Economics: A Contemporary
Introduction (11th Edition) –
Original Practice Questions And
Correct Answers
Chapter 1: The Economic Challenge
Question 1
Economics is best defined as the study of:
A. Money and banking only
B. How society allocates scarce resources
C. Government spending exclusively
D. Business management
✅ Correct Answer: B. How society allocates scarce resources
Solution
Step 1: Identify the key concept in economics.
Economics focuses on scarcity and choices.
Step 2: Evaluate options.
● A: Too narrow.
● C: Only one part of economics.
● D: Management is a separate discipline.
● B: Correct because economics examines how limited resources are allocated.
Final Answer: B
Question 2
,Which of the following is an example of opportunity cost?
A. Paying sales tax
B. The next best alternative given up
C. Receiving a scholarship
D. Earning interest
✅ Correct Answer: B. The next best alternative given up
Solution
Step 1: Recall the definition of opportunity cost.
Opportunity cost equals the value of the best alternative forgone when making a choice.
Step 2: Match the definition.
Option B exactly matches the definition.
Final Answer: B
Question 3
A production possibilities frontier (PPF) illustrates:
A. Inflation rates
B. Maximum output combinations possible
C. Consumer spending patterns
D. Tax revenue
✅ Correct Answer: B. Maximum output combinations possible
Solution
The PPF shows the maximum possible combinations of two goods that can be produced with
available resources and technology.
Final Answer: B
Chapter 2: Economic Decision Makers
,Question 4
Households primarily supply:
A. Finished goods
B. Factors of production
C. Government services
D. Imports
✅ Correct Answer: B
Solution
Households provide labor, land, capital, and entrepreneurship to firms.
Final Answer: B
Question 5
In the circular flow model, firms receive revenue from:
A. Factor markets
B. Product markets
C. Government taxes
D. Foreign aid
✅ Correct Answer: B
Solution
Consumers purchase goods and services in product markets, generating revenue for firms.
Final Answer: B
Chapter 3: Demand and Supply
Question 6
If the price of a good increases, quantity demanded will generally:
, A. Increase
B. Stay constant
C. Decrease
D. Double
✅ Correct Answer: C
Solution
According to the law of demand, higher prices lead to lower quantities demanded.
Final Answer: C
Question 7
A rightward shift in demand indicates:
A. Consumers want less at every price
B. Consumers want more at every price
C. Supply decreased
D. Prices must fall
✅ Correct Answer: B
Solution
A demand increase means buyers are willing to purchase more at every price level.
Final Answer: B
Question 8
Market equilibrium occurs when:
A. Demand exceeds supply
B. Supply exceeds demand
C. Quantity demanded equals quantity supplied
D. Government sets prices
✅ Correct Answer: C
Solution
Introduction (11th Edition) –
Original Practice Questions And
Correct Answers
Chapter 1: The Economic Challenge
Question 1
Economics is best defined as the study of:
A. Money and banking only
B. How society allocates scarce resources
C. Government spending exclusively
D. Business management
✅ Correct Answer: B. How society allocates scarce resources
Solution
Step 1: Identify the key concept in economics.
Economics focuses on scarcity and choices.
Step 2: Evaluate options.
● A: Too narrow.
● C: Only one part of economics.
● D: Management is a separate discipline.
● B: Correct because economics examines how limited resources are allocated.
Final Answer: B
Question 2
,Which of the following is an example of opportunity cost?
A. Paying sales tax
B. The next best alternative given up
C. Receiving a scholarship
D. Earning interest
✅ Correct Answer: B. The next best alternative given up
Solution
Step 1: Recall the definition of opportunity cost.
Opportunity cost equals the value of the best alternative forgone when making a choice.
Step 2: Match the definition.
Option B exactly matches the definition.
Final Answer: B
Question 3
A production possibilities frontier (PPF) illustrates:
A. Inflation rates
B. Maximum output combinations possible
C. Consumer spending patterns
D. Tax revenue
✅ Correct Answer: B. Maximum output combinations possible
Solution
The PPF shows the maximum possible combinations of two goods that can be produced with
available resources and technology.
Final Answer: B
Chapter 2: Economic Decision Makers
,Question 4
Households primarily supply:
A. Finished goods
B. Factors of production
C. Government services
D. Imports
✅ Correct Answer: B
Solution
Households provide labor, land, capital, and entrepreneurship to firms.
Final Answer: B
Question 5
In the circular flow model, firms receive revenue from:
A. Factor markets
B. Product markets
C. Government taxes
D. Foreign aid
✅ Correct Answer: B
Solution
Consumers purchase goods and services in product markets, generating revenue for firms.
Final Answer: B
Chapter 3: Demand and Supply
Question 6
If the price of a good increases, quantity demanded will generally:
, A. Increase
B. Stay constant
C. Decrease
D. Double
✅ Correct Answer: C
Solution
According to the law of demand, higher prices lead to lower quantities demanded.
Final Answer: C
Question 7
A rightward shift in demand indicates:
A. Consumers want less at every price
B. Consumers want more at every price
C. Supply decreased
D. Prices must fall
✅ Correct Answer: B
Solution
A demand increase means buyers are willing to purchase more at every price level.
Final Answer: B
Question 8
Market equilibrium occurs when:
A. Demand exceeds supply
B. Supply exceeds demand
C. Quantity demanded equals quantity supplied
D. Government sets prices
✅ Correct Answer: C
Solution
