Economics concepts worksheet with answers

The current account of the balance of payments mainly records:

1. APurchases and sales of foreign companies, shares, bonds and other assets
2. BChanges in the government's debt
3. CThe central bank's interest rate decisions
4. DTrade in goods and services, primary income and current transfers

Marginal cost is:

1. AThe extra cost of producing one more unit of output
2. BThe lowest price a firm can charge
3. CTotal cost divided by the total number of units produced
4. DThe cost of the firm's buildings and machines

A good for which demand rises when income rises is called:

1. AA public good
2. BA Giffen good
3. CAn inferior good
4. DA normal good

In the long run in monopolistic competition, firms typically:

1. AEarn large economic profits protected by entry barriers
2. BCharge a price equal to marginal cost
3. CEarn zero economic profit and have excess capacity
4. DProduce at the minimum of average total cost

The marginal cost curve cuts the average total cost curve:

1. AAt the maximum point of average total cost
2. BNever, as the two curves are parallel
3. CAt the minimum point of average total cost
4. DWhere average total cost equals zero

Nominal GDP grew by 5% and the GDP deflator rose by 2%. Real GDP grew by approximately:

1. A2.5%
2. B10%
3. C3%
4. D7%

A lump-sum tax (a fixed amount, independent of output) is imposed on a profit-maximising monopolist. In the short run, its output will:

1. ARise to make up for the tax
2. BFall to zero
3. CFall, because the tax raises the firm's average cost
4. DStay the same, because MR and MC do not change

Price discrimination by a firm requires that:

1. AIt operates in perfect competition
2. BIts costs differ for each customer
3. CAll consumers have identical elasticity of demand and buy the same amount
4. DIt has market power, can separate markets and prevent resale