MI007MTTC Economics Practice Exam
**Question 1. Which of the following best defines opportunity cost?**
A) The monetary price paid for a good or service
B) The value of the next best alternative foregone when a choice is made
C) The total cost of all inputs used in production
D) The profit earned from selling a product
Answer: B
Explanation: Opportunity cost measures what is sacrificed—the next best
alternative—when a decision is taken, not the explicit monetary price.
**Question 2. The Production Possibilities Frontier (PPF) illustrates which of the
following concepts?**
A) Economic growth only
B) The maximum output of a single good
C) Scarcity, trade‑offs, efficiency, and economic growth
D) The relationship between price and quantity demanded
Answer: C
Explanation: The PPF shows the trade‑offs between two goods, indicating scarcity,
efficiency (points on the curve), and growth (outward shift).
, MI007MTTC Economics Practice Exam
**Question 3. In a market economy, which of the following is the primary
mechanism that allocates resources?**
A) Central planning by the government
B) Prices determined by supply and demand
C) Customary traditions and rituals
D) Random allocation
Answer: B
Explanation: Market economies rely on price signals generated by supply and
demand to allocate resources efficiently.
**Question 4. Which economic system is characterized by private ownership of
resources and profit motive?**
A) Command economy
B) Traditional economy
C) Market economy
D) Mixed economy
Answer: C
Explanation: In a market economy, individuals and firms own resources and make
decisions based on profit incentives.
, MI007MTTC Economics Practice Exam
**Question 5. Which of the following is NOT a determinant of demand?**
A) Consumer income
B) Prices of related goods
C) Technology used in production
D) Consumer tastes
Answer: C
Explanation: Technology affects supply, not demand. Demand determinants
include income, prices of substitutes/complements, tastes, and expectations.
**Question 6. If the price of a complement good rises, the demand curve for the
related good will:**
A) Shift leftward (decrease)
B) Shift rightward (increase)
C) Remain unchanged
D) Become perfectly elastic
Answer: A
Explanation: A higher price for a complement reduces the quantity demanded of
the related good, shifting its demand curve left.
, MI007MTTC Economics Practice Exam
**Question 7. When a market is in equilibrium, which of the following statements
is true?**
A) Quantity supplied exceeds quantity demanded
B) Quantity demanded exceeds quantity supplied
C) Quantity supplied equals quantity demanded
D) There is a persistent surplus
Answer: C
Explanation: Equilibrium occurs where the quantity supplied equals the quantity
demanded at the market price.
**Question 8. A price ceiling set below the equilibrium price will most likely
cause:**
A) A surplus of the good
B) A shortage of the good
C) No change in quantity exchanged
D) An increase in producer surplus
Answer: B
Explanation: A ceiling below equilibrium price creates excess demand (shortage)
because quantity demanded exceeds quantity supplied.
**Question 1. Which of the following best defines opportunity cost?**
A) The monetary price paid for a good or service
B) The value of the next best alternative foregone when a choice is made
C) The total cost of all inputs used in production
D) The profit earned from selling a product
Answer: B
Explanation: Opportunity cost measures what is sacrificed—the next best
alternative—when a decision is taken, not the explicit monetary price.
**Question 2. The Production Possibilities Frontier (PPF) illustrates which of the
following concepts?**
A) Economic growth only
B) The maximum output of a single good
C) Scarcity, trade‑offs, efficiency, and economic growth
D) The relationship between price and quantity demanded
Answer: C
Explanation: The PPF shows the trade‑offs between two goods, indicating scarcity,
efficiency (points on the curve), and growth (outward shift).
, MI007MTTC Economics Practice Exam
**Question 3. In a market economy, which of the following is the primary
mechanism that allocates resources?**
A) Central planning by the government
B) Prices determined by supply and demand
C) Customary traditions and rituals
D) Random allocation
Answer: B
Explanation: Market economies rely on price signals generated by supply and
demand to allocate resources efficiently.
**Question 4. Which economic system is characterized by private ownership of
resources and profit motive?**
A) Command economy
B) Traditional economy
C) Market economy
D) Mixed economy
Answer: C
Explanation: In a market economy, individuals and firms own resources and make
decisions based on profit incentives.
, MI007MTTC Economics Practice Exam
**Question 5. Which of the following is NOT a determinant of demand?**
A) Consumer income
B) Prices of related goods
C) Technology used in production
D) Consumer tastes
Answer: C
Explanation: Technology affects supply, not demand. Demand determinants
include income, prices of substitutes/complements, tastes, and expectations.
**Question 6. If the price of a complement good rises, the demand curve for the
related good will:**
A) Shift leftward (decrease)
B) Shift rightward (increase)
C) Remain unchanged
D) Become perfectly elastic
Answer: A
Explanation: A higher price for a complement reduces the quantity demanded of
the related good, shifting its demand curve left.
, MI007MTTC Economics Practice Exam
**Question 7. When a market is in equilibrium, which of the following statements
is true?**
A) Quantity supplied exceeds quantity demanded
B) Quantity demanded exceeds quantity supplied
C) Quantity supplied equals quantity demanded
D) There is a persistent surplus
Answer: C
Explanation: Equilibrium occurs where the quantity supplied equals the quantity
demanded at the market price.
**Question 8. A price ceiling set below the equilibrium price will most likely
cause:**
A) A surplus of the good
B) A shortage of the good
C) No change in quantity exchanged
D) An increase in producer surplus
Answer: B
Explanation: A ceiling below equilibrium price creates excess demand (shortage)
because quantity demanded exceeds quantity supplied.
