Economics concepts worksheet with answers

Which body sets monetary policy for the euro area?

1. AThe national finance ministries
2. BThe European Parliament
3. CThe European Central Bank
4. DThe European Commission

GDP measures:

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

Marginal cost is:

1. AThe lowest price a firm can charge
2. BThe cost of the firm's buildings and machines
3. CThe extra cost of producing one more unit of output
4. DTotal cost divided by the total number of units produced

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

1. ACost-push inflation
2. BDemand-pull inflation
3. CDisinflation
4. DDeflation

Overfishing in international waters is an example of:

1. AA natural monopoly
2. BPrice discrimination
3. CThe tragedy of the commons
4. DA Giffen good

In the long run in monopolistic competition, firms typically:

1. AEarn large economic profits protected by entry barriers
2. BProduce at the minimum of average total cost
3. CEarn zero economic profit and have excess capacity
4. DCharge a price equal to marginal cost

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. B25% above marginal cost, as a share of price
3. C4 times marginal cost
4. DEqual to marginal cost

Why does the deadweight loss of a tax grow when the good's demand and supply are more elastic?

1. AThe government collects more tax revenue
2. BPrices do not change, so consumers bear the whole burden of the tax instead
3. CElastic markets have no consumer surplus
4. DQuantity traded falls more, so more mutually beneficial trades are lost