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Unit 3 of 5

Unit 3: Economics

Study guide for CLEP CLEP Social Sciences & History — Unit 3: Economics. Practice questions, key concepts, and exam tips.

50

Practice Questions

12

Flashcards

4

Key Topics

Key Concepts to Study

Supply and demand, market equilibrium
Macroeconomic indicators: GDP, inflation, unemployment
Fiscal and monetary policy
International trade and comparative advantage

Sample Practice Questions

Try these 5 questions from this unit. Sign up for full access to all 50.

Q1EASY

What best describes mercantilism?

A) Economic system where countries have no international trade
B) Economic system where countries focus on importing goods
C) Economic system where countries focus on exporting goods
D) Economic system where countries have equal trade balances
E) Economic system where countries print their own currency
Show Answer

Answer: C — Economic system where countries focus on exporting goods is correct because mercantilism is an economic policy where countries prioritize exporting goods to accumulate wealth.

Q2HARD

What best describes the concept of comparative advantage?

A) Countries should only produce goods for domestic consumption
B) Countries should specialize in producing goods with absolute advantage
C) Countries benefit from trade by specializing in producing goods at a lower opportunity cost
D) Trade is a zero-sum game where one country's gain is another country's loss
E) Tariffs are necessary to protect domestic industries
Show Answer

Answer: C — Countries benefit from trade by specializing in producing goods at a lower opportunity cost is correct because it accurately describes the concept of comparative advantage, while distractor B is incorrect as it refers to absolute advantage.

Q3MEDIUM

The concept of opportunity cost is best described as

A) The cost of producing one more unit of a good
B) The profit earned from selling a good
C) The total cost of producing all units of a good
D) The value of the next best alternative given up
E) The revenue generated from a business
Show Answer

Answer: D — The value of the next best alternative given up is correct because opportunity cost refers to the value of the next best alternative foregone.

Q4MEDIUM

The law of diminishing marginal utility states that as

A) The price of a good increases, the quantity demanded increases
B) The price of a good decreases, the quantity demanded decreases
C) The quantity of a good consumed decreases, the marginal utility increases
D) The quantity of a good consumed increases, the marginal utility decreases
E) The quantity of a good consumed remains constant, the marginal utility remains constant
Show Answer

Answer: D — The quantity of a good consumed increases, the marginal utility decreases is correct because the law of diminishing marginal utility states that as the quantity of a good consumed increases, the marginal utility decreases.

Q5MEDIUM

Which 18th-century philosopher argued that people are motivated by self-interest?

A) Jean-Jacques Rousseau
B) John Locke
C) Adam Smith
D) Immanuel Kant
E) Voltaire
Show Answer

Answer: C — Adam Smith is correct because Adam Smith discussed self-interest in 'The Wealth of Nations'. Rousseau focused on social contracts.

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Study Tips for Unit 3: Economics

  • Focus on understanding concepts, not memorizing facts — CLEP tests application
  • Practice with timed questions to build exam-day speed
  • Review explanations for wrong answers — they reveal common misconceptions
  • Use flashcards for key terms, practice questions for deeper understanding

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