Economics concepts worksheet with answers

Adam Smith's example of the pin factory illustrated the benefits of:

1. AThe division of labour
2. BPrice controls
3. CFree trade between countries
4. DGovernment regulation

A common rule of thumb defines a recession as:

1. ATwo consecutive quarters of falling real GDP
2. BA fall in the stock market of 10%
3. CA year with inflation above 5%
4. DAny month with rising unemployment

The Consumer Price Index (CPI) measures:

1. AThe interest rate charged by banks
2. BThe total value of goods produced in a country
3. CThe prices that firms pay for raw materials and other inputs used in their production
4. DThe changing cost of a fixed basket of goods and services bought by households

Crowding out refers to:

1. AImports replacing domestic production
2. BOvercrowded public services
3. CToo many firms entering a market
4. DHigher government borrowing raising interest rates and reducing private investment

In a simple closed economy without taxes, the MPC is 0.8. The Keynesian spending multiplier is:

1. A0.8
2. B8
3. C5
4. D1.25

A Gini coefficient of 0 indicates:

1. AZero unemployment
2. BPerfect equality of income
3. CZero economic growth
4. DPerfect inequality of income

A monopolist faces demand P = 100 − Q and has constant marginal cost of 20. What are its profit-maximising output and price?

1. AQ = 80, P = 20
2. BQ = 50, P = 50
3. CQ = 40, P = 20
4. DQ = 40, P = 60

The principal–agent problem arises when:

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