FBLA Economics Practice Questions with Explanations
Questions
The study of how people and societies use limited resources to satisfy unlimited wants is:
- Economics
- Accounting
- Sociology
- Finance
The condition that exists because wants are unlimited and resources are limited is:
- Scarcity
- Shortage
- Inflation
- Surplus
The value of the next best alternative given up when making a choice is:
- Opportunity cost
- Sunk cost
- Marginal cost
- Explicit cost
A graph showing the maximum combinations of two goods an economy can produce with its resources is the:
- Production possibilities curve
- Demand curve
- Supply curve
- Lorenz curve
A point outside the production possibilities curve represents output that is:
- Unattainable with current resources
- Efficient
- Inefficient
- The equilibrium point
An outward shift of the production possibilities curve represents:
- Economic growth
- A recession
- Higher unemployment
- Increased scarcity
The study of individual households, firms, and markets is:
- Microeconomics
- Macroeconomics
- Econometrics
- International economics
The study of the economy as a whole, including inflation and unemployment, is:
- Macroeconomics
- Microeconomics
- Behavioral finance
- Accounting
A statement that describes what is and can be tested with facts is a(n):
- Positive economic statement
- Normative economic statement
- Value judgment
- Hypothesis with no evidence
A statement about what ought to be, based on values, is a(n):
- Normative economic statement
- Positive economic statement
- Economic law
- Statistical fact
The factors of production are land, labor, capital, and:
- Entrepreneurship
- Money
- Consumers
- Government
The payment received by owners of land is called:
- Rent
- Wages
- Interest
- Profit
The reward for entrepreneurship is:
- Profit
- Rent
- Wages
- Interest
Investment in education, training, and skills that makes workers more productive is:
- Human capital
- Physical capital
- Financial capital
- Natural capital
The additional benefit or cost of producing or consuming one more unit is:
- Marginal
- Total
- Average
- Sunk
Specialization means:
- Concentrating on producing a limited range of goods
- Producing everything a person needs
- Avoiding trade
- Using only natural resources
Output per worker per hour is a measure of:
- Productivity
- Inflation
- Scarcity
- Utility
The satisfaction or usefulness a consumer gets from a good is:
- Utility
- Elasticity
- Equilibrium
- Marginal cost
The principle that each additional unit of a good provides less satisfaction than the one before is:
- Diminishing marginal utility
- The law of supply
- Economies of scale
- Comparative advantage
A farmer can grow either wheat or corn on a field. If she chooses wheat, the corn she gives up is the:
- Opportunity cost of wheat
- Marginal revenue of corn
- Sunk cost of the field
- Comparative advantage of wheat
Money already spent that cannot be recovered and should not affect future decisions is a:
- Sunk cost
- Opportunity cost
- Marginal cost
- Variable cost
The three basic economic questions every society must answer are what to produce, how to produce, and:
- For whom to produce
- When to produce
- Where to sell
- Why to produce
An economy in which decisions are based on customs and traditions is a:
- Traditional economy
- Command economy
- Market economy
- Mixed economy
An economy in which the government makes most economic decisions is a:
- Command economy
- Market economy
- Traditional economy
- Free enterprise economy
An economy in which individuals and businesses make decisions through markets is a:
- Market economy
- Command economy
- Traditional economy
- Planned economy
Most modern economies, including the U.S., are:
- Mixed economies
- Pure command economies
- Traditional economies
- Pure market economies
The economist who wrote "The Wealth of Nations" in 1776 and described the "invisible hand" is:
- Adam Smith
- John Maynard Keynes
- Karl Marx
- Milton Friedman
The economist whose 1936 work argued government spending can fight recessions is:
- John Maynard Keynes
- Adam Smith
- Friedrich Hayek
- David Ricardo
The economist associated with monetarism and the importance of the money supply is:
- Milton Friedman
- John Maynard Keynes
- Karl Marx
- Thomas Malthus
The economist who developed the theory of comparative advantage is:
- David Ricardo
- Adam Smith
- Karl Marx
- John Kenneth Galbraith
The theory that government should have little involvement in the economy is:
- Laissez-faire
- Socialism
- Communism
- Keynesianism
Key features of capitalism include private property, profit motive, competition, and:
- Voluntary exchange
- Central planning
- Government-set prices
- Collective ownership of all businesses
The quantity of a good consumers are willing and able to buy at each price is:
- Demand
- Supply
- Quantity supplied
- Consumer surplus
The law of demand states that, all else equal, as price increases, quantity demanded:
- Decreases
- Increases
- Stays the same
- Doubles
A change in the price of a good causes a:
- Movement along the demand curve
- Shift of the demand curve to the right
- Shift of the demand curve to the left
- Shift of the supply curve
An increase in consumer income for a normal good causes the demand curve to:
- Shift to the right
- Shift to the left
- Stay the same
- Become vertical
A good for which demand falls as income rises, such as generic store brands, is a(n):
- Inferior good
- Normal good
- Luxury good
- Complementary good
If the price of coffee rises, the demand for tea (a substitute) will:
- Increase
- Decrease
- Stay the same
- Fall to zero
If the price of printers falls, the demand for ink cartridges (a complement) will:
- Increase
- Decrease
- Stay the same
- Become perfectly elastic
Which factor would shift the demand curve, rather than cause a movement along it?
- A change in consumer tastes
- A change in the good's own price
- A change in quantity demanded
- A movement to a new price
The law of supply states that, all else equal, as price increases, quantity supplied:
- Increases
- Decreases
- Stays the same
- Falls to zero
An improvement in production technology causes the supply curve to:
- Shift to the right
- Shift to the left
- Stay the same
- Become downward sloping
An increase in the cost of raw materials causes the supply curve to:
- Shift to the left
- Shift to the right
- Stay the same
- Become horizontal
The price at which quantity demanded equals quantity supplied is the:
- Equilibrium price
- Price ceiling
- Price floor
- Reservation price
When the price is above equilibrium, the market has a:
- Surplus
- Shortage
- Equilibrium
- Price ceiling
When the price is below equilibrium, the market has a:
- Shortage
- Surplus
- Equilibrium
- Price floor
If demand increases while supply stays the same, equilibrium price and quantity will:
- Both increase
- Both decrease
- Price rise, quantity fall
- Price fall, quantity rise
If supply increases while demand stays the same, equilibrium price will:
- Decrease and quantity will increase
- Increase and quantity will decrease
- Increase and quantity will increase
- Stay the same
A legal maximum price set below equilibrium, such as rent control, is a:
- Price ceiling
- Price floor
- Subsidy
- Tariff
A legal minimum price set above equilibrium, such as the minimum wage, is a:
- Price floor
- Price ceiling
- Quota
- Excise tax