Economics concepts worksheet with answers

A common rule of thumb defines a recession as:

1. AA fall in the stock market of 10%
2. BTwo consecutive quarters of falling real GDP
3. CAny month with rising unemployment
4. DA year with inflation above 5%

Economies of scale occur when:

1. ATotal costs fall as output increases
2. BA firm produces less to cut costs
3. CPrices rise as the firm grows
4. DLong-run average cost falls as output increases

Inflation is:

1. AA rise in the price of one product
2. BAn increase in the money supply, whatever happens to prices
3. CA sustained rise in the general price level
4. DA fall in unemployment

The marginal cost curve cuts the average total cost curve:

1. ANever, as the two curves are parallel
2. BAt the minimum point of average total cost
3. CWhere average total cost equals zero
4. DAt the maximum point of average total cost

A Nash equilibrium is a situation where:

1. AAll players achieve the highest possible total payoff
2. BThe players agree to cooperate through a binding contract that maximises their combined total payoff
3. CNo player can improve their payoff by changing strategy alone, given the others' strategies
4. DOne player has won and the others have lost

The price of a good rises by 10% and quantity demanded falls by 20%. The price elasticity of demand is:

1. A-2, so demand is elastic
2. B-0.5, so demand is inelastic
3. C-0.5, so demand is elastic
4. D-2, so demand is inelastic

The Laffer curve illustrates that:

1. ABeyond some point, raising tax rates can reduce total tax revenue
2. BTax revenue is unrelated to tax rates
3. CLower tax rates always reduce tax revenue, whatever the starting rate
4. DHigher tax rates always increase tax revenue

Price discrimination by a firm requires that:

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