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100+ Free IFoA CB2 Practice Questions

Prepare for the IFoA Subject CB2 Business Economics exam with instant access — no signup required.

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Key Facts: IFoA CB2 Exam

3h 20m

Exam Time

IFoA curriculum

45%

Microeconomics Weight

IFoA CB2 syllabus

45%

Macroeconomics Weight

IFoA CB2 syllabus

~150 hrs

Recommended Study

IFoA

3

Syllabus Areas

IFoA CB2 syllabus

Word CBT

Exam Format

IFoA curriculum

IFoA Subject CB2 Business Economics is a Core Principles subject delivered as a 3 hour 20 minute computer-based (Word) exam combining short multiple-choice items with longer structured-answer questions. The current syllabus weights microeconomics and macroeconomics at roughly 45% each, with around 10% on economic models and historical applications. The IFoA recommends about 150 study hours, sets the pass mark for each sitting rather than publishing a fixed percentage, and lists current fees on its exam fees schedule.

Sample IFoA CB2 Practice Questions

Try these sample questions to test your IFoA CB2 exam readiness. Each question includes a detailed explanation. Start the interactive quiz above for the full 100+ question experience with AI tutoring.

1A market is initially in equilibrium. If consumer incomes rise and the good is a normal good, what happens to the equilibrium price and quantity, all else equal?
A.Both price and quantity rise
B.Price rises but quantity falls
C.Both price and quantity fall
D.Price falls but quantity rises
Explanation: A rise in income increases demand for a normal good, shifting the demand curve rightward. Along an upward-sloping supply curve, this raises both the equilibrium price and the equilibrium quantity.
2The price elasticity of demand for a product is measured as -0.4. A firm raises the price by 10%. What is the approximate effect on quantity demanded and total revenue?
A.Quantity rises 4%; total revenue rises
B.Quantity falls 4%; total revenue rises
C.Quantity falls 4%; total revenue falls
D.Quantity falls 25%; total revenue falls
Explanation: Elasticity of -0.4 means demand is inelastic: a 10% price rise reduces quantity by only 4%. Because the proportional price rise exceeds the proportional quantity fall, total revenue increases when price rises for an inelastic good.
3Cross-price elasticity of demand between Good X and Good Y is calculated as +1.8. What does this indicate about the relationship between the two goods?
A.They are unrelated
B.They are complements
C.They are substitutes
D.Good X is an inferior good
Explanation: A positive cross-price elasticity means a rise in the price of Y increases demand for X, the defining feature of substitute goods. The large magnitude (1.8) indicates they are close substitutes.
4According to the law of diminishing marginal utility, as a consumer increases consumption of a good, holding other consumption constant, the marginal utility from each additional unit:
A.Becomes negative immediately
B.Increases at an increasing rate
C.Remains constant
D.Eventually falls
Explanation: The law of diminishing marginal utility states that, beyond some point, each additional unit consumed yields less extra satisfaction than the previous unit. Marginal utility eventually falls, though it need not become negative.
5A consumer maximises utility subject to a budget constraint. At the optimum interior solution, the ratio of marginal utilities of two goods equals:
A.The ratio of the goods' prices
B.Unity for all goods
C.The income elasticity ratio
D.The ratio of total utilities
Explanation: Utility maximisation requires the marginal rate of substitution to equal the price ratio: MUx/MUy = Px/Py. Equivalently, marginal utility per pound is equalised across goods, so the marginal-utility ratio equals the price ratio.
6An indifference curve for two normal goods is typically convex to the origin. This convexity reflects:
A.A constant marginal rate of substitution
B.A diminishing marginal rate of substitution
C.Perfect substitutability between the goods
D.That the goods are economic bads
Explanation: Convexity to the origin reflects a diminishing marginal rate of substitution: as a consumer holds more of one good, they are willing to give up less of the other to gain a further unit. This produces the bowed-in shape.
7When the price of a good falls, the substitution effect for a normal good always:
A.Reverses the income effect
B.Reduces the quantity demanded
C.Increases the quantity demanded
D.Leaves quantity demanded unchanged
Explanation: The substitution effect always moves consumption toward the good that has become relatively cheaper. When price falls, the substitution effect raises quantity demanded of that good, regardless of whether it is normal or inferior.
8A Giffen good is best characterised by which of the following?
A.A good with perfectly elastic demand
B.A normal good with negative cross-price elasticity
C.A luxury good with high income elasticity
D.An inferior good whose demand rises as its price rises
Explanation: A Giffen good is a strongly inferior good for which the negative income effect outweighs the substitution effect. As a result, the quantity demanded rises when its own price rises, giving an upward-sloping demand curve.
9A firm's total cost is TC = 200 + 10Q. What are its average fixed cost and marginal cost at an output of 50 units?
A.AFC = 4; MC = 10
B.AFC = 10; MC = 4
C.AFC = 14; MC = 10
D.AFC = 4; MC = 14
Explanation: Fixed cost is 200, so AFC = 200/50 = 4. Marginal cost is the derivative of total cost with respect to output, which is the constant 10 here. Hence AFC = 4 and MC = 10.
10In the short run, the law of diminishing marginal returns implies that as a firm adds more of a variable input to fixed inputs, eventually the:
A.Marginal cost falls continuously
B.Marginal product of the variable input falls
C.Total product falls immediately
D.Average fixed cost rises
Explanation: Diminishing marginal returns means that, beyond some point, each additional unit of the variable input adds less to output than the previous unit, so its marginal product falls. This causes marginal cost to rise as output expands.

About the IFoA CB2 Exam

IFoA Subject CB2 Business Economics is a Core Principles associateship subject covering microeconomics and macroeconomics, including market behaviour, market structures, market failure, national income, inflation, unemployment, money, and international trade.

Assessment

Combined short multiple-choice items and longer structured written-answer questions, with most marks awarded for application of economic theory

Time Limit

3 hours 20 minutes

Passing Score

The IFoA sets the pass mark for each sitting and does not publish a fixed percentage in advance

Exam Fee

See the current IFoA exam fees schedule for the CB2 fee (Institute and Faculty of Actuaries (IFoA))

IFoA CB2 Exam Content Outline

10%

Economic Models and Historical Applications

Understand the nature and purpose of economic models, scarcity and opportunity cost, positive versus normative analysis, and recent historical applications such as financial crises and the role of the financial system.

45%

Microeconomics

Analyse supply, demand and price determination, price, income and cross elasticities, consumer behaviour and utility, firm costs and production, market structures (perfect competition, monopoly, oligopoly, monopolistic competition), and market failure including externalities, public goods and asymmetric information.

45%

Macroeconomics

Work with national income and the circular flow, government macroeconomic objectives, unemployment, inflation, economic growth, money and the financial system, fiscal and monetary policy, and international trade and exchange rates.

How to Pass the IFoA CB2 Exam

What You Need to Know

  • Passing score: The IFoA sets the pass mark for each sitting and does not publish a fixed percentage in advance
  • Assessment: Combined short multiple-choice items and longer structured written-answer questions, with most marks awarded for application of economic theory
  • Time limit: 3 hours 20 minutes
  • Exam fee: See the current IFoA exam fees schedule for the CB2 fee

Keys to Passing

  • Work through all 100 available questions
  • Review every answer and explanation
  • Track weak areas and revisit them
  • Use our AI tutor for tough concepts

IFoA CB2 Study Tips from Top Performers

1Treat CB2 as an application subject: practise explaining and applying economic theory to scenarios, not just memorising definitions, because most marks reward application.
2Become fluent with core diagrams such as supply and demand, cost curves, market structures, and aggregate demand and supply, since you will use them to support written answers.
3Drill the small set of formulas that appear, including elasticities, the spending and credit multipliers, and the quantity theory of money, until calculations are quick and accurate.
4Balance your time roughly 45/45/10 across microeconomics, macroeconomics, and economic models to mirror the syllabus weightings.
5Use the around 150 recommended study hours to combine concept review with timed practice that mixes short and longer question formats under exam-like conditions.

Frequently Asked Questions

How long is the IFoA CB2 exam?

CB2 is a 3 hour 20 minute computer-based exam delivered in Word. It combines short multiple-choice items with longer structured-answer questions, so disciplined time management across both formats matters.

How many questions are on IFoA CB2?

The IFoA does not publish a single fixed count. The paper typically includes around 26-30 short multiple-choice items plus 6-10 longer structured-answer questions. This free bank provides 100 multiple-choice questions for knowledge practice.

What is the passing score for IFoA CB2?

The IFoA sets the pass mark for each sitting through its standard-setting process and does not publish a fixed percentage in advance. Aim to demonstrate strong application of economic theory rather than targeting a specific number.

Which topics matter most on CB2?

Microeconomics and macroeconomics each carry roughly 45% of the syllabus, with around 10% on economic models and historical applications. Focus your study time on market behaviour, market structures, national income, inflation, and policy.

How much study time does CB2 require?

The IFoA recommends approximately 150 hours of study for CB2. Most candidates spread this over several weeks alongside practice questions and past-paper style application work.

Is CB2 multiple choice only?

No. CB2 is a mixed-format application paper with both short multiple-choice items and longer structured written answers, often involving diagrams. Our 100 multiple-choice questions are knowledge-building practice, not a replica of the full paper.