Economics concepts worksheet with answers

The basic economic problem of scarcity means that:

1. ASome goods are always unavailable in shops because firms produce too little
2. BOnly poor countries need to make choices
3. CWants are unlimited but resources to satisfy them are limited
4. DPrices are always rising over time

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

1. ARise
2. BBecome zero
3. CStay exactly the same
4. DFall

Marginal cost is:

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

A country imposes a tariff on imported steel. Which effect is most likely?

1. ADomestic steel prices rise and domestic production increases
2. BDomestic steel prices fall and imports rise
3. CThe world price of steel rises sharply for all countries that trade it
4. DDomestic consumers gain surplus

In perfect competition in the long run, firms earn:

1. AMonopoly profits
2. BLosses forever
3. CLarge economic profits
4. DZero economic profit

In the long run in monopolistic competition, firms typically:

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

Purchasing power parity (PPP) suggests that, in the long run, exchange rates adjust so that:

1. ATrade balances are always zero
2. BInterest rates are equal in all countries
3. CEvery currency ends up having the same nominal value as the US dollar
4. DThe same basket of goods costs the same in different countries

Under a fixed exchange rate with free capital movement, a country:

1. ACan set any interest rate it likes
2. BMust have a budget surplus
3. CCannot trade with other countries
4. DLoses control of independent monetary policy