Economics concepts worksheet with answers

Deflation is:

1. AA slowdown in the rate of inflation, with prices still rising
2. BA sustained fall in the general price level
3. CA reduction in government spending
4. DA fall in the value of the currency

A cartel is:

1. AA single firm that controls the whole market for a product or service
2. BA trade union that negotiates wages
3. CA government agency that regulates prices
4. DA group of firms that agree to coordinate prices or output

Inflation is:

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

Stagflation is a combination of:

1. ADeflation and rapid growth
2. BHigh growth and falling prices
3. CHigh inflation and high unemployment with low growth
4. DLow inflation and low unemployment

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

Crowding out refers to:

1. AImports replacing domestic production
2. BToo many firms entering a market
3. COvercrowded public services
4. DHigher government borrowing raising interest rates and reducing private investment

In the "Battle of the Sexes" coordination game, how many pure-strategy Nash equilibria are there?

1. AOne
2. BNone
3. CFour
4. DTwo

A monopolist faces demand P = 100 − Q and has constant marginal cost of 20. What are its profit-maximising output and price?

1. AQ = 50, P = 50
2. BQ = 40, P = 20
3. CQ = 40, P = 60
4. DQ = 80, P = 20