Economics concepts worksheet with answers

Which body sets monetary policy for the euro area?

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

A market with only one seller is called:

1. AAn oligopoly
2. BA monopsony
3. CPerfect competition
4. DA monopoly

A point inside a country's production possibility frontier shows:

1. AAn output level that cannot be reached
2. BThe maximum output the economy can produce
3. CEconomic growth over time
4. DUnemployed or inefficiently used resources

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. AIgnored, because it is a sunk cost
2. BAdded to the expected future costs
3. CTreated as the opportunity cost of stopping
4. DRecovered by raising prices

A price ceiling set below the equilibrium price typically causes:

1. ANo change in the market
2. BA shortage
3. CA surplus
4. DAn increase in supply

A public good is:

1. ANon-rival and non-excludable
2. BRival and excludable
3. CProvided only by private firms
4. DAny good bought by the government

Akerlof's "market for lemons" explains how:

1. APublic goods are under-provided
2. BLemons become cheaper in summer
3. CAsymmetric information can drive good-quality products out of a market
4. DMonopolies set high prices

The Lerner index (P − MC)/P for a profit-maximising monopolist equals 1/|PED|. If |PED| = 4, the price is:

1. A25% above marginal cost, as a share of price
2. B4 times marginal cost
3. C75% above marginal cost, as a share of price
4. DEqual to marginal cost