ECON312
Principles of Economics
Comprehensive Test Review (Qns & Ans)
2025
1. Which of the following best describes the concept of
opportunity cost?
- A) The cost of an economic decision
- B) The benefit of an alternative foregone
- C) The monetary cost of a good or service
- D) The total cost of production
- ANS: B) The benefit of an alternative foregone
- Rationale: Opportunity cost refers to the value of the next
best alternative that must be foregone when making a decision.
©/2025
,2. What is the primary purpose of a demand curve in economics?
- A) To show the relationship between price and quantity
supplied
- B) To show the relationship between price and quantity
demanded
- C) To illustrate the cost of production
- D) To indicate the level of market competition
- ANS: B) To show the relationship between price and
quantity demanded
- Rationale: A demand curve shows how the quantity
demanded of a good changes with changes in its price, holding
other factors constant.
3. Which of the following best describes the concept of marginal
utility?
- A) Total satisfaction received from consuming a good
- B) Additional satisfaction received from consuming one more
unit of a good
- C) The cost of producing one additional unit of output
- D) The total cost of consuming a good
- ANS: B) Additional satisfaction received from consuming
one more unit of a good
©/2025
, - Rationale: Marginal utility refers to the additional
satisfaction gained from consuming one more unit of a good or
service.
Fill-in-the-Blank Questions
4. The __________ is a graphical representation of the
production possibilities frontier, showing the maximum
combination of two goods that can be produced with available
resources and technology.
- ANS: PPF (Production Possibility Frontier)
- Rationale: The production possibilities frontier (PPF) is a
curve showing the maximum feasible combinations of two goods
that an economy can produce with its available resources and
technology.
5. In a perfectly competitive market, firms are considered
__________, meaning they cannot influence the market price and
must accept the prevailing market price.
- ANS: Price takers
- Rationale: In a perfectly competitive market, firms are price
takers, meaning they must accept the market price and cannot
influence it through their own actions.
6. __________ refers to a situation where the allocation of
resources leads to the maximum possible total surplus, meaning
©/2025
, that no further changes can make someone better off without
making someone else worse off.
- ANS: Economic efficiency
- Rationale: Economic efficiency is a situation where
resources are allocated in a way that maximizes total surplus,
meaning any further changes would harm someone else.
True/False Questions
7. True or False: In the short run, at least one factor of
production is fixed.
- ANS: True
- Rationale: In the short run, at least one factor of production
is fixed, while other factors can vary.
8. True or False: A decrease in the price of a substitute good will
increase the demand for the related good.
- ANS: False
- Rationale: A decrease in the price of a substitute good will
decrease the demand for the related good, as consumers switch to
the cheaper substitute.
9. True or False: The law of diminishing returns states that as
more units of a variable input are added to a fixed input, the
marginal product of the variable input eventually decreases.
©/2025
Principles of Economics
Comprehensive Test Review (Qns & Ans)
2025
1. Which of the following best describes the concept of
opportunity cost?
- A) The cost of an economic decision
- B) The benefit of an alternative foregone
- C) The monetary cost of a good or service
- D) The total cost of production
- ANS: B) The benefit of an alternative foregone
- Rationale: Opportunity cost refers to the value of the next
best alternative that must be foregone when making a decision.
©/2025
,2. What is the primary purpose of a demand curve in economics?
- A) To show the relationship between price and quantity
supplied
- B) To show the relationship between price and quantity
demanded
- C) To illustrate the cost of production
- D) To indicate the level of market competition
- ANS: B) To show the relationship between price and
quantity demanded
- Rationale: A demand curve shows how the quantity
demanded of a good changes with changes in its price, holding
other factors constant.
3. Which of the following best describes the concept of marginal
utility?
- A) Total satisfaction received from consuming a good
- B) Additional satisfaction received from consuming one more
unit of a good
- C) The cost of producing one additional unit of output
- D) The total cost of consuming a good
- ANS: B) Additional satisfaction received from consuming
one more unit of a good
©/2025
, - Rationale: Marginal utility refers to the additional
satisfaction gained from consuming one more unit of a good or
service.
Fill-in-the-Blank Questions
4. The __________ is a graphical representation of the
production possibilities frontier, showing the maximum
combination of two goods that can be produced with available
resources and technology.
- ANS: PPF (Production Possibility Frontier)
- Rationale: The production possibilities frontier (PPF) is a
curve showing the maximum feasible combinations of two goods
that an economy can produce with its available resources and
technology.
5. In a perfectly competitive market, firms are considered
__________, meaning they cannot influence the market price and
must accept the prevailing market price.
- ANS: Price takers
- Rationale: In a perfectly competitive market, firms are price
takers, meaning they must accept the market price and cannot
influence it through their own actions.
6. __________ refers to a situation where the allocation of
resources leads to the maximum possible total surplus, meaning
©/2025
, that no further changes can make someone better off without
making someone else worse off.
- ANS: Economic efficiency
- Rationale: Economic efficiency is a situation where
resources are allocated in a way that maximizes total surplus,
meaning any further changes would harm someone else.
True/False Questions
7. True or False: In the short run, at least one factor of
production is fixed.
- ANS: True
- Rationale: In the short run, at least one factor of production
is fixed, while other factors can vary.
8. True or False: A decrease in the price of a substitute good will
increase the demand for the related good.
- ANS: False
- Rationale: A decrease in the price of a substitute good will
decrease the demand for the related good, as consumers switch to
the cheaper substitute.
9. True or False: The law of diminishing returns states that as
more units of a variable input are added to a fixed input, the
marginal product of the variable input eventually decreases.
©/2025
