Economics concepts worksheet with answers

A point inside a country's production possibility frontier shows:

1. AThe maximum output the economy can produce
2. BAn output level that cannot be reached
3. CUnemployed or inefficiently used resources
4. DEconomic growth over time

Economies of scale occur when:

1. APrices rise as the firm grows
2. BLong-run average cost falls as output increases
3. CA firm produces less to cut costs
4. DTotal costs fall as output increases

Market failure occurs when:

1. AA firm goes bankrupt
2. BThe free market allocates resources inefficiently
3. CPrices rise in a market
4. DThe stock market falls sharply

A negative externality occurs when:

1. AA third party bears a cost not paid by the producer or consumer
2. BConsumers pay more for a product than it costs the firm to produce
3. CA firm makes a loss
4. DThe government taxes a product

The income elasticity of demand for a good is -0.4. The good is:

1. AA normal necessity
2. BA complement
3. CAn inferior good
4. DA luxury good

A Gini coefficient of 0 indicates:

1. APerfect equality of income
2. BZero unemployment
3. CPerfect inequality of income
4. DZero economic growth

Under perfect (first-degree) price discrimination, the monopolist:

1. ACharges every consumer the same price
2. BProduces less than a single-price monopolist, creating a larger deadweight loss
3. CCaptures all consumer surplus and produces the efficient output
4. DCreates the largest possible deadweight loss

A deadweight loss represents:

1. AThe profit of a monopolist
2. BThe tax revenue collected by the government
3. CThe loss of total surplus when output differs from the efficient level
4. DLosses made by firms that are forced to leave the market in the long run