Economics Sample Questions

Question 1

Which of the following is NOT an example of the principle of scarcity?
A. overfishing in key coastal waters
B. A pharmaceutical company lowers the price of a commonly used generic drug
C. Drought reduces the amount of pumpkins sold in fall farmer’s markets
D. Flu season ramps up, and flu vaccines are hard to find

Answer 1

B. A pharmaceutical company lowers the price of a commonly used generic drug

Question 2

A company is looking to hire a new website designer to refresh its website. The first candidate is fresh out of college, and this would be his first job. The second candidate has worked as a website designer for ten years; however, the company would have to pay him twice as much as the first candidate. Which of the following illustrates how the company uses marginal analysis to decide which candidate to hire?
A. weigh the cost of hiring a web designer against the benefit of having customers
B. weigh the cost of increased pay for the second against the benefit of more experience
C. weigh the cost of the first candidate’s lack of experience against the cost of the second candidate’s high price
D. weigh the benefit of the first candidate’s price against the benefit of the second candidate’s experience

Answer 2

B. weigh the cost of increased pay for the second against the benefit of more experience

Question 3

At the amusement park, a child takes her first rollercoaster ride. She loves it so much, she wants to go again. According to the law of diminishing marginal utility, which of the following is most likely to happen after the child’s tenth ride?
A. The child will have a greater desire to ride the rollercoaster than on her first ride
B. The child will never want to ride any rollercoaster again
C. The child will experience the same level of excitement as after her first ride.
D. The child will be less interested–or uninterested entirely–in riding the rollercoaster again that day

Answer 3

D. The child will be less interested–or uninterested entirely–in riding the rollercoaster again that day.

Question 4

At Point A on the production possibility graph, which of the following is true about the economy?
A. The economy should increase wine production and decrease grain production
B. New resources are required before production can increase
C. Some resources are being underutilized or wasted
D. The economy is producing at its greatest efficiency.

Answer 4

C. Some resources are being underutilized or wasted

Question 5

Which of the following is NOT  a consequence of specialization?
A. lower wages 
B. higher quality goods
C. higher profits 
D. lower prices

Answer 5

A. lower wages

Question 6

Company A can produce 900 pencils at the cost of producing 300 pens. For the same cost, Company B can produce either 200 pens or 1000 pencils. Which company has the comparative advantage and which company has the absolute advantage in producing pencils?
A. Company A has the comparative advantage, Company B has the absolute advantage
B. Company A has both the comparative and absolute advantages
C. Company A has the absolute advantage; Company B has the comparative advantage
D. Company B has both the comparative and absolute advantages

Answer 6

D. Company B has both the comparative and absolute advantages