IGCSE Economics MCQ Practice: Cambridge (CIE)

IGCSE Economics Multiple Choice Questions

Instructions: Choose the single best answer for each question.

1. What is the fundamental economic problem faced by all societies?

   • A) Inflation
   • B) Unemployment
   • C) Scarcity
   • D) Government debt

2. Which of the following is considered a factor of production?

   • A) Money
   • B) Shares
   • C) Labour
   • D) Bonds

3. An increase in the price of a substitute good will most likely lead to which of the following for the original good?

   • A) A decrease in demand
   • B) An increase in demand
   • C) A decrease in supply
   • D) An increase in supply

4. What does a point inside the Production Possibility Curve (PPC) represent?

   • A) Efficient use of resources
   • B) Unattainable production
   • C) Inefficient use of resources
   • D) Economic growth

5. Which economic system relies primarily on the interaction of supply and demand to allocate resources?

   • A) Command economy
   • B) Mixed economy
   • C) Market economy
   • D) Traditional economy

6. If the price elasticity of demand for a good is 0.5, what does this indicate?

   • A) Demand is elastic
   • B) Demand is inelastic
   • C) Demand is unitary elastic
   • D) Demand is perfectly elastic

7. A firm experiences 'economies of scale' when:

   • A) Its average costs increase as output increases.
   • B) Its average costs decrease as output increases.
   • C) Its total costs remain constant as output increases.
   • D) Its marginal costs exceed its average costs.

8. Which of the following is a primary aim of government economic policy?

   • A) To maximize private sector profits
   • B) To ensure perfect competition
   • C) To achieve full employment
   • D) To eliminate all taxes

9. Fiscal policy primarily involves the government's use of:

   • A) Interest rates and money supply
   • B) Exchange rates and trade barriers
   • C) Taxation and government spending
   • D) Subsidies and regulation

10. What is 'opportunity cost'?

    • A) The total cost of production
    • B) The explicit cost of a decision
    • C) The benefit of the next best alternative forgone
    • D) The cost of all alternatives

11. Which of these is a function of money?

    • A) A store of value
    • B) A source of interest
    • C) A means of production
    • D) A form of investment

12. When the government imposes a tariff on imported goods, what is the most likely effect?

    • A) Domestic prices decrease
    • B) Imports increase
    • C) Government revenue increases
    • D) Domestic production decreases

13. Inflation is best defined as:

    • A) A sustained increase in the general price level
    • B) A one-time increase in the price of a single good
    • C) A decrease in the unemployment rate
    • D) A period of economic recession

14. A movement along the demand curve is caused by a change in:

    • A) Consumer income
    • B) The price of the good itself
    • C) Tastes and preferences
    • D) The price of substitute goods

15. What is 'structural unemployment'?

    • A) Unemployment due to seasonal changes
    • B) Unemployment due to a lack of overall demand
    • C) Unemployment due to a mismatch between skills and available jobs
    • D) Unemployment due to people voluntarily changing jobs

16. Which of the following is an example of a fixed cost for a firm?

    • A) Raw materials
    • B) Wages for production workers
    • C) Rent for the factory building
    • D) Electricity bill for machinery in use

17. A country experiences a balance of payments deficit when:

    • A) Its exports exceed its imports
    • B) Its imports exceed its exports
    • C) Its government spending exceeds its tax revenue
    • D) Its national debt increases

18. How does an increase in interest rates typically affect borrowing and spending in an economy?

    • A) Encourages more borrowing and spending
    • B) Discourages borrowing and spending
    • C) Has no effect on borrowing and spending
    • D) Only affects government borrowing

19. What does 'specialization' in production lead to?

    • A) Decreased output and higher costs
    • B) Increased efficiency and higher output
    • C) Reduced trade and self-sufficiency
    • D) More diversified skill sets for workers

20. Which of the following is a characteristic of a public good?

    • A) Excludability and rivalry
    • B) Non-excludability and rivalry
    • C) Excludability and non-rivalry
    • D) Non-excludability and non-rivalry

Answer Key

1. C
2. C
3. B
4. C
5. C
6. B
7. B
8. C
9. C
10. C
11. A
12. C
13. A
14. B
15. C
16. C
17. B
18. B
19. B
20. D