Economics concepts worksheet with answers

Real GDP differs from nominal GDP because real GDP:

1. AIs adjusted for changes in the price level
2. BIncludes only goods, not services
3. CIs measured in a foreign currency
4. DExcludes government spending

Which of these is a barrier to entry into a market?

1. ALow start-up costs
2. BPerfect information for all buyers
3. CMany small firms selling identical products
4. DPatents held by existing firms

Fixed costs are costs that:

1. ACan be avoided entirely by producing nothing in the short run
2. BAre paid only when the firm makes a profit
3. CRise in proportion to each unit produced
4. DDo not change with the level of output in the short run

A savings account pays a nominal interest rate of 6% and inflation is 4%. The approximate real interest rate is:

1. A10%
2. B2%
3. C1.5%
4. D24%

The marginal cost curve cuts the average total cost curve:

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

In country A, 1 car costs 2 tonnes of wheat to produce; in country B, 1 car costs 4 tonnes of wheat. Which statement is correct?

1. AB has a comparative advantage in cars and A in wheat
2. BA has a comparative advantage in both goods
3. CNeither country gains from trade
4. DA has a comparative advantage in cars and B in wheat

According to the quantity theory of money (MV = PY), if velocity and real output are constant, a 5% rise in the money supply leads to:

1. AAbout a 5% rise in real output
2. BAbout a 5% rise in the price level
3. CNo change in prices
4. DA 5% fall in velocity

A lump-sum tax (a fixed amount, independent of output) is imposed on a profit-maximising monopolist. In the short run, its output will:

1. AFall, because the tax raises the firm's average cost
2. BFall to zero
3. CStay the same, because MR and MC do not change
4. DRise to make up for the tax