Economics concepts worksheet with answers

Consumer surplus is:

1. AThe amount of goods left unsold at the end of the day
2. BThe difference between what consumers are willing to pay and what they actually pay
3. CThe profit that firms make from selling to consumers at prices above their production costs
4. DThe total amount consumers spend on a good

Monopolistic competition is a market with:

1. AA few firms selling identical products
2. BMany firms selling differentiated products, with free entry
3. CMany firms selling identical products with no branding or advertising
4. DOne firm and high barriers to entry

GDP measures:

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

A firm has spent €1 million on research for a product that now looks unprofitable. When deciding whether to continue, the €1 million should be:

1. AIgnored, because it is a sunk cost
2. BTreated as the opportunity cost of stopping
3. CAdded to the expected future costs
4. DRecovered by raising prices

Using the expenditure approach, GDP equals:

1. AC + I + G + X + M
2. BC − I + G − (X + M)
3. CWages + profits − taxes
4. DC + I + G + (X − M)

Unexpectedly high inflation tends to benefit:

1. ASavers holding cash
2. BLenders who receive fixed interest payments
3. CBorrowers with fixed-rate loans
4. DPensioners on fixed nominal incomes

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

1. AZero
2. BEqual to marginal cost
3. CHalfway between monopoly price and marginal cost
4. DThe monopoly price

Which is a key difference between the CPI and the GDP deflator?

1. AThe CPI includes prices of imported consumer goods; the GDP deflator covers only domestically produced goods
2. BThey always give exactly the same inflation rate
3. CThe GDP deflator includes imported goods; the CPI does not
4. DThe CPI covers investment goods; the GDP deflator does not