Correct Answer: B) Study of scarcity and choice
Explanation: Lionel Robbins defined economics as the study of scarcity and choice, emphasizing the allocation of limited resources to satisfy unlimited wants.
A) Adam Smith
B) Alfred Marshall
C) John Maynard Keynes
D) Karl Marx
Correct Answer: A) Adam Smith
Explanation: Adam Smith, in his book The Wealth of Nations, defined economics as the science of wealth, making him closely associated with this definition.
A) Study of wealth and resources
B) Study of scarcity and choice
C) Study of production and welfare
D) Study of demand and supply
Correct Answer: B) Study of scarcity and choice
Explanation: Lionel Robbins defined economics as the study of scarcity and choice, emphasizing the allocation of limited resources to satisfy unlimited wants.
A) Production and consumption
B) Scarcity and choice
C) Demand and supply
D) Money and inflation
Correct Answer: B) Scarcity and choice
Explanation: The scarcity definition highlights that the primary economic problems arise from limited resources and the need to make choices.
A) Cost of all alternative goods
B) Cost of all inputs in production
C) Cost of next best alternative
D) Cost of labor and capital
Correct Answer: C) Cost of next best alternative
Explanation: Opportunity cost refers to the value of the next best alternative that is foregone when making a decision.
A) By studying government policies
B) By eliminating scarcity entirely
C) By minimizing production costs
D) By analyzing opportunity costs
Correct Answer: D) By analyzing opportunity costs
Explanation: Economics addresses resource allocation by analyzing opportunity costs, which helps in making efficient use of limited resources.
A) Unlimited wants and resources
B) Unlimited wants and limited resources
C) Limited wants and resources
D) Limited wants and unlimited resources
Correct Answer: B) Unlimited wants and limited resources
Explanation: Every economy faces the basic problem of having unlimited wants but only limited resources available to satisfy them.
A) Satisfaction from all units consumed
B) Decrease in total satisfaction over time
C) Total satisfaction from consumption
D) Additional satisfaction from one unit
Correct Answer: D) Additional satisfaction from one unit
Explanation: Marginal utility refers to the additional satisfaction gained from consuming one more unit of a good or service.
A) One who maximizes utility or profits
B) One who minimizes costs and expenses
C) One who avoids risks and uncertainty
D) One who increases wealth and savings
Correct Answer: A) One who maximizes utility or profits
Explanation: A rational decision-maker is someone who aims to maximize utility (for consumers) or profits (for firms) based on available information.
A) It helps balance production and consumption
B) It involves sacrificing one goal for another
C) It increases efficiency in resource allocation
D) It reduces costs in economic activities
Correct Answer: B) It involves sacrificing one goal for another
Explanation: Trade-offs occur when choosing one option requires sacrificing another due to the scarcity of resources.
A) Resources and wants
B) Wants and needs
C) Supply and demand
D) Production and labor
Correct Answer: A) Resources and wants
Explanation: Economists study the relationship between limited resources and unlimited wants to understand the problem of scarcity.
A) Distribution of income and wealth
B) Measurement of national income levels
C) Determination of demand and supply
D) Assignment of limited resources to uses
Correct Answer: D) Assignment of limited resources to uses
Explanation: Allocation of resources refers to assigning available resources to different uses in the most efficient way possible.
A) Microeconomics studies national economies, macroeconomics focuses on firms
B) Microeconomics studies individual units, macroeconomics looks at entire economy
C) Microeconomics looks at inflation, macroeconomics focuses on prices
D) Microeconomics studies governments, macroeconomics focuses on firms
Correct Answer: B) Microeconomics studies individual units, macroeconomics looks at entire economy
Explanation: Microeconomics focuses on individual consumers, firms, and markets, while macroeconomics studies the economy as a whole.
A) Maximizing total production output
B) Minimizing government spending
C) Maximizing total utility or benefit
D) Reducing overall economic costs
Correct Answer: C) Maximizing total utility or benefit
Explanation: Economic efficiency occurs when resources are allocated in a way that maximizes total benefit or utility for society.
A) The study of wealth accumulation and its distribution
B) The study of individual choices and human behavior
C) The study of production techniques and capital formation
D) The study of inflationary trends and unemployment rates
Correct Answer: A) The study of wealth accumulation and its distribution
Explanation: Classical economists like Adam Smith viewed economics as the science of wealth, focusing on its accumulation and distribution.
A) The analysis of what is, based on observable facts
B) The analysis of what should be, based on value judgments
C) A focus on economic growth and future stability
D) The study of government policies and regulation
Correct Answer: A) The analysis of what is, based on observable facts
Explanation: Positive economics objectively analyzes economic realities without making normative (value-based) judgments.
A) Reduce costs
B) Create policies
C) Make predictions
D) Eliminate scarcity
Correct Answer: C) Make predictions
Explanation: Economic models are simplified frameworks used to analyze complex situations and predict outcomes.
A) What should be
B) What is
C) What is profitable
D) What is scarce
Correct Answer: A) What should be
Explanation: Normative economics involves opinions on how the economy ought to work, based on ethical or value-based beliefs.
A) Prices
B) Trade-offs
C) Inflation
D) Scarcity
Correct Answer: B) Trade-offs
Explanation: The PPF represents the trade-offs between two goods and shows the maximum possible production levels.
A) Global trade
B) Policy rules
C) Choice theory
D) Supply laws
Correct Answer: C) Choice theory
Explanation: Economics explains how people make choices, particularly in the presence of limited resources.
A) Increasing output
B) Reducing demand
C) Lowering prices
D) Limiting choices
Correct Answer: A) Increasing output
Explanation: Economic growth refers to an increase in the production of goods and services over time.
& stay ahead of your competitors!
* Subscribe to our email newsletter to get the latest posts delivered right to your email.