Economics concepts worksheet with answers

If supply increases while demand stays the same, the equilibrium price will usually:

1. AStay exactly the same
2. BRise
3. CBecome zero
4. DFall

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

1. ADemand shifts to the right
2. BThe quantity demanded rises
3. CThe quantity demanded falls
4. DSupply falls

The phrase "ceteris paribus" means:

1. AThe price is fixed
2. BThe government does not intervene
3. COther things being equal
4. DSupply equals demand

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. ARecovered by raising prices
2. BAdded to the expected future costs
3. CIgnored, because it is a sunk cost
4. DTreated as the opportunity cost of stopping

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

1. A1.5%
2. B24%
3. C10%
4. D2%

In an oligopoly, firms are typically:

1. AMany and too small to affect the price
2. BA single seller in the market
3. CCompletely unregulated by competition law
4. DFew and interdependent in their decisions

The principal–agent problem arises when:

1. AThe government owns a firm
2. BAn agent acting for a principal has different goals and the principal cannot fully monitor them
3. CA buyer and seller have identical information
4. DTwo firms agree to fix prices

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

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