Economics concepts worksheet with answers

Free printable Economics concepts worksheet: 8 problems from easy to exam level, with an answer key. Print it or save it as a PDF.

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1.Easy

Economies of scale occur when:

  1. AA firm produces less to cut costs
  2. BTotal costs fall as output increases
  3. CPrices rise as the firm grows
  4. DLong-run average cost falls as output increases
2.Easy

What is opportunity cost?

  1. AThe cost of starting a new business
  2. BThe value of the best alternative given up when making a choice
  3. CThe price of a product during a sale
  4. DThe total money spent on a purchase, including any taxes and fees
3.Easy

Which statement is a normative statement?

  1. AThe government should raise the minimum wage
  2. BThe minimum wage rose by 3% last year
  3. CUnemployment fell to 4% in June
  4. DHigher prices reduce quantity demanded
4.Medium

The marginal propensity to consume is:

  1. AThe share of an extra euro of income that is spent on consumption
  2. BThe average share of total income that households save over a year
  3. CThe total consumption in an economy
  4. DThe interest rate on consumer loans
5.Medium

Education generates benefits for society beyond the individual student. Without intervention, the market will likely:

  1. AProvide exactly the efficient amount of education, as prices reflect all benefits
  2. BUnder-provide education compared with the social optimum
  3. CStop providing education altogether
  4. DOver-provide education compared with the social optimum
6.Medium

A negative externality occurs when:

  1. AA third party bears a cost not paid by the producer or consumer
  2. BA firm makes a loss
  3. CThe government taxes a product
  4. DConsumers pay more for a product than it costs the firm to produce
7.Hard

Under a fixed exchange rate with free capital movement, a country:

  1. ACannot trade with other countries
  2. BMust have a budget surplus
  3. CCan set any interest rate it likes
  4. DLoses control of independent monetary policy
8.Hard

The Lerner index (P − MC)/P for a profit-maximising monopolist equals 1/|PED|. If |PED| = 4, the price is:

  1. AEqual to marginal cost
  2. B4 times marginal cost
  3. C75% above marginal cost, as a share of price
  4. D25% above marginal cost, as a share of price

Answer key

  1. 1. D · Long-run average cost falls as output increases
  2. 2. B · The value of the best alternative given up when making a choice
  3. 3. A · The government should raise the minimum wage
  4. 4. A · The share of an extra euro of income that is spent on consumption
  5. 5. B · Under-provide education compared with the social optimum
  6. 6. A · A third party bears a cost not paid by the producer or consumer
  7. 7. D · Loses control of independent monetary policy
  8. 8. D · 25% above marginal cost, as a share of price

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