticity (T/F)
ANSWER True
Demand rises when income increases.
8. Inferior goods have negative income elasticity (T/F)
ANSWER True
Demand falls when income rises.
9. Elastic demand means quantity responds strongly to price changes (T/F)
ANSWER True
Elasticity > 1 implies high responsiveness.
10. Perfectly inelastic demand is horizontal (T/F)
ANSWER False
It is vertical.
11. GDP measures total market value of final goods and services (T/F)
ANSWER True
Intermediate goods are excluded.
12. Nominal GDP adjusts for inflation (T/F)
ANSWER False
Real GDP adjusts for inflation.
13. Inflation reduces purchasing power (T/F)
ANSWER True
Money buys fewer goods.
, 14. Unemployment rate includes discouraged workers (T/F)
ANSWER False
They are not counted in labor force.
15. Fiscal policy involves government spending and taxation (T/F)
ANSWER True
Used to influence economic activity.
16. Monetary policy is controlled by central banks (T/F)
ANSWER True
They manage money supply and interest rates.
17. Lower interest rates encourage investment (T/F)
ANSWER True
Borrowing becomes cheaper.
18. Higher taxes reduce disposable income (T/F)
ANSWER True
Consumers have less to spend.
19. A monopoly has many sellers (T/F)
ANSWER False
It has a single seller.
20. Perfect competition has identical products (T/F)
ANSWER True
Products are homogeneous.
21. Marginal cost is the cost of producing one more unit (T/F)
ANSWER True
It guides production decisions.
22. Average cost always decreases with output (T/F)
ANSWER False
It can decrease then increase.
23. Law of diminishing returns applies in short run (T/F)
ANSWER True
Adding inputs eventually lowers marginal output.
24. Fixed costs change with output (T/F)
ANSWER False
They remain constant.
25. Variable costs change with output (T/F)
ANSWER True
They depend on production level.
26. A budget constraint shows income limits (T/F)
ANSWER True
It defines affordable combinations.
27. Utility measures satisfaction (T/F)
ANSWER True
Used in consumer theory.
28. Indifference curves cannot cross (T/F)
ANSWER True
Crossing violates consistency.
(2026) EXAM || MOCK EXAM QUESTIONS AND
CORRECT ANSWERS (VERIFIED) | FULL SET 1–100
1. If demand increases while supply remains constant, price rises (T/F)
ANSWER True
Higher demand with unchanged supply creates upward pressure on prices.
2. If supply increases while demand remains constant, price falls (T/F)
ANSWER True
More supply at the same demand lowers equilibrium price.
3. Opportunity cost refers to the next best alternative forgone (T/F)
ANSWER True
It measures what you give up when making a choice.
4. Scarcity implies unlimited resources (T/F)
ANSWER False
Scarcity means resources are limited.
5. A price ceiling above equilibrium is binding (T/F)
ANSWER False
Only ceilings below equilibrium are binding.
6. A price floor below equilibrium is binding (T/F)
ANSWER False
Only floors above equilibrium are binding.
7. Normal goods have positive income elasticity (T/F)
ANSWER True
Demand rises when income increases.
8. Inferior goods have negative income elasticity (T/F)
ANSWER True
Demand falls when income rises.
9. Elastic demand means quantity responds strongly to price changes (T/F)
ANSWER True
Elasticity > 1 implies high responsiveness.
10. Perfectly inelastic demand is horizontal (T/F)
ANSWER False
It is vertical.
11. GDP measures total market value of final goods and services (T/F)
ANSWER True
Intermediate goods are excluded.
12. Nominal GDP adjusts for inflation (T/F)
ANSWER False
Real GDP adjusts for inflation.
13. Inflation reduces purchasing power (T/F)
ANSWER True
Money buys fewer goods.
, 14. Unemployment rate includes discouraged workers (T/F)
ANSWER False
They are not counted in labor force.
15. Fiscal policy involves government spending and taxation (T/F)
ANSWER True
Used to influence economic activity.
16. Monetary policy is controlled by central banks (T/F)
ANSWER True
They manage money supply and interest rates.
17. Lower interest rates encourage investment (T/F)
ANSWER True
Borrowing becomes cheaper.
18. Higher taxes reduce disposable income (T/F)
ANSWER True
Consumers have less to spend.
19. A monopoly has many sellers (T/F)
ANSWER False
It has a single seller.
20. Perfect competition has identical products (T/F)
ANSWER True
Products are homogeneous.
21. Marginal cost is the cost of producing one more unit (T/F)
ANSWER True
It guides production decisions.
22. Average cost always decreases with output (T/F)
ANSWER False
It can decrease then increase.
23. Law of diminishing returns applies in short run (T/F)
ANSWER True
Adding inputs eventually lowers marginal output.
24. Fixed costs change with output (T/F)
ANSWER False
They remain constant.
25. Variable costs change with output (T/F)
ANSWER True
They depend on production level.
26. A budget constraint shows income limits (T/F)
ANSWER True
It defines affordable combinations.
27. Utility measures satisfaction (T/F)
ANSWER True
Used in consumer theory.
28. Indifference curves cannot cross (T/F)
ANSWER True
Crossing violates consistency.
