Economics concepts worksheet with answers

A point inside a country's production possibility frontier shows:

1. AEconomic growth over time
2. BUnemployed or inefficiently used resources
3. CAn output level that cannot be reached
4. DThe maximum output the economy can produce

Market failure occurs when:

1. APrices rise in a market
2. BThe free market allocates resources inefficiently
3. CThe stock market falls sharply
4. DA firm goes bankrupt

Which statement is a normative statement?

1. AUnemployment fell to 4% in June
2. BThe minimum wage rose by 3% last year
3. CHigher prices reduce quantity demanded
4. DThe government should raise the minimum wage

The marginal propensity to consume is:

1. AThe total consumption in an economy
2. BThe average share of total income that households save over a year
3. CThe interest rate on consumer loans
4. DThe share of an extra euro of income that is spent on consumption

A minimum wage set above the equilibrium wage in a competitive labour market is predicted to cause:

1. AA surplus of labour (unemployment)
2. BNo change in employment
3. CA shortage of labour
4. DA fall in the wage rate

In a simple closed economy without taxes, the MPC is 0.8. The Keynesian spending multiplier is:

1. A0.8
2. B5
3. C8
4. D1.25

In the Prisoner's Dilemma, the Nash equilibrium is:

1. ABoth players defect, even though both cooperating would be better
2. BBoth players cooperate
3. COne player cooperates and the other defects, so only one of them gains
4. DThere is no equilibrium

Price discrimination by a firm requires that:

1. AAll consumers have identical elasticity of demand and buy the same amount
2. BIt operates in perfect competition
3. CIt has market power, can separate markets and prevent resale
4. DIts costs differ for each customer