Economics concepts worksheet with answers

What is opportunity cost?

1. AThe value of the best alternative given up when making a choice
2. BThe price of a product during a sale
3. CThe total money spent on a purchase, including any taxes and fees
4. DThe cost of starting a new business

Two goods are substitutes if:

1. AA rise in income reduces demand for both goods at the same time
2. BThey are produced by the same firm
3. CA rise in the price of one increases demand for the other
4. DThey are always consumed together

Deflation is:

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

In an oligopoly, firms are typically:

1. AFew and interdependent in their decisions
2. BMany and too small to affect the price
3. CA single seller in the market
4. DCompletely unregulated by competition law

A price ceiling set below the equilibrium price typically causes:

1. AAn increase in supply
2. BNo change in the market
3. CA surplus
4. DA shortage

In country A, 1 car costs 2 tonnes of wheat to produce; in country B, 1 car costs 4 tonnes of wheat. Which statement is correct?

1. ANeither country gains from trade
2. BA has a comparative advantage in both goods
3. CA has a comparative advantage in cars and B in wheat
4. DB has a comparative advantage in cars and A in wheat

The principal–agent problem arises when:

1. AAn agent acting for a principal has different goals and the principal cannot fully monitor them
2. BA buyer and seller have identical information
3. CThe government owns a firm
4. DTwo firms agree to fix prices

In the Mundell–Fleming model with perfect capital mobility and a floating exchange rate:

1. AFiscal policy is effective, but monetary policy is largely ineffective
2. BBoth policies have no effect on output
3. CBoth policies are equally effective
4. DMonetary policy is effective but fiscal policy is largely ineffective