Economics concepts worksheet with answers

Monopolistic competition is a market with:

1. AMany firms selling identical products with no branding or advertising
2. BA few firms selling identical products
3. COne firm and high barriers to entry
4. DMany firms selling differentiated products, with free entry

Adam Smith's example of the pin factory illustrated the benefits of:

1. AGovernment regulation
2. BFree trade between countries
3. CThe division of labour
4. DPrice controls

The current account of the balance of payments mainly records:

1. AThe central bank's interest rate decisions
2. BPurchases and sales of foreign companies, shares, bonds and other assets
3. CChanges in the government's debt
4. DTrade in goods and services, primary income and current transfers

In perfect competition in the long run, firms earn:

1. ALosses forever
2. BLarge economic profits
3. CMonopoly profits
4. DZero economic profit

Comparative advantage means a country should specialise in goods it can produce:

1. AAt a lower opportunity cost than other countries
2. BWith the most workers
3. CMore cheaply in absolute terms than every other country
4. DOnly for its own consumption

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. BThe government
3. CConsumers
4. DIt is always split equally

Akerlof's "market for lemons" explains how:

1. AAsymmetric information can drive good-quality products out of a market
2. BPublic goods are under-provided
3. CMonopolies set high prices
4. DLemons become cheaper in summer

The time-inconsistency problem in monetary policy (Kydland and Prescott) is a key argument for:

1. AAbolishing central banks entirely
2. BGovernments setting interest rates directly, especially before elections
3. CIndependent central banks with a credible commitment to low inflation
4. DFixing the money supply at zero growth