Economics concepts worksheet with answers

A good for which demand rises when income rises is called:

1. AA public good
2. BA normal good
3. CA Giffen good
4. DAn inferior good

Consumer surplus is:

1. AThe total amount consumers spend on a good
2. BThe difference between what consumers are willing to pay and what they actually pay
3. CThe profit that firms make from selling to consumers at prices above their production costs
4. DThe amount of goods left unsold at the end of the day

Real GDP differs from nominal GDP because real GDP:

1. AIncludes only goods, not services
2. BIs adjusted for changes in the price level
3. CIs measured in a foreign currency
4. DExcludes government spending

The principle of diminishing marginal utility states that:

1. AExtra satisfaction from each additional unit consumed tends to fall
2. BSatisfaction rises as income falls
3. CTotal satisfaction falls with each additional unit of the good that is consumed
4. DConsumers always prefer more expensive goods

The price of petrol rises sharply. What happens to the demand curve for large cars?

1. AIt shifts to the left
2. BIt shifts to the right
3. CThere is a movement along it
4. DIt becomes vertical

In perfect competition in the long run, firms earn:

1. AZero economic profit
2. BMonopoly profits
3. CLarge economic profits
4. DLosses forever

Price discrimination by a firm requires that:

1. AAll consumers have identical elasticity of demand and buy the same amount
2. BIts costs differ for each customer
3. CIt has market power, can separate markets and prevent resale
4. DIt operates in perfect competition

Moral hazard arises when:

1. AA buyer cannot observe product quality before buying, so low-quality sellers dominate the market
2. BOne party changes behaviour after a contract because they do not bear the full consequences
3. CTwo firms collude on price
4. DPrices are too high for poor consumers