The economic problem has, at its core, the issue of choice because

A. our income determines what we can choose

B. resources are finite
C. as consumers we are free to choose what we want
D. the more we earn the more we can choose

2. Labour is a factor of production because

A. its value to an economy can be improved
B. its productivity affects productive efficiency
C. it is a resource which can contribute to output
D. Its cost can be reduced

3. Which of the following is a strength of a market economy?

A. There will be greater productivity than in a command economy
B. There will be greater equality of income than in a mixed economy
C. There will be fewer negative externalities than in a mixed economy
D. There will be greater provision of public goods than in a command economy

4. An individual will make economic decisions at the margin regarding which course of action should
be taken. The table below shows two outcomes associated with each of four courses of action that
an individual could take. Which of the four courses of action would a rational consumer choose?

Outcome A
Outcome B
A.
Marginal benefit 50
Marginal cost 50
B.
Marginal benefit 100
Marginal cost 50
C.
Marginal benefit 50
Marginal cost 100
D.
Marginal benefit 0
Marginal cost 0

5. On a production possibility diagram, a proportionate increase in productive efficiency in all sectors

of the Zimbabwean economy would be indicated by which of the following?
A. A parallel outward shift of the production possibility curve
B. A parallel inward shift of the production possibility curve
C. A new position along the production possibility curve
D. A new position beyond the production possibility curve

6. The table below shows an individual’s potential needs and wants. Which combination correctly
identifies a need and a want?

Need
Want
A.
Transport
Food
B.
Shelter
Water
C.
WiFi
Clothing
D.
Healthcare
Education

7. The ___________ problem refers to the way in which resources or inputs are organized to produce
the goods and services that consumers want.
A. What to produce
B. How to produce
C. For whom to produce
D. Full employment of resources

8. A case of decrease in supply, followed by an increase in demand, the equilibrium price____.

A. Falls
B. Rises
C. Remains constant
D. Becomes zero

9. In an industry, (1) demand is perfectly inelastic and (2) supply is perfectly elastic. If a tax is
imposed in this industry, ________ bear the entire burden of the tax and equilibrium
quantity________.
A. Buyers, decreases.
B. Buyers, is unchanged.
C. Sellers, decreases.
D. Sellers, is unchanged

10. Suppose that when the price of a good increases from $5 to $6, the quantity demanded
decreases from 2 units to 1 units. From this information, we can say that
A. demand is perfectly inelastic
B. demand is perfectly elastic
C. demand is elastic
D. demand is inelastic

11. Consider two normal goods, good A and good B. Suppose good A is a necessity and good B is a
luxury good. Which of the following statements is true?
A. As your income increases, the share of your income that you spend on good A increases while the
share of your income you spend on good B decreases
B. As your income increases, the share of your income that you spend on good A decreases while the
share of your income you spend on good B increases
C. As your income increases, the share of your income that you spend on good A and good B both
increase
D. As your income increases, the share of your income that you spend on good A and good B both
decrease

12. When calculating elasticity, we use percentage changes instead of actual changes because
A. Using percentage changes will get rid of the negative sign
B. Using percentage changes will get rid of the units problem
C. Using actual changes will always overestimate elasticity
D. Using actual changes will always underestimate elasticity

13. When both the price of a substitute and the price of complement of X rises, the demand for X:
A. Rises
B. Falls
C. Remains unchanged
D. All of the above is possible

14. The Price and quantity relationship for an inferior good is:
A. Direct
B. Inverse
C. Positive
D. Indirect

15. Suppose you are told that the own-price elasticity of supply equal 0.5. Which of the following is
the correct interpretation of this number?
A. A 1% increase in price will result in a 50% increase in quantity supplied.
B. A 1% increase in price will result in a 5% increase in quantity supplied.
C. A 1% increase in price will result in a 2% increase in quantity supplied.
D. A 1% increase in price will result in a 0.5% increase in quantity supplied.

16. If goods A and B are substitutes, then which of the following could be the value of the cross-price
elasticity of demand for good Y?
A. -0.5.
B. -2.
C. Neither a) nor b).
D. Both a) and b).
17. Suppose Air Zimbabwe is considering an increase in air fares. If doing so results in an increase in
revenues raised, which of the following could be the value of the own-price elasticity of demand for
ferry rides?
A. 0.5.
B. 1.0.
C. 1.5.
D. All of the above.

18. What happens to the market for rental housing if a price ceiling is imposed?
A. Rental prices will increase, leading to a surplus of apartments
B. Rental prices will decrease, leading to a shortage of available apartments
C. The number of available apartments will remain unchanged
D. More landlords will enter the market
19. Which of the following is an example of a price floor?
A. Minimum wage laws
B. Rent control
C. Price gouging laws
D. Sales tax

20. How does a price ceiling affect producer surplus?

A. Producer surplus increases
B. Producer surplus decreases
C. Producer surplus remains unchanged
D. Producer surplus is eliminated

21. What is the primary goal of welfare economics?

A. To maximize producer profits
B. To determine the best allocation of resources for societal welfare
C. To minimize government intervention in markets
D. To maximize consumer choices

22. In the context of consumer choice, what is the equimarginal principle?

A. Consumers will allocate their income to equalize the marginal utility per dollar spent across all
goods.
B. Consumers will always choose the good with the highest total utility.
C. Marginal utility will always be greater than average utility.
D. The price of goods does not affect consumer choice.

23. What do indifference curves represent?

A. The different combinations of goods that yield different total utility levels.
B. The combinations of two goods that provide the same level of satisfaction to the consumer.
C. The relationship between price and quantity demanded for a good.
D. The maximum utility a consumer can achieve given their income.

24. Which of the following best describes the substitution effect?

A. The decrease in quantity demanded due to an increase in price.
B. The change in consumption patterns due to a change in relative prices.
C. The increase in total utility from consuming more of a good.
D. The change in income resulting from price changes.

25. What is the primary purpose of constructing a utility schedule?

A. To show the relationship between price and quantity demanded.
B. To quantify the total satisfaction derived from consumption of different quantities.
C. To illustrate consumer preferences graphically.
D. To determine the optimal price for a good in the market.

26. How does a negative externality in production typically affect the supply curve?
A. It shifts the supply curve to the right
B. It shifts the supply curve to the left
C. It has no effect on the supply curve
D. It creates a new supply curve altogether

27. Which of the following statements about public goods is true?

A. They are always provided by the private sector.
B. They can lead to market failure if not provided efficiently.
C. They are always excludable.
D. They are typically high in rivalry.

28. If the government imposes a tax on a good, what is likely to happen to the total welfare in the
market?
A. Total welfare will increase
B. Total welfare will decrease
C. Total welfare will remain unchanged
D. Total welfare will double

29. Which of the following statements about producer surplus is correct?

A. It is always greater than consumer surplus.
B. It can be affected by changes in production costs.
C. It is equal to total revenue.
D. It is the area above the supply curve.
30. How can government intervention help correct market inefficiencies caused by negative
externalities?
A. By reducing taxes
B. By imposing regulations or taxes on the activity causing the externality
C. By subsidizing all industries equally
D. By completely banning the product

31. What is the "free rider problem"?

A. Consumers avoiding paying for public goods
B. Producers not being able to cover their costs
C. Individuals benefiting from a good without paying for it
D. All of the above

32. Which of the following statements is/are correct?

(a) A firm who practices price discrimination will do so because it may be able to increase its profits.
(b) If a monopolist wants to practice price discrimination the buyers in the different markets must
have the same price elasticities of demand.
(c) If a monopolist wants to practice price discrimination it must be able to separate markets and
resale between markets should prevented.
A. a; b; c
B. a;b
C. a;c
D. b;c

33. Which of the following statement is/are correct?

(a) When the government intervenes in some or other way and regulates a monopolist, one basic
objective could be to bring about higher prices for the consumers.
(b) Another objective could be to force the monopolist to produce less.
(c) Lastly, the government could have the objective to decrease the monopolist’s excess profits.
A. a ; b; c
B. a; b
C. a ; c
D. Not (i); (ii); or (iii)

34. Which of the following can one expect to find in the market form of monopolistic competition?
(a) Long -run economic profits
(b) Product differentiation and advertising
(c) Downward-sloping demand curves faced by each firm
A. a ; b; c
B. a ; b
C. a ; c
D. b ; c

35. Under dominant-firm price leadership

(a) All firms produce identical output quantities
(b) All firms charge identical prices
(c) All firms face identical cost conditions
Which of the above statements is/are correct?
A. a ; b; c
B. a
C. b
D. c

36. According to the theory of the kinked demand curve:

(a) The portion of the demand curve above the kink is more elastic than below the kink.
(b) An increase in cost (shift in the cost curves) always reduces output sold.
(c) An outward shift of the demand curve always increases price.
Which of the following statements is/are correct?
A. a ; b; c
B. a;b
C. b;c
D. Not (i); (ii); or (iii);

37. Which of the following describes an Isoquant?

(a) They intersect.
(b) They are negative slope
(c) They are concave
(i) a; b; c
(ii) a; c
(iii) b ; c
(iv) Not (i); (ii); or (iii)

38. Which statement is correct?

(a) Costs are minimised when the isocost cuts the isoquant.
(b) Costs are minimised when isoquant is tangential to the isocost.
(c) None of the above
(d) All of the above

39. Which of the following describes the concept of Economies of Scale?

(a) Economies of scale are experienced in the short-run period
(b) Economies of scale are due to specialization, managerial specialization and the use of efficient
capital.
(c) Economies of scale are as a result of increasing costs.
(d) Economies of scale remain unchanged as output increases.

40. Under what conditions would firms consider shutting down a business?
(a) When average revenue (AR) is equal to average total cost (ATC).
(b) When average revenue (AR) is equal to average variable cost (AVC).
(c) When the business is not making profits.
(d) None of the above.