Economics concepts worksheet with answers

Monopolistic competition is a market with:

1. AOne firm and high barriers to entry
2. BMany firms selling differentiated products, with free entry
3. CA few firms selling identical products
4. DMany firms selling identical products with no branding or advertising

Inflation is:

1. AAn increase in the money supply, whatever happens to prices
2. BA fall in unemployment
3. CA sustained rise in the general price level
4. DA rise in the price of one product

Fixed costs are costs that:

1. ACan be avoided entirely by producing nothing in the short run
2. BDo not change with the level of output in the short run
3. CRise in proportion to each unit produced
4. DAre paid only when the firm makes a profit

A public good is:

1. ARival and excludable
2. BAny good bought by the government
3. CNon-rival and non-excludable
4. DProvided only by private firms

Using the expenditure approach, GDP equals:

1. AWages + profits − taxes
2. BC + I + G + X + M
3. CC − I + G − (X + M)
4. DC + I + G + (X − M)

A Nash equilibrium is a situation where:

1. AOne player has won and the others have lost
2. BNo player can improve their payoff by changing strategy alone, given the others' strategies
3. CThe players agree to cooperate through a binding contract that maximises their combined total payoff
4. DAll players achieve the highest possible total payoff

The Coase theorem states that, if property rights are clearly defined and transaction costs are low:

1. AExternalities cannot be corrected without direct government regulation or a Pigouvian tax
2. BThe polluter must always compensate the victim
3. CPrivate bargaining can reach an efficient outcome regardless of who holds the rights
4. DGovernments must always tax externalities

According to the quantity theory of money (MV = PY), if velocity and real output are constant, a 5% rise in the money supply leads to:

1. AAbout a 5% rise in the price level
2. BNo change in prices
3. CAbout a 5% rise in real output
4. DA 5% fall in velocity