Economics concepts worksheet with answers

A budget deficit occurs when:

1. AThe value of imports exceeds the value of exports in a year
2. BA firm's costs exceed its revenue
3. CTotal government debt falls
4. DGovernment spending exceeds government revenue in a year

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

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

Fixed costs are costs that:

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

In perfect competition in the long run, firms earn:

1. ALarge economic profits
2. BMonopoly profits
3. CZero economic profit
4. DLosses forever

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

1. A5.3%
2. B5%
3. C95%
4. D50%

A currency depreciation tends to:

1. AMake imports cheaper
2. BReduce the price of all domestic goods and make imports cheaper
3. CMake exports cheaper abroad and imports more expensive
4. DHave no effect on trade

Akerlof's "market for lemons" explains how:

1. AMonopolies set high prices
2. BLemons become cheaper in summer
3. CAsymmetric information can drive good-quality products out of a market
4. DPublic goods are under-provided

The Lerner index (P − MC)/P for a profit-maximising monopolist equals 1/|PED|. If |PED| = 4, the price is:

1. A25% above marginal cost, as a share of price
2. BEqual to marginal cost
3. C75% above marginal cost, as a share of price
4. D4 times marginal cost