SENIOR HIGH SCHOOL DEPARTMENT

DIAGNOSTIC TEST
APPLIED ECONOMICS

Name: __________________________________Section: _____________Date: _____________Score: ________

MULTIPLE CHOICE: Read and understand each question, and then write the letter that corresponds to the correct
answer at the space provided before each item.

_____1. He defines economics as the science of choice. It studies how people choose to use scarce resources or
limited productive resources to produce various commodities and to distribute these commodities for
consumption. The author of this is:
a. Fajardo b. Sicat c. Nordhaus d. Samuelson
_____2. Economics is derived from the Greek word “oikanomia” meaning:
a. Economic management b. Household management
c. Social management d. Political management
_____3. Economics is important so that we may be able to:
a. Understand problems facing the citizens and family
b. Analyze fascinating patterns of social behaviour
c. Help the government promote growth & improve quality of life
d. All of these choices
_____4. Economics is a social science because it deals with:
a. Human nature b. Natural resources
c. Experimentation d. Plants & animals
_____5. A division of economics that is concerned with the overall performance of the entire economy. It studies
the economic system as a whole rather than the individual economic units.
a. macro economics b. micro economics c. Price theory d. economics
_____ 6. These are examples of human wants except:
a. Smartphone b. Clothing c. Perfume d. Watch
_____7. Type of economic system wherein decision-making is centralized in the government.
a. Traditional b. command c. market d. bottom economy

_____8. Macroeconomics deals with the following except:

a. Gross National Product b. Employment c. National Income d. Price of rice
_____9. The simplest application of mathematics for economic analysis is found in this field because it explains
the relationships:
a. Physics b. Geometry c. Chemistry d. Sociology
_____10. Applying economic theories to current economic conditions can be extremely helpful. Applied
economics acts as a mechanism to:
a. Sweep aside all attempts to dress up the situation so that it will appear to be worse or better than it actually is.
b. Avoid the recurrence of a negative situation, or at least minimize the impact.
c. Determine what steps can be reasonably be taken to improve the current economic situation.
d. All of the above
_____11. It refers to the application of statistical and mathematical theories to economics for the purpose of
testing hypotheses and forecasting future trends.
a. Applied Economics b. Models c. Probability d. Econometrics
_____12. A division of economics that is concerned with the behavior of individual entities such as consumer, the
producer and the resource owner.
a. macroeconomics b. micro economics c. Price theory d. economics
_____13. Once the goods are produced, how shall they be distributed?
a. What to produce? b. How to produce?
c. For whom to produce d. How much to produce?
_____14. Because of scarcity, people and economies must make decisions over how to:
a. Allocate resources b. Import resources
c. Export resources d. Stagnation of resources
_____15. This kind of economy makes use of antiquated equipment and tools:
a. Traditional economy b. Planned economy c. Market economy d. Mixed economy
_____16. A government controlled economy:
a. Traditional economy b. Command economy c. Free market economy d. Planned
economy
_____17. It is the value of what is foregone in order to have something else:
a. Scarcity b. Income c. Opportunity cost d. Wealth

_____18. It reflects the desire of the consumer for a commodity:

a. Demand b. Supply c. Market d. Supply schedule
_____19. In market equilibrium, a higher price will result to:
a. Shortage b. Surplus c. Constant supply d. Constant demand
_____20. Which of the following is true?
a. The supplies of inputs used affect the supply of good.
b. The lower the price of the good, the smaller the quantity that will be offered by the supplier.
c. The lower the price of the good, the bigger the quantity that will be demanded by the buyer.
d. All the above are true
_____21. The supply curve is positively sloped because:
a. Any increase in the cost of production will result to a higher price.
b. The lower the price, the larger supply the consumers are willing to buy.
c. The higher the price, the higher the quantity that suppliers are willing to sell.
d. The larger the quantity supplied, the lower the price.
_____22. The demand curve is sloping down because:
a. Any increase in the cost of production will result to a higher price.
b. The lower the price, the higher the demand
c. The higher the price, the higher the quantity that suppliers are willing to sell.
d. The larger the quantity supplied, the lower the price.
_____23. Demand for television increases despite the increase in price is due to a change in:
a. Supply b. Quantity demanded c. Demand d. None of these are correct
_____24. When the % change in price is lesser than the % change in quantity demanded, the demand is said to
be:
a. Elastic b. Inelastic c. Unitary d. Perfectly elastic
_____25. At a given price, quantity demanded can change infinitely. The demand is:
a.Elastic b. Perfectly elastic c. Inelastic d. Perfectly inelastic
_____26. The price elasticity of supply measures:
a. The degree of responsiveness of quantity supplied to variations in price.
b. The degree of responsiveness of quantity demanded to variations in price.
c. The price of commodity at which buyers are willing to buy.
d. The quantity of goods that buyers are willing to buy.
_____27. The price elasticity of demand measures:
a. The degree of responsiveness of quantity supplied to variations in price.
b. The degree of responsiveness of quantity demanded to variations in price.
c. The price of commodity at which buyers are willing to buy.
d. The quantity of goods that buyers are willing to buy.
_____28. When the % change in price is greater than the % change in quantity demanded, the demand is said to
be:
a. Elastic b. Inelastic c. Unitary d. Perfectly elastic
_____29. The coefficient of demand relates a percentage change in quantity demanded of Good A in response to
a percentage change in the price of Good B:
a. Price elasticity of demand b. Cross elasticity of demand
c. Income elasticity of demand d. Cross elasticity of supply
_____30. If prices of basic commodities increase in the market, consumers will look for:
a. Expensive products b. Substitute product c. Luxury Products d. Grocery items
_____31. A market structure wherein a firm takes the prices charged by its rivals as given and ignores the impact
of its own prices on the prices of other firms:
a. Monopoly b. Oligopoly c. Monopolistic competition d. Perfect competition
_____32.This is characterized by many buyers and sellers, many products that are similar in nature and, as a
result, many substitutes:
a. Monopolistic competition b. Perfect competition c. Oligopoly d. Monopoly
_____33. There are no barriers to entry into or exit out of the market:
a. Perfect competition b. Monopolistic competition c. Oligopoly d. Monopoly
_____34. This is a market structure in which there is only one producer/seller for a product:
a. Monopoly b. Monopolistic competition c. Oligopoly d. Perfect competition
_____35. Cartel is part of:
a. Monopoly b. Oligopoly c. Monopolistic competition d. Perfect competition
_____36. What is the opportunity cost of a person going to college?
a. The time that one could have spent doing other activities
b. Other life opportunities one could have availed
c. The income that one could have earned when he/she worked instead
d. All of these are correct
_____37. Which of the following depicts the concept of excess supply?
a. A huge wave of informal settlers come to the city
b. A popular artist dies, thus, there will obviously be no more artworks from him.

c. A new restaurant opens up in town and gets great reviews. There are only 15 tables but everyone wants to get
a reservation.
d. None of these are correct
_____38. Types of commodities that comes from agricultural products and livestocks.
a. Commodities b. Hard commodities c. Soft commodities d. None of these are correct
_____39. These are types of commodities from natural resources that need to be extracted:
a. Commodities b. Hard commodities c. Soft commodities d. None of these are correct
_____40. Prices of apples and grapes tend to increase during Christmas season.
a. weather b. seasonal variation c. Taxation d. Political condition
_____41. New product invention will lead to an increase in demand which will also signal an increase in price of
the commodity affected.
a. weather b. seasonal variation c. Technology d. market speculation
_____42. A table that shows how much of a product firms will sell at different prices.
a. Demand schedule b. Supply schedule C. Graph of demand d. Graph of supply
_____43. A table that shows how much of a given product household would be willing to buy at a different
prices.
a. Demand schedule b. Supply schedule C. Graph of demand d. Graph of supply
______44. The condition that exists when quantity supplied and quantity demanded at the current price is
equal.
a. Equilibrium b. Determinants c. Demand function d. Price rate
_____45. If an increase in the price of paper leads to a decrease in the demand for pencils, then paper and pencils
are:
a. substitutes b. complements c. normal goods d. inferior goods

True or False: Write TRUE if the statement is correct, and FALSE if the statement is wrong.

______46. The lower the price of the good, the bigger the quantity that will be demanded by the buyer
______47. The lower the price of the good, the smaller the quantity that will be offered by the supplier.
______48. Demand curve is a graph that shows how much of the product a firm will sell at different prices.
______49. Scarcity is a situation wherein the amount of something available is insufficient to satisfy the
desire
for it.
_____50. Capital refers to all human efforts be it mental or physical that help to produce satisfying goods and
services. Also called human resources.

_____51. Type of business organization in which it is owned by a single individual who is singly responsible for
running the business.
a. Sole proprietorship c. Corporation
b. Partnership d. Cooperative
_____52. Types of organization in which two or more persons combine their resources in a business with a view
to making a profit.
a. Sole proprietorship c. Corporation
b. Partnership d. Cooperative
_____53. Noel owns a fast food chain. He recently read from a reputable magazine that there is a continuous
increase number of people that are embracing healthier eating options. This situation shows a/an ____ for Noel
to exploit.
a.Strength b. Threats c. Opportunity d. None of these are correct
_____ 54. The flow of activities of household and firms in a circular direction is also known as:
a.Intra-Production Payment Flow c. Circular Flow
b. Resource-Production-Payment Flow d. All of these are correct
_____55. Business organization in which they elect board of directors to run the business.
a. Sole proprietorship c. Corporation
b. Partnership d. Cooperative
_____56. Organization in which the members have an equal say in decision-making with one vote per member
regardless of number of shares held
a. Sole proprietorship c. Corporation
b. Partnership d. Cooperative
_____57. Cynthia plans to open a boutique that sells apparel, footwear, and accessories. What will happen to the
competitiveness of the firms in the industry?
a. Higher bargaining power of supplier c. Increase competition
b. Lessen competition d. None of these are correct
_____58. Which of the following is considered a stakeholder in a business?
a.Employees b. owner c. Shareholders d. All of these are correct
_____59. This is type of industry which is involved in the processing of items and indulges in either creation of
new commodities or in value addition. The final products can either serve as finished goods for sale to customers
or as intermediate goods used in production process.
a.Agribusiness b. Manufacturing c. Retail and Service d. International Trade
_____60. Alice is a saleslady in a local store. She greets customers and assists them. She also helps maintain an
inventory of merchandise. To what industry does Alice work in?
a.International Trade b. Agribusiness c. Retail and Services d. Manufacturing
“EDUCATION in values means the cultivation of affectivity, leading the educand through exposure to
experience of value and of the valuable.” - R. Aquino