O Level Economics MCQs with answers
Practise O Level Economics (2281) with 445 exam-style MCQs, each with the answer and a short explanation. Every test is marked the moment you finish and shows your score chapter by chapter, so you know what to revise next. It is free and needs no sign-up.
445 questions · 6 chapters
What each chapter covers 6 chapters
The questions follow the syllabus chapter by chapter. You can test the whole subject or one chapter at a time.
- The basic economic problem 44 questionsThe nature of the basic economic problem, Factors of production, Opportunity cost, Production possibility curve (PPC) diagrams
- The allocation of resources 114 questionsThe role of markets in allocating resources, Demand, Supply, Price determination, Price changes, Price elasticity of demand (PED), Price elasticity of supply (PES), Market economic system, Market failure, Mixed economic system
- Microeconomic decision-makers 100 questionsMoney and banking, Households, Workers, Firms, Firms and production, Firms’ costs, revenue and objectives, Types of markets
- Government and the macroeconomy 89 questionsGovernment macroeconomic intervention, Fiscal policy, Monetary policy, Supply-side policy, Economic growth, Employment and unemployment, Inflation
- Economic development 43 questionsLiving standards, Poverty, Population, Differences in economic development between countries
- International trade and globalisation 55 questionsSpecialisation and free trade, Globalisation and trade restrictions, Foreign exchange rates, Current account of the balance of payments
Sample O Level Economics MCQs with answers 12 questions
12 questions from the test, one or two from each chapter. Try each one, then open the answer.
1. What does a point outside an economy's current PPC show?
- A
an output reached by moving resources between the goods
- B
the most efficient output of the two goods
- C
an output it cannot reach with its current resources
- D
an output at which some resources are unemployed
Show answer
Answer: C. Points beyond the PPC are unattainable until the quantity or quality of resources, or technology, improves. Moving resources between goods only moves the economy along the curve.
2. Many parents in a town do not have their children vaccinated because they do not realise how much it helps. What is the most likely consequence?
- A
too many resources go into vaccination, and money is wasted
- B
vaccination becomes a public good supplied by the market
- C
resources are allocated efficiently, as parents choose freely
- D
too few resources go into vaccination, so disease spreads
Show answer
Answer: D. Vaccination is a merit good with external benefits, so leaving it to individual choice leads to under-consumption. Unvaccinated children can pass disease to others, a cost to third parties.
3. What is meant by labour productivity?
- A
the output produced per worker in a given period of time
- B
the number of hours each worker works in a week
- C
the total output produced by all the workers in a firm
- D
the total wages paid for each unit of output
Show answer
Answer: A. Productivity measures efficiency: output per worker (or per hour worked). The total output of all workers is production, not productivity.
4. Which of these is an example of expansionary monetary policy?
- A
cutting the central bank's policy interest rate
- B
raising the rate of income tax
- C
raising the central bank's policy interest rate
- D
cutting government spending on roads
Show answer
Answer: A. A lower interest rate makes borrowing cheaper and saving less attractive, which raises spending. Income tax and spending on roads are fiscal policy tools.
5. What is meant by an optimum population?
- A
the population that gives the highest output per head
- B
a population that is neither growing nor falling over time
- C
the largest population that the country's farmland can feed
- D
a population with exactly equal numbers of males and females
Show answer
Answer: A. At the optimum population, the number of people makes the best use of the available land, capital and technology, so output per head is maximised. A country with more people than this is over-populated.
6. Why might free trade harm some domestic firms?
- A
they may be unable to compete with cheaper imports
- B
they will lose access to markets in other countries
- C
they will have to pay tariffs on all of their exports
- D
they will face less competition and become inefficient
Show answer
Answer: A. Removing trade barriers exposes domestic firms to foreign rivals; firms with higher costs may lose sales and close, causing job losses.
7. An economy with a bowed-out PPC moves along the curve, producing more and more food and less and less clothing. What happens to the opportunity cost of each extra unit of food?
- A
it falls, as farmers become more skilled with practice
- B
it stays the same, as the total amount of resources is fixed
- C
it falls, as fewer resources are left in clothing
- D
it rises, as resources less suited to farming are moved into it
Show answer
Answer: D. The resources moved first are those best suited to farming. Later, resources better suited to clothing must be moved, so each extra unit of food costs more clothing.
8. A firm raises the price of its product while all other conditions stay the same. What happens to the quantity it sells?
- A
it rises, as supply extends along the supply curve
- B
it falls, as the demand curve shifts to the left
- C
it stays the same, as demand and supply both change
- D
it falls, as demand contracts along the demand curve
Show answer
Answer: D. A higher price with nothing else changed causes a movement up the existing demand curve, so fewer units are sold. The demand curve itself does not shift.
9. A shop shows the prices of all its goods in rupees, so customers can easily compare their values. Which function of money does this show?
- A
standard of deferred payment
- B
store of value
- C
unit of account
- D
medium of exchange
Show answer
Answer: C. As a unit of account (measure of value), money gives a common way of pricing and comparing the value of different goods. The goods have not yet been bought, so this is not money acting as a medium of exchange.
10. What is a recession?
- A
a sustained fall in the general price level
- B
a fall in the rate of inflation for two consecutive quarters
- C
a fall in real GDP for two consecutive quarters
- D
a slower rise in real GDP than in the previous year
Show answer
Answer: C. A recession is a period of negative economic growth, usually defined as real GDP falling for two quarters in a row. Slower growth is still growth, and a falling price level is deflation.
11. Floods destroy crops and livestock in a farming region, leaving many families without income. Which cause of poverty does this show?
- A
age
- B
low wages
- C
environmental factors
- D
illness
Show answer
Answer: C. Natural events such as floods, droughts and earthquakes can destroy livelihoods, especially where families depend on farming.
12. A country's current account deficit widens because its exports fall sharply. What is the most likely effect on the domestic economy?
- A
GDP and employment fall as total demand falls
- B
the currency appreciates as a result of the fall in exports
- C
employment rises in the export industries
- D
inflation rises as total demand increases
Show answer
Answer: A. Exports are part of total demand, so a fall in exports reduces output and jobs, especially in export industries. It also tends to reduce inflation and to weaken the currency.
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Are these past paper questions?
The 445 MCQs are our own, written to the syllabus in the style of the exam.
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Instantly. You get your score, the right answer and an explanation for every question, and a list of the topics to work on.
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