Economics concepts worksheet with answers

A progressive tax is one where:

1. AEveryone pays the same percentage of income
2. BThe proportion of income paid in tax rises as income rises
3. CThe proportion of income paid falls as income rises
4. DEveryone pays the same amount of tax

A tariff is:

1. AA limit on the quantity of imports
2. BA ban on all foreign trade
3. CA subsidy for exporters
4. DA tax on imported goods

Deflation is:

1. AA sustained fall in the general price level
2. BA fall in the value of the currency
3. CA slowdown in the rate of inflation, with prices still rising
4. DA reduction in government spending

Unexpectedly high inflation tends to benefit:

1. ABorrowers with fixed-rate loans
2. BLenders who receive fixed interest payments
3. CPensioners on fixed nominal incomes
4. DSavers holding cash

Education generates benefits for society beyond the individual student. Without intervention, the market will likely:

1. AUnder-provide education compared with the social optimum
2. BOver-provide education compared with the social optimum
3. CStop providing education altogether
4. DProvide exactly the efficient amount of education, as prices reflect all benefits

In the short run, a firm in perfect competition should shut down if the market price is below:

1. AMarginal revenue
2. BAverage fixed cost
3. CAverage total cost
4. DAverage variable cost

According to prospect theory (Kahneman and Tversky), people typically:

1. AAlways maximise expected monetary value
2. BPrefer risk when facing gains of any size
3. CTreat losses and gains of the same size as equally important
4. DFeel losses more strongly than equal-sized gains

A monopolist maximises profit where:

1. APrice equals marginal cost
2. BMarginal revenue equals marginal cost
3. CTotal revenue is at its maximum
4. DAverage cost is at its minimum