Free Economics (5911) Practice Questions

Sample Practice Questions

Try these 10 sample questions from the Economics (5911) practice bank. Each includes the answer and explanation. Continue with the interactive practice above to review the full question set.

1. 1A town has enough construction workers and equipment to build either a library or a pool this year, but residents want both. Which economic problem makes a choice necessary?

   1. A.Price inflation
   2. B.Resource scarcityCorrect answer: B
   3. C.Market surplus
   4. D.Income inequality

   Explanation: The Federal Reserve education guide states, "productive resources are limited." Available workers and equipment cannot satisfy both wants this year, so scarcity forces a choice. Inflation concerns prices, a surplus concerns excess supply, and inequality concerns distribution.

   Reference: Scope and Sequence for Economic Content — High School, Standard 1: Scarcity, opening statement (HS.1)

2. 2The price of a good falls while incomes, preferences, and prices of related goods remain fixed. How is the law of demand represented on its demand graph?

   1. A.A rightward shift of the demand curve
   2. B.A leftward shift of the demand curve
   3. C.A movement toward a lower quantity along the curve
   4. D.A movement toward a higher quantity along the curveCorrect answer: D

   Explanation: The guide says the price–quantity relationship "exists as long as other factors influencing demand do not change." With those factors fixed, a price reduction raises quantity demanded along the existing curve; it does not shift demand.

   Reference: Scope and Sequence for Economic Content — High School, Standard 8, Grade 8 benchmark 1 (HS.4)

3. 3Which production is included in current U.S. gross domestic product?

   1. A.New cars produced in the United States by a foreign-owned factoryCorrect answer: A
   2. B.New cars produced abroad by a U.S.-owned factory
   3. C.A used car transferred between two U.S. households
   4. D.Existing corporate shares transferred between U.S. investors

   Explanation: BEA defines GDP as "The value of the final goods and services produced in the United States". New domestic production counts regardless of factory ownership. Foreign production is outside U.S. GDP; reselling an existing car or financial claim does not itself create current final output.

   Reference: Gross Domestic Product — BEA Learning Center — Gross Domestic Product, opening definition

4. 4A student can spend Saturday at a free concert, earning $90 at work, or volunteering. She prefers working to volunteering but chooses the concert. What is the opportunity cost of attending?

   1. A.The $90 of earnings forgoneCorrect answer: A
   2. B.The combined value of both rejected activities
   3. C.The concert's zero admission price
   4. D.The value of the least preferred alternative

   Explanation: The guide defines opportunity cost as "the value of the best alternative that would have been chosen instead." Work is the next-best alternative here, so the forgone $90 is the opportunity cost; neither all rejected options nor the ticket price measures it.

   Reference: Scope and Sequence for Economic Content — High School, Standard 1, Grade 4 benchmark 5 (HS.1)

5. 5A new production method reduces the resources required for each unit of a good. Demand and other conditions stay fixed. What is the direct effect on the good's supply curve?

   1. A.It shifts right because unit production costs fallCorrect answer: A
   2. B.It shifts left because unit production costs fall
   3. C.It stays fixed while the quantity supplied falls
   4. D.It stays fixed while only the demand curve shifts

   Explanation: The guide identifies "the technology used to make the product" as a supply determinant. A cost-saving method makes more output profitable at each price, shifting supply right. It is not a movement caused by the good’s own price or a change in consumers’ demand.

   Reference: Scope and Sequence for Economic Content — High School, Standard 8, Grade 12 benchmark 2 (HS.5)

6. 6In billions of dollars, consumption is 500, investment is 100, government purchases are 150, exports are 80, and imports are 110. What is GDP using the expenditure approach?

   1. A.$750 billion
   2. B.$780 billion
   3. C.$720 billionCorrect answer: C
   4. D.$940 billion

   Explanation: The guide says GDP sums "household consumption spending, investment expenditures, purchases by federal, state, and local governments, and net exports." Net exports are 80 − 110 = −30; GDP = 500 + 100 + 150 − 30 = 720. Omitting trade, reversing its sign, or adding imports gives the distractors.

   Reference: Scope and Sequence for Economic Content — High School, Standard 18, Grade 8 benchmarks 2–3 (HS.10)

7. 7Which resource used by a furniture manufacturer is physical capital in the economic sense?

   1. A.The timber harvested from a forest
   2. B.The effort provided by a carpenter
   3. C.The saw installed in the workshopCorrect answer: C
   4. D.The money held in a bank account

   Explanation: The Federal Reserve transcript describes capital as "the machinery, tools and buildings humans use to produce goods and services." A saw is a produced tool. Timber is a natural resource, effort is labor, and money finances purchases rather than itself being a productive tool.

   Reference: Factors of Production — Economic Lowdown Podcast — Transcript, third factor of production: capital

8. 8Rice and pasta are substitutes for consumers. If the price of rice rises while other demand determinants stay fixed, what happens to demand for pasta?

   1. A.It decreases as consumers switch toward rice
   2. B.It increases as consumers switch toward pastaCorrect answer: B
   3. C.It stays fixed because pasta's own price has not changed
   4. D.It becomes a movement along pasta's existing demand curve

   Explanation: The guide lists "the prices of related products" among factors that change demand. Because these goods are substitutes, more expensive rice raises demand for pasta at each pasta price. Treating a related good’s price change as a movement along pasta’s curve confuses demand with quantity demanded.

   Reference: Scope and Sequence for Economic Content — High School, Standard 8, Grade 12 benchmark 1 (HS.5)

9. 9An economy produces exactly the same quantities of all final goods and services as last year, but all their prices rise by 10%. What happens to nominal GDP and real GDP?

   1. A.Both rise by 10%
   2. B.Nominal GDP rises; real GDP stays unchangedCorrect answer: B
   3. C.Nominal GDP stays unchanged; real GDP rises
   4. D.Both stay unchanged

   Explanation: BEA explains that real GDP is "adjusted to remove the effects of inflation over time". With quantities unchanged, current-dollar GDP rises solely because of prices; inflation-adjusted real GDP does not rise. Confusing current prices with real output yields the other conclusions.

   Reference: Gross Domestic Product — BEA Learning Center — More to know, real and nominal GDP paragraphs

10. 10Total benefit from three hours of tutoring is valued at $105; total benefit from four hours is $130. What is the marginal benefit of the fourth hour?

    1. A.$32.50
    2. B.$105.00
    3. C.$130.00
    4. D.$25.00Correct answer: D

    Explanation: The guide states, "Marginal benefit is the change in total benefit resulting from an action." The fourth hour adds $130 − $105 = $25. Dividing total benefit by four gives an average, while $105 and $130 are totals.

    Reference: Scope and Sequence for Economic Content — High School, Standard 2, Grade 8 benchmark 2 (HS.1)