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1. What is the basic economic problem?
 A. Scarcity and choice

 B. Abundance and surplus
 C. Profit maximization
 D. Monopoly power
2. Which of the following is an example of a normative statement?
 A. Inflation is currently at 2%.
 B. The government should reduce taxes to increase disposable income.
 C. Unemployment rates have decreased this year.
 D. The price of oil has increased due to supply constraints.
3. If the price of a good increases and the demand for a related good also
increases, the goods are considered:
 A. Substitutes
 B. Complements
 C. Inferior
 D. Normal
4. A perfectly inelastic demand curve is represented by which of the
following?
 A. A vertical line
 B. A horizontal line
 C. A downward-sloping line
 D. An upward-sloping line
5. In the short run, a firm should shut down if:
 A. Total revenue exceeds total cost
 B. Price is greater than average variable cost
 C. Price is less than average variable cost
 D. Marginal cost is less than marginal revenue
6. The opportunity cost of an item is:
 A. The amount of money paid for it
 B. The value of the next best alternative forgone
 C. The time taken to produce it
 D. The benefit received from all other alternatives
7. A leftward shift in the supply curve is most likely caused by:
 A. An improvement in technology
 B. An increase in the price of raw materials
 C. A decrease in consumer incomes
 D. A decrease in the price of the good
8. Which of the following is an example of a public good?
 A. Electricity
 B. National defense
 C. A private car
 D. A smartphone
9. If the income elasticity of demand for a product is positive, the product
is considered:
 A. Inferior
 B. Normal
 C. Complementary
 D. A luxury
10. The demand for labor is:
 A. Derived demand
 B. Inelastic
 C. Direct demand
 D. Perfectly elastic
11. In a monopolistically competitive market, firms:
 A. Produce identical products
 B. Are price takers
 C. Produce differentiated products
 D. Have significant barriers to entry
12. Which of the following is a tool of monetary policy?
 A. Taxation
 B. Government spending
 C. Setting interest rates
 D. Subsidies
13. The Phillips curve shows the relationship between:
 A. Inflation and unemployment
 B. Inflation and GDP
 C. Unemployment and economic growth
 D. Interest rates and investment
14. A regressive tax system is one where:
 A. Higher-income individuals pay a higher percentage of their income in taxes
 B. Lower-income individuals pay a higher percentage of their income in taxes
 C. All individuals pay the same percentage of their income in taxes
 D. No taxes are paid by individuals
15. When a country experiences a balance of payments surplus, it means:
 A. Its imports exceed its exports
 B. Its exports exceed its imports
 C. Its currency is depreciating
 D. It has a trade deficit
16. Which economic concept is described as "the ability of one entity to
produce a good or service using fewer resources than another"?
 A. Comparative advantage
 B. Absolute advantage
 C. Opportunity cost
 D. Marginal utility
17. Which of the following is most likely to cause a rightward shift in the
demand curve for a normal good?
 A. A decrease in consumer incomes
 B. An increase in the price of a complementary good
 C. A decrease in the price of a substitute good
 D. A successful advertising campaign
18. Fiscal policy involves changes in:
 A. Interest rates and money supply
 B. Government spending and taxation
 C. Exchange rates and import quotas
 D. Wage rates and employment laws
19. Which of the following is a characteristic of a perfectly competitive
market?
 A. Many firms producing differentiated products
 B. Significant barriers to entry and exit
 C. Firms are price makers
 D. Perfect information among buyers and sellers
20. What is meant by "externality" in economics?
 A. A cost or benefit experienced by someone who is not involved in the
transaction
 B. The additional cost of producing one more unit of a good
 C. The change in total cost from producing one more unit
 D. A reduction in the price level
This test covers a range of topics that are essential for A-Level Economics. It
touches on fundamental concepts, market dynamics, government policies, and
specific economic models, providing a comprehensive evaluation of a student's
understanding of the subject.
Answer Key:
1. A. Scarcity and choice

2. B. The government should reduce taxes to increase disposable income.
3. A. Substitutes
4. A. A vertical line
5. C. Price is less than average variable cost
6. B. The value of the next best alternative forgone
7. B. An increase in the price of raw materials
8. B. National defense
9. B. Normal
10. A. Derived demand
11. C. Produce differentiated products
12. C. Setting interest rates
13. A. Inflation and unemployment
14. B. Lower-income individuals pay a higher percentage of their income in taxes
15. B. Its exports exceed its imports
16. B. Absolute advantage
17. D. A successful advertising campaign
18. B. Government spending and taxation
19. D. Perfect information among buyers and sellers
20. A. A cost or benefit experienced by someone who is not involved in the transaction

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1. What is the basic economic problem?

 A. Scarcity and choice

1. A. Scarcity and choice

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