IGCSE Economics CIE Section 2 – The Allocation of Resources Practice Test

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• Which statement describes unit price elasticity of supply?
• When a change in price causes a complete change in quantity supplied (PES = ∞), this describes:
• Labour-intensive: which production method uses a high proportion of labour relative to capital?
• Public goods are typically underprovided by the market due to which characteristics, and how does government provision address this?
• Resource allocation is the process of deciding how scarce resources (land, labour, capital, entrepreneurship) are used to produce goods and services. Why is it necessary in an economy?
• The costs imposed on those who are not involved in the consumption and production activities are called
• Define dynamic efficiency and how it differs from productive efficiency.
• Which term describes a rise in supply at any given price, shifting the supply curve to the right?
• In the price elasticity of demand formula, what does the numerator represent?
• Total benefits to society equal private benefits plus external benefits
• Excludability refers to the ability of owners to do what, and how does this influence resource allocation?
• Which term describes goods that are detrimental to consumers and are often over-consumed?
• Which of the following is an example of a public good?
• When a price change causes an equal percentage change in quantity demanded, leaving total revenue unchanged, the demand is?
• How can public goods be funded beyond taxes?
• A potential drawback for the host country when a multinational operates there is
• Which statement describes a market economic system?
• When resources are allocated to produce the right products in the right quantities, this is known as?
• If the price elasticity of demand is infinite, which type of demand is this?
• Firms owned by shareholders and individuals belong to which sector?
• Which of the following best describes a market as used in economics?
• An economy in which both the public and private sectors play an important role is called a
• If a change in price has no effect on the quantity demanded, the PED is?
• Inelastic demand is when the quantity demanded changes by a smaller percentage than the change in price; |PED|
• Why might a government subsidize education or healthcare?
• What factor tends to attract multinational companies to a country?
• Which term describes the total supply of a product?
• What term describes an agreement between two or more firms to sell a product at the same price?
• Which of the following is an example of a positive externality?
• What is the formula for price elasticity of supply (PES)?
• Which statement correctly distinguishes productive efficiency from allocative efficiency?
• Which concept describes the power to influence prices due to lack of competition?
• When the quantity demanded changes by a greater percentage than the change in price, the demand is described as?
• Which term describes a situation where there is no market to allocate a particular resource?
• Which of the following is a strategy MNCs use to transfer technology to a host country?
• Which statement best defines a multinational company?
• Which method assesses investment projects by considering social costs and benefits?
• The benefits enjoyed by those who are not involved in an activity are called
• The institutions, organizations and mechanisms that influence economic behaviour and determine how resources are allocated are known as what?
• Which of the following is not a factor of production?
• If the quantity supplied changes by a greater percentage than the percentage change in price, the supply is?
• What is deadweight loss and when can it occur in resource allocation?
• A public good is characterized by being non-rival and non-excludable, which implies that
• Allocative efficiency occurs when___?
• An arrangement that brings buyers into contact with sellers is known as what?
• A product that can be used in place of another is called what?
• When demand is inelastic, who bears the majority of the tax burden?
• The benefits enjoyed by those who are not involved in the consumption and production activities are called
• Tax incidence depends on elasticities; burden shifts toward the less elastic side.
• Excess demand is defined as the amount by which
• The part of the economy that involves the transactions of the government is called?
• Why might the government intervene in a mixed economy?
• Demand falls as price rises as consumers will buy more of a good when its price is lower and less when its price is higher. This describes which concept?
• If demand is highly elastic, which group tends to bear a greater share of a tax burden?
• Which term refers to taxes on the income and wealth of individuals and firms?
• Which of the following is a determinant of price elasticity of supply?
• The total costs to a society of an economic activity are called
• Market Supply: what is Market Supply?
• Why might a market economy require government intervention to achieve allocative efficiency?
• Which term best describes a good that is non-excludable but rivalrous, such as rival natural resources?
• Which term denotes a government payment intended to promote the development of key industries?
• Which of the following is a likely effect on local suppliers when a multinational expands into a country?
• When a change in price causes an equal percentage change in the quantity supplied (PES = 1), this is called:
• A product often used together with another product is called what?
• Merit goods are
• A subsidy shifts supply downward or demand upward, increasing output.
• Which of the following statements is correct about price controls?
• In the presence of a negative externality, how do marginal private cost and marginal social cost relate, and what misallocation condition is typical?
• A demand that responds very strongly to price changes is said to be which type?
• Which term describes a system where the price mechanism allocates resources and land and capital privately owned?
• When a change in price causes no change in quantity supplied (PES = 0), this describes:
• The sale of public sector assets to the private sector is called?
• A situation in which a market left on its own fails to allocate resources efficiently. Where the social costs outweigh the social benefits is called?
• Which of the following statements about welfare measures involving consumer surplus and producer surplus is correct?
• Which of the following is an example of capital?
• Which market condition is described as a market where most potential customers have bought the product?
• The term 'economic agents' refers to which groups?
• Resources should be allocated where MB equals MC.
• In a free market economy, how do prices allocate resources?
• A fall in demand at any given price, causing the demand curve to shift to the left, is called what?
• Elasticity refers to the degree to which individuals, consumers or producers change their demand or the amount supplied in response to price or income changes.
• Which two methods can promote a positive externality?
• If the quantity demanded changes by a smaller percentage than the change in price, this type of demand is called:
• If the quantity supplied changes by a smaller percentage than the percentage change in price, the supply is?
• A measure of the responsiveness of the quantity demanded to a change in price is called?
• Which of the following are properties of a public good?
• A product that can be used in place of another is called which term?
• Which term describes the willingness and ability of producers to offer a good at a given price level?
• Firms are business concerns that produce goods and services and employ workers and other factors of production. Which term describes these organizations?
• A fall in the quantity supplied caused by a fall in the product's own price is called which term?
• The fall in the quantity demanded due to a rise in price is called?
• An economic system in which the government makes crucial decisions, land and capital are state-owned and resources are allocated by directives is called what?
• The total demand for a product is called which term?
• Division of labor increases productivity because tasks are specialized; however it can cause monotony.
• Price elasticity of demand is defined as
• Efficiency occurring over time as a result of investment and innovation is called?
• Households are buyers and are also known as which term?
• The benefits received by those directly consuming or producing a product are called
• A product whose demand increases when income increases and decreases when income falls is known as which type of good?
• Which concept describes improvements over time due to investment and innovation?
• Shifts in the demand curve caused by changes in tastes, income, other goods, or expectations are known as what?
• A merit good is best described as a good whose consumption provides positive externalities and is under-consumed by the market.
• Which term describes changes in supply conditions that cause shifts of the supply curve?
• Excess supply is defined as the amount by which
• What is the process called when ownership and control of an industry moves from the private sector to the government?
• In the context of externalities, which statement about marginal social benefit and marginal private benefit is true?
• The total benefits to a society of an economic activity are called
• A product whose demand decreases when income increases and increases when income falls is known as which type of good?
• Market Disequilibrium: a situation where demand and supply are not equal at the current price is called?
• What is specialization and why does it matter for resource allocation?
• What is the effect of capital goods investment decisions on intertemporal resource allocation?
• One clear benefit for a host country from a multinational company is
• Which statement best describes the free-rider problem and public provision?
• A rise in the quantity supplied caused by a rise in the product's own price is called what?
• Which concept is about producing goods at the lowest possible cost with full resource use?
• Price controls can cause deadweight loss because they prevent the market from reaching equilibrium.
• A payment by a government to encourage the development of certain key industries is called what?
• Which policy action is commonly used to reduce the consumption of demerit goods?
• Non-price rationing is used to allocate scarce goods when
• A market in which most potential customers who need, want, and can afford a product have bought it is called
• Capital-intensive: which production method uses a high proportion of capital relative to labour?
• Why are incentives important in resource allocation?
• The term for the sum of all individual demands in a market is which of the following?
• Someone who consumes a good or service without paying for it (e.g. defense) is called?
• Which statement best describes the role of government in a mixed economy?
• What is the formula for Price Elasticity of Demand (PED)?
• What is the PED value for perfectly elastic demand?
• Market Equilibrium: a situation where demand and supply are equal at the current price is known as?
• PED stands for which concept?
• Goods that generate positive externalities and are under-consumed if left to market forces are called
• A rise in demand at any given price, causing the demand curve to shift to the right, is called what?
• Those not directly involved in producing or consuming a product are referred to as?
• What best describes the motive for multinational companies to expand production abroad?
• In a perfectly competitive market, allocative efficiency is achieved when:
• Two goods that are often used together are known as what?
• Which of the following best describes consumer surplus?
• A government-owned business designed to act in the public interest is called a
• A rise in the quantity demanded caused by a fall in the price of the product is called?
• Which term describes an economy where private sector and public sector both play important roles?
• What is the market clearing price?
• Distinguish between rival and non-rival goods with an example.
• Which description best defines a mixed economic system?
• Multinational companies can affect prices in host markets by
• Which scenario is a classic example of government failure reducing welfare?
• In the presence of a positive externality, how does a free market typically allocate resources compared to the social optimum?
• Supply rises as price increases as more willing and able to sell a good at a higher price. This describes which concept?
• The study of the whole economy is called which branch of economics?
• Unit elastic demand means total revenue is unaffected by price changes; what is the impact on total revenue?
• Define a quasi-public good and give an example.
• The addition of individual components to arrive at a total amount is called?
• Firms owned by shareholders and individuals belong to which sector?
• Which market structure features a single seller in the market?
• Decision-makers in an economy include households, firms and government. What are these decision-makers collectively called?
• Which term describes an economic and political system in which a country's trade and industry are controlled by private owners for profit, rather than by the state?
• A Pigouvian tax is designed to...
• Which type of good is rival and excludable?
• Which is a typical benefit of multinational companies to host countries?
• Which term best defines the private sector?
• Costs imposed on third parties not reflected in market prices are known as which concept?
• In a pure market economy, trade and industry are controlled by private owners for profit rather than by the state. This describes?
• Public choice theory studies how political incentives shape policy choices and resource distribution, often prioritizing which of the following over welfare?
• If the government sells its stake in a railway company to private investors, this is an example of?
• A fall in supply at any given price, due to non-price factors, is described by which term?
• Allocative efficiency occurs when marginal benefit equals marginal cost. Which statement best describes the outcome?
• Which of the following is an example of a positive externality?
• The allocation of scarce resources and the relative prices in a market economy are determined by which concept?
• Products which the government regards as harmful and will be over-consumed if left to market forces, such as tobacco, are called
• A price floor set above the equilibrium price leads to what outcome?
• A required payment to a local, state, or national government is called what?
• In the presence of a negative externality, if external costs are not internalized, the market tends to produce too much, causing:
• Taxes on the income and wealth of individuals and firms are called what?
• Which policy action would governments typically use to raise the consumption of merit goods?
• Compare resource allocation in market, command, and mixed economies.
• Which condition describes elastic demand?
• Products which the government considers consumers do not fully appreciate how beneficial they are and so will be under-consumed if left to market forces, such as healthcare and education, are called
• Which statement correctly distinguishes an ad valorem tax from a specific tax?
• Which term describes shifts in the demand curve caused by non-price factors such as tastes, income, and expectations?
• Which describes the price mechanism?
• The level of output where social cost equals social benefit and welfare is maximised is called
• Which statement about multinational companies is true?
• Which statement correctly describes the formula for price elasticity of supply?
• What term describes taxes on goods and services such as GST and VAT?
• Which policy instruments can correct a negative externality by raising private costs toward social costs?
• Two goods that can replace each other in consumption are known as what?
• Which term describes someone who benefits from a public good without paying for it?
• The costs borne by those directly consuming or producing a product are called
• In a market with excess demand, what is the likely effect on price?
• Supply: what is Supply?
• The average cost of production is defined as what?
• FDI stands for
• The phrase 'A rise in the quantity demanded caused by a fall in price' matches which term from the list?
• Taxes on goods and services such as GST and VAT are referred to as what?
• How can information asymmetry lead to misallocation of resources? Provide an example used in economic learning.
• Organisations owned by the government which sell products are called?
• The study of the behaviour and decisions of households and firms, and the performance of individual markets is called what?
• A firm that operates manufacturing plants in several countries is known as a
• How can public expenditure on infrastructure influence resource allocation in the long run?
• Which system relies on consumers to determine what is produced, with resources allocated by the price mechanism?
• What is the term for a limit on the amount of a good that can be consumed?
• Which term refers to the willingness and ability of buyers to purchase a good or service?
• Which statement about a lump-sum tax is correct?
• Which of the following describes market failure due to productive and allocative inefficiency?
• Which term describes a fall in supply at any given price, shifting the supply curve to the left?
• Elastic demand is when the quantity demanded changes by a greater percentage than the change in price; |PED|
• Market Equilibrium relationship: at market equilibrium, what is true about quantity demanded and quantity supplied?
• In a market with excess supply, what is the likely effect on price?
• Which policy instrument is typically used to internalize a negative externality?
• The costs imposed on those who are not involved in an activity are known as
• Which statement defines productive efficiency?
• Which allocation method uses tickets drawn at random to decide who receives goods?
• What is market failure and give two examples related to allocation of resources?
• Which statement best defines opportunity cost?
• The term used for the total demand of a product across all buyers is?
• A potential risk for the host country when a large multinational operates there is
• If a farmer can choose to produce wheat or corn, where wheat would yield $1000 and corn would yield $1200, what is the opportunity cost of choosing wheat?
• Why are subsidies common in agriculture?
• Which of the following is not a determinant of price elasticity of supply?
• Which term is used for taxes on the income and wealth of individuals and firms?
• How do multinational companies influence resource allocation in a country?
• Determinants of price elasticity of demand include which of the following?
• Allocative efficiency implies which relationship between marginal social benefit and marginal social cost?
• Which statement is true about scarcity and shortages?
• How does a shortage arise and how is it resolved in a market?
• Why might governments subsidize healthcare?
• Which characteristic best describes a private good?
• What term describes a company that produces in more than one country?
• Which factor of production is most associated with risk-taking and entrepreneurial ability?
• The system or organisation for exercising authority over a body of people is called what?
• What is deadweight loss in the context of allocative efficiency?
• A situation where demand and supply are not equal is called?
• An externality is a side effect of a market activity affecting others not directly involved. Which of the following is a negative externality?
• Which statement best characterizes non-excludable, non-rival goods, i.e., public goods?
• In a planned economic system, which assets are state-owned and allocated by directives?
• Which term refers to prioritizing short-term gains over long-term welfare?
• A situation in which a good or service is produced at the lowest possible cost and full use of resources is called?
• In a mixed economy, what role does the price mechanism play in resource allocation?
• How does the decision to invest in capital goods affect long-run resource allocation?
• A product which is non-rival and non-excludable and hence needs to be financed by taxation is called
• If income rises and the demand for a product increases, the product is classified as what type of good?
• A market in which firms purchase the factors of production from households is called