Economics concepts worksheet with answers

Marginal cost is:

1. AThe lowest price a firm can charge
2. BThe cost of the firm's buildings and machines
3. CThe extra cost of producing one more unit of output
4. DTotal cost divided by the total number of units produced

The unemployment rate is calculated as:

1. AThe number of unemployed divided by the total population
2. BThe number of unemployed divided by the labour force
3. CThe number of job vacancies divided by the population
4. DThe number of employed divided by the labour force

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

1. AFree trade between countries
2. BPrice controls
3. CGovernment regulation
4. DThe division of labour

Unemployment benefits and progressive income taxes are called automatic stabilisers because they:

1. APrevent all recessions from happening
2. BKeep the government budget balanced in every year of the business cycle
3. CFix the exchange rate automatically
4. DReduce fluctuations in demand without new government decisions

Comparative advantage means a country should specialise in goods it can produce:

1. AMore cheaply in absolute terms than every other country
2. BOnly for its own consumption
3. CAt a lower opportunity cost than other countries
4. DWith the most workers

A country has 950 employed people and 50 unemployed people seeking work. Its unemployment rate is:

1. A50%
2. B5.3%
3. C95%
4. D5%

In Spence's job market signalling model, education can be valuable to employers even if it does not raise productivity because:

1. AIt guarantees that every graduate is highly productive
2. BIt is less costly for high-ability workers to acquire, so it reveals their type
3. CIt reduces the wages employers must pay
4. DEmployers are required by law to hire graduates

In the Prisoner's Dilemma, the Nash equilibrium is:

1. AThere is no equilibrium
2. BBoth players defect, even though both cooperating would be better
3. COne player cooperates and the other defects, so only one of them gains
4. DBoth players cooperate