Economics concepts worksheet with answers

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

1. APrice controls
2. BFree trade between countries
3. CGovernment regulation
4. DThe division of labour

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

GDP measures:

1. AThe value of all exports only
2. BThe government's budget
3. CThe total wealth and savings held by a country's citizens and firms at the end of a year
4. DThe total market value of final goods and services produced in a country in a period

Rising consumer confidence would most likely:

1. AShift aggregate demand to the right
2. BShift aggregate supply to the left
3. CShift aggregate demand to the left
4. DHave no effect on the economy

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

1. A5%
2. B50%
3. C5.3%
4. D95%

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

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

In the Bertrand model, two firms sell identical products with the same constant marginal cost and compete on price. The equilibrium price is:

1. AEqual to marginal cost
2. BHalfway between monopoly price and marginal cost
3. CZero
4. DThe monopoly price

The principal–agent problem arises when:

1. ATwo firms agree to fix prices
2. BThe government owns a firm
3. CAn agent acting for a principal has different goals and the principal cannot fully monitor them
4. DA buyer and seller have identical information