Economics concepts worksheet with answers

Macroeconomics studies:

1. AOnly the stock market
2. BThe economy as a whole, such as inflation, unemployment and growth
3. CThe decisions of individual households and firms in particular markets
4. DThe accounts of a single company

Economies of scale occur when:

1. AA firm produces less to cut costs
2. BPrices rise as the firm grows
3. CLong-run average cost falls as output increases
4. DTotal costs fall as output increases

The phrase "ceteris paribus" means:

1. AThe government does not intervene
2. BThe price is fixed
3. COther things being equal
4. DSupply equals demand

A minimum wage set above the equilibrium wage in a competitive labour market is predicted to cause:

1. AA shortage of labour
2. BNo change in employment
3. CA surplus of labour (unemployment)
4. DA fall in the wage rate

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

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

A Gini coefficient of 0 indicates:

1. APerfect inequality of income
2. BZero unemployment
3. CPerfect equality of income
4. DZero economic growth

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

1. AGovernments must always tax externalities
2. BThe polluter must always compensate the victim
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

Ricardian equivalence suggests that a debt-financed tax cut will:

1. AHave little effect on spending, because households save to pay expected future taxes
2. BReduce interest rates sharply
3. CAlways cause inflation
4. DStrongly increase consumption, because households spend most of the tax cut through the multiplier