Economics concepts worksheet with answers

Demand is called "price elastic" when the absolute value of its price elasticity is:

1. ALess than 1
2. BExactly 0
3. CExactly 1
4. DGreater than 1

Two goods are substitutes if:

1. AA rise in income reduces demand for both goods at the same time
2. BThey are always consumed together
3. CThey are produced by the same firm
4. DA rise in the price of one increases demand for the other

Which statement is a normative statement?

1. AUnemployment fell to 4% in June
2. BHigher prices reduce quantity demanded
3. CThe government should raise the minimum wage
4. DThe minimum wage rose by 3% last year

The marginal propensity to consume is:

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

A price ceiling set below the equilibrium price typically causes:

1. AA surplus
2. BNo change in the market
3. CA shortage
4. DAn increase in supply

A Nash equilibrium is a situation where:

1. AOne player has won and the others have lost
2. BAll players achieve the highest possible total payoff
3. CNo player can improve their payoff by changing strategy alone, given the others' strategies
4. DThe players agree to cooperate through a binding contract that maximises their combined total payoff

The "convergence hypothesis" from the Solow model predicts that:

1. AExchange rates converge to a fixed value
2. BPoorer countries with similar fundamentals tend to grow faster than richer ones
3. CRich countries always grow faster than poor ones, because they have more capital
4. DAll countries will eventually have the same population

A regulator forces a natural monopoly to set price equal to marginal cost. The likely problem is that:

1. AOutput falls below the monopoly level
2. BThe firm makes a loss because average cost is above marginal cost
3. CThe firm makes very large profits
4. DConsumers face a shortage, because demand exceeds supply at that price