Economics concepts worksheet with answers

Which list gives the four traditional factors of production?

1. AWages, rent, interest and profit
2. BMoney, labour, shares and land
3. CSupply, demand, price and quantity
4. DLand, labour, capital and entrepreneurship

Structural unemployment is caused by:

1. ASeasonal changes in demand for labour
2. BThe normal time that workers take to search for and move between jobs
3. CA mismatch between workers' skills or location and the jobs available
4. DA temporary fall in aggregate demand

Fixed costs are costs that:

1. ACan be avoided entirely by producing nothing in the short run
2. BDo not change with the level of output in the short run
3. CRise in proportion to each unit produced
4. DAre paid only when the firm makes a profit

If demand for a product is price inelastic, a price increase will:

1. AIncrease total revenue
2. BDecrease total revenue
3. CLeave total revenue unchanged
4. DReduce quantity demanded to zero

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

1. AStop providing education altogether
2. BUnder-provide education compared with the social optimum
3. COver-provide education compared with the social optimum
4. DProvide exactly the efficient amount of education, as prices reflect all benefits

If the ECB raises its main interest rate, the most likely short-term effect is:

1. AAn immediate rise in GDP
2. BA fall in the value of the euro
3. CHigher borrowing and spending, which adds to inflationary pressure
4. DLower borrowing and spending, reducing inflationary pressure

A Giffen good is one where:

1. ADemand rises with income, like most goods
2. BQuantity demanded rises when its price rises, because a strong income effect outweighs the substitution effect
3. CDemand rises because the good is a status symbol
4. DThe price never changes

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 operates in perfect competition
4. DIt has market power, can separate markets and prevent resale