Economics concepts worksheet with answers

According to the law of demand, when the price of a normal good rises (other things equal):

1. ADemand shifts to the right
2. BSupply falls
3. CThe quantity demanded rises
4. DThe quantity demanded falls

A cartel is:

1. AA single firm that controls the whole market for a product or service
2. BA group of firms that agree to coordinate prices or output
3. CA government agency that regulates prices
4. DA trade union that negotiates wages

What is opportunity cost?

1. AThe total money spent on a purchase, including any taxes and fees
2. BThe value of the best alternative given up when making a choice
3. CThe cost of starting a new business
4. DThe price of a product during a sale

A savings account pays a nominal interest rate of 6% and inflation is 4%. The approximate real interest rate is:

1. A24%
2. B10%
3. C1.5%
4. D2%

A sharp rise in world oil prices leading to higher inflation is an example of:

1. ADemand-pull inflation
2. BDisinflation
3. CDeflation
4. DCost-push inflation

A per-unit tax is placed on a good with very inelastic demand and elastic supply. Who bears most of the tax burden?

1. AProducers
2. BIt is always split equally
3. CThe government
4. DConsumers

In the Mundell–Fleming model with perfect capital mobility and a floating exchange rate:

1. AMonetary policy is effective but fiscal policy is largely ineffective
2. BBoth policies are equally effective
3. CBoth policies have no effect on output
4. DFiscal policy is effective, but monetary policy is largely ineffective

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

1. A75% above marginal cost, as a share of price
2. B4 times marginal cost
3. CEqual to marginal cost
4. D25% above marginal cost, as a share of price