Economics concepts worksheet with answers

Two goods are substitutes if:

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

A tariff is:

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

Fiscal policy uses:

1. ATrade agreements only
2. BGovernment spending and taxation
3. CInterest rates set by the central bank
4. DExchange rate controls only

A minimum wage set above the equilibrium wage in a competitive labour market is predicted to cause:

1. AA shortage of labour
2. BA fall in the wage rate
3. CNo change in employment
4. DA surplus of labour (unemployment)

A country imposes a tariff on imported steel. Which effect is most likely?

1. ADomestic steel prices rise and domestic production increases
2. BThe world price of steel rises sharply for all countries that trade it
3. CDomestic steel prices fall and imports rise
4. DDomestic consumers gain surplus

Overfishing in international waters is an example of:

1. AA Giffen good
2. BPrice discrimination
3. CA natural monopoly
4. DThe tragedy of the commons

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. AFall to zero
2. BStay the same, because MR and MC do not change
3. CRise to make up for the tax
4. DFall, because the tax raises the firm's average cost

Akerlof's "market for lemons" explains how:

1. AAsymmetric information can drive good-quality products out of a market
2. BLemons become cheaper in summer
3. CPublic goods are under-provided
4. DMonopolies set high prices