EST2 HS ECONOMICS
📊 HARD MOCK EXAM
60 Hard Questions – Micro & Macro Economics
No pictures – Pure Economics – 60 Questions
Directions: Choose the best answer for each question (A – E). Answers are provided below each question.
Questions 1 – 10: Microeconomics
1. If the cross-price elasticity of demand between two goods is -3.0, the goods are classified as:
A) Substitutes
B) Complements
C) Inferior goods
D) Luxury goods
E) Independent goods
Answer: B
2. A firm in perfect competition maximizes profit when it produces where:
A) Price equals marginal cost (P = MC)
B) Price equals average total cost (P = ATC)
C) Marginal revenue equals average total cost (MR = ATC)
D) Total revenue is maximized
E) Average variable cost is minimized
Answer: A
3. Which of the following is NOT a characteristic of monopolistic competition?
A) Many sellers
B) Differentiated products
C) Low barriers to entry
D) Price-taking behavior
E) Some control over price
Answer: D
4. The marginal utility of a good diminishes as:
A) More of the good is consumed
B) The price of the good increases
C) The consumer's income increases
D) The good becomes more scarce
E) The good becomes less desirable
Answer: A
5. A price ceiling set below the equilibrium price will likely cause:
A) A surplus of the good
B) A shortage of the good
C) An increase in supply
D) A decrease in demand
E) The market to remain in equilibrium
Answer: B
6. Which of the following correctly defines "normal goods"?
A) Goods for which demand increases as consumer income decreases
B) Goods for which demand increases as consumer income increases
C) Goods that are always purchased regardless of price
D) Goods with a negative income elasticity of demand
E) Goods that are inferior in quality
Answer: B
7. In the long run, a monopolist will:
A) Earn normal profit
B) Earn economic profit
C) Produce at the minimum of average total cost
D) Face perfectly elastic demand
E) Have no barriers to entry
Answer: B
8. The production possibility frontier (PPF) is bowed outward because of:
A) Constant opportunity costs
B) Increasing opportunity costs
C) Decreasing opportunity costs
D) Zero opportunity costs
E) The law of diminishing marginal utility
Answer: B
9. A firm is experiencing economies of scale when:
A) Long-run average total cost decreases as output increases
B) Long-run average total cost increases as output increases
C) Short-run average total cost is minimized
D) Marginal cost is less than average total cost
E) Total fixed costs are zero
Answer: A
10. Which of the following is a public good?
A) A private car
B) National defense
C) A restaurant meal
D) A smartphone
E) A college education
Answer: B
Questions 11 – 20: Microeconomics Continued
11. Price elasticity of demand measures the responsiveness of:
A) Quantity demanded to a change in price
B) Quantity supplied to a change in price
C) Demand to a change in income
D) Demand to a change in the price of substitutes
E) Supply to a change in production costs
Answer: A
12. The opportunity cost of a choice is:
A) The total cost of all alternatives
B) The value of the next best alternative forgone
C) The monetary cost of the chosen option
D) The time spent making the decision
E) The total benefit received from the choice
Answer: B
13. A monopolistic competitor in the long run will produce at an output level where:
A) P = MC and P = ATC
B) MR = MC and P = ATC
C) P = MR and P > MC
D) MR = MC and P > ATC
E) P = MC and P > ATC
Answer: B
14. The law of demand states that, all else being equal:
A) As price increases, quantity demanded increases
B) As price decreases, quantity demanded decreases
C) As price increases, quantity demanded decreases
D) Price and quantity demanded are unrelated
E) Price and quantity demanded move in the same direction
Answer: C
15. A binding price floor will cause:
A) A shortage of the good
B) A surplus of the good
C) An increase in demand
D) A decrease in supply
E) The market to clear
Answer: B
16. Which of the following is a characteristic of a perfectly competitive market?
A) Barriers to entry are high
B) Products are differentiated
C) Firms are price takers
D) There are few sellers
E) Advertising is heavily used
Answer: C
17. Consumer surplus is defined as:
A) The difference between what consumers are willing to pay and what they actually pay
B) The difference between price and marginal cost
C) Total revenue minus total cost
D) The profit earned by producers
E) The total expenditure on a good
Answer: A
18. A natural monopoly occurs when:
A) A single firm controls all resources
B) A single firm can produce at a lower cost than multiple firms due to economies of scale
C) The government grants exclusive rights to a firm
D) There is only one buyer in the market
E) Products are highly differentiated
Answer: B
19. Marginal cost is the:
A) Total cost divided by output
B) Change in total cost when one additional unit is produced
C) Average cost of production
D) Fixed cost per unit
E) Cost of producing the first unit
Answer: B
20. Veblen goods are characterized by:
A) Demand that decreases as price increases
B) Demand that increases as price increases (conspicuous consumption)
C) A negative income elasticity of demand
D) Perfectly inelastic demand
E) Demand that is unaffected by price
Answer: B
Questions 21 – 30: Macroeconomics
21. GDP is the total market value of:
A) All final goods and services produced within a country in a given period
B) All goods and services sold in a country in a year
C) All intermediate goods produced in a country
D) All goods produced by citizens of a country, regardless of location
E) All exports minus imports
Answer: A
22. Which of the following is NOT counted in GDP?
A) Government spending on infrastructure
B) Consumer spending on services
C) The sale of a used car
D) Business investment in equipment
E) Net exports
Answer: C
23. The natural rate of unemployment includes:
A) Frictional and cyclical unemployment
B) Frictional and structural unemployment
C) Structural and cyclical unemployment
D) Only cyclical unemployment
E) Only frictional unemployment
Answer: B
24. If the marginal propensity to consume (MPC) is 0.8, the simple multiplier is:
A) 1.25
B) 2.0
C) 4.0
D) 5.0
E) 8.0
Answer: D
25. When the central bank increases the money supply, interest rates typically:
A) Increase
B) Decrease
C) Remain unchanged
D) Become zero
E) Double
Answer: B
26. The Phillips Curve suggests a trade-off between:
A) Inflation and economic growth
B) Unemployment and economic growth
C) Inflation and unemployment
D) Exports and imports
E) Taxes and government spending
Answer: C
27. The fiscal policy tool used to combat a recession includes:
A) Increasing taxes and decreasing government spending
B) Decreasing taxes and increasing government spending
C) Increasing the money supply
D) Increasing interest rates
E) Selling government bonds in the open market
Answer: B
28. The Laffer Curve suggests that:
A) Tax cuts always increase revenue
B) Tax increases always increase revenue
C) There is an optimal tax rate that maximizes revenue
D) Lower taxes always lead to lower revenue
E) Tax revenue is unaffected by tax rates
Answer: C
29. The consumer price index (CPI) measures:
A) The average price of all goods produced in an economy
B) The average price of a basket of goods and services purchased by a typical consumer
C) The wholesale price of goods
D) The cost of living for producers
E) The price of imports only
Answer: B
30. A trade deficit occurs when:
A) Exports exceed imports
B) Imports exceed exports
C) Government spending exceeds tax revenue
D) A country has a surplus in its current account
E) A country's currency appreciates
Answer: B
Questions 31 – 40: Macroeconomics Continued
31. Which of the following is a function of money?
A) Store of value
B) Unit of account
C) Medium of exchange
D) All of the above
E) None of the above
Answer: D
32. Stagflation is characterized by:
A) High inflation and low unemployment
B) High inflation and high unemployment
C) Low inflation and low unemployment
D) Economic growth and low inflation
E) Deflation and low unemployment
Answer: B
33. The crowding-out effect occurs when:
A) Higher taxes reduce consumer spending
B) Increased government borrowing raises interest rates and reduces private investment
C) Exports exceed imports
D) The central bank prints too much money
E) Wages rise faster than productivity
Answer: B
34. The money multiplier is calculated as:
A) 1 / reserve requirement
B) 1 / (1 - reserve requirement)
C) Reserve requirement × deposits
D) Total reserves × money supply
E) 1 / interest rate
Answer: A
35. A decrease in the discount rate by the central bank will:
A) Decrease the money supply
B) Increase the money supply
C) Increase the reserve requirement
D) Decrease the reserve requirement
E) Have no effect on the money supply
Answer: B
36. The balance of payments includes:
A) The current account and the capital account
B) The trade balance and the fiscal balance
C) The savings account and the investment account
D) Exports and imports only
E) Government spending and taxation
Answer: A
37. Real GDP is nominal GDP adjusted for:
A) Changes in the price level (inflation)
B) Population growth
C) Exchange rate changes
D) Government spending
E) Interest rate fluctuations
Answer: A
38. An expansionary fiscal policy during a recession includes:
A) Increasing taxes and decreasing government spending
B) Decreasing taxes and increasing government spending
C) Decreasing the money supply
D) Increasing interest rates
E) Selling government bonds
Answer: B
39. The Gini coefficient measures:
A) Income inequality
B) The rate of inflation
C) Economic growth
D) The unemployment rate
E) The poverty rate
Answer: A
40. Which of the following best describes "quantitative easing"?
A) Raising interest rates to control inflation
B) The central bank purchasing long-term securities to increase the money supply
C) Decreasing the reserve requirement
D) Increasing taxes to reduce government debt
E) Reducing government spending
Answer: B
Questions 41 – 50: International & Advanced Topics
41. The theory of comparative advantage states that countries should:
A) Produce all goods domestically
B) Specialize in producing goods where they have a comparative advantage and trade
C) Impose tariffs on all imported goods
D) Subsidize all domestic industries
E) Avoid international trade
Answer: B
42. A tariff is a tax on:
A) Exports
B) Imports
C) Domestic production
D) Income
E) Capital gains
Answer: B
43. The appreciation of a country's currency will likely:
A) Increase exports and decrease imports
B) Decrease exports and increase imports
C) Increase both exports and imports
D) Decrease both exports and imports
E) Have no effect on trade
Answer: B
44. Which of the following is a barrier to entry in a monopoly?
A) High start-up costs
B) Government licenses and patents
C) Control of essential resources
D) All of the above
E) None of the above
Answer: D
45. Game theory is used in economics to study:
A) How firms make decisions in competitive markets
B) Strategic interactions between decision-makers
C) The behavior of consumers
D) The determination of equilibrium prices
E) The allocation of resources
Answer: B
46. The prisoner's dilemma is an example of:
A) A game with no dominant strategy
B) A situation where cooperation leads to the best outcome for both players
C) A situation where self-interest leads to a suboptimal outcome
D) A perfectly competitive market
E) A monopoly pricing strategy
Answer: C
47. A monopsonist in the labor market will hire workers up to the point where:
A) MRP = MC
B) MRP = Wage
C) Wage = MC
D) MRP = AVC
E) Wage = ATC
Answer: A
48. A negative externality occurs when:
A) The social cost of production exceeds the private cost
B) The private cost exceeds the social cost
C) The social benefit exceeds the private benefit
D) The market is perfectly competitive
E) There are no external effects
Answer: A
49. The Coase Theorem suggests that:
A) Government intervention is always necessary to solve externalities
B) Private bargaining can solve externality problems when property rights are well-defined
C) Externalities cannot be solved without taxes
D) All externalities are negative
E) Market failures are permanent
Answer: B
50. The term "rational expectations" refers to the idea that:
A) People make decisions based on all available information
B) People act irrationally in economic matters
C) Economic agents ignore future expectations
D) Inflation expectations are always wrong
E) Markets are always inefficient
Answer: A
Questions 51 – 60: Advanced & Contemporary Economics
51. The "invisible hand" concept, introduced by Adam Smith, refers to:
A) Government intervention in markets
B) The self-regulating nature of markets through individuals pursuing self-interest
C) The role of central banks in controlling inflation
D) The distribution of wealth by the government
E) The regulation of monopolies
Answer: B
52. A country has a comparative advantage in producing a good when it:
A) Can produce more of the good than any other country
B) Has the lowest opportunity cost of producing the good
C) Has the lowest absolute cost of producing the good
D) Has the largest workforce
E) Has the most advanced technology
Answer: B
53. Which of the following best describes the "tragedy of the commons"?
A) The overuse of shared resources due to individual self-interest
B) The efficient allocation of public goods
C) The privatization of all natural resources
D) The regulation of common resources by the government
E) The protection of endangered species
Answer: A
54. The Laffer Curve is used to illustrate the relationship between:
A) Inflation and unemployment
B) Tax rates and tax revenue
C) Interest rates and investment
D) Government spending and GDP
E) Exports and imports
Answer: B
55. The multiplier effect in Keynesian economics refers to:
A) The increase in government spending causing a larger increase in GDP
B) The decrease in taxes causing a smaller increase in GDP
C) The direct impact of exports on GDP
D) The effect of interest rates on investment
E) The impact of inflation on purchasing power
Answer: A
56. Which of the following is a tool of monetary policy?
A) Government spending
B) Taxation
C) Open market operations
D) Subsidies
E) Tariffs
Answer: C
57. A country experiencing a balance of payments deficit can correct it by:
A) Decreasing exports
B) Increasing imports
C) Devaluing its currency
D) Reducing interest rates
E) Increasing government spending
Answer: C
58. The concept of "moral hazard" is most closely associated with:
A) The tendency of individuals to take more risks when they are protected from the consequences
B) The efficient allocation of resources in a market
C) The regulation of monopolies
D) The provision of public goods
E) The determination of equilibrium prices
Answer: A
59. A regressive tax is one in which:
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) Everyone pays the same amount in taxes
D) Everyone pays the same percentage of their income in taxes
E) Only corporations pay taxes
Answer: B
60. The main purpose of the World Trade Organization (WTO) is to:
A) Provide financial aid to developing countries
B) Promote international trade and reduce trade barriers
C) Regulate global currency exchange rates
D) Establish a single global currency
E) Control the world's oil supply
Answer: B
✅ END OF ECONOMICS MOCK EXAM – All 60 Questions Complete!
Posted for practice purposes only.
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