EOC EOC Economics 1 — Questions and Answers
Question 1: What term describes the total value of all goods and services produced within a country in a year?
- Gross Domestic Product (Correct answer)
- Consumer Price Index
- Net National Income
- Balance of Trade
Correct answer: Gross Domestic Product
Gross Domestic Product (GDP) measures the total monetary value of all finished goods and services produced within a country's borders in a specific time period.
Question 2: When the price of a good increases, what typically happens to the quantity demanded, according to the law of demand?
- It increases
- It decreases (Correct answer)
- It stays the same
- It doubles
Correct answer: It decreases
The law of demand states that as the price of a good rises, consumers will purchase less of it, assuming all other factors remain constant.
Question 3: What is the term for the additional cost incurred by producing one more unit of a good or service?
- Fixed cost
- Sunk cost
- Marginal cost (Correct answer)
- Opportunity cost
Correct answer: Marginal cost
Marginal cost refers to the change in total production cost that comes from making or producing one additional unit of a product.
Question 4: Which type of economic system relies primarily on supply and demand to determine prices and production?
- Command economy
- Traditional economy
- Market economy (Correct answer)
- Mixed economy
Correct answer: Market economy
In a market economy, prices and production decisions are determined by the interactions of supply and demand with minimal government intervention.
Question 5: What is 'inflation' in economic terms?
- A decrease in the money supply
- A general rise in price levels over time (Correct answer)
- An increase in unemployment
- A drop in consumer spending
Correct answer: A general rise in price levels over time
Inflation is the rate at which the general level of prices for goods and services rises over time, reducing purchasing power.
Question 6: What does 'opportunity cost' mean in economics?
- The price paid for a product
- The cost of raw materials
- The value of the next best alternative foregone (Correct answer)
- The total cost of production
Correct answer: The value of the next best alternative foregone
Opportunity cost is the value of the best alternative you give up when making a choice between competing options.
EOC EOC Economics 1
What term describes the total value of all goods and services produced within a country in a year?