Economics concepts worksheet with answers

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

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

Market failure occurs when:

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

A market with only one seller is called:

1. AAn oligopoly
2. BPerfect competition
3. CA monopsony
4. DA monopoly

A Gini coefficient of 0 indicates:

1. APerfect equality of income
2. BPerfect inequality of income
3. CZero economic growth
4. DZero unemployment

Both supply and demand for a good increase. What can we say for certain about the new equilibrium?

1. AQuantity rises, but the change in price is uncertain
2. BPrice rises, but the change in quantity is uncertain
3. CBoth price and quantity fall
4. DBoth price and quantity rise

In perfect competition in the long run, firms earn:

1. AZero economic profit
2. BLosses forever
3. CLarge economic profits
4. DMonopoly profits

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

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

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. CTwo firms agree to fix prices
4. DThe government owns a firm