Economics concepts worksheet with answers

Consumer surplus is:

1. AThe difference between what consumers are willing to pay and what they actually pay
2. BThe amount of goods left unsold at the end of the day
3. CThe profit that firms make from selling to consumers at prices above their production costs
4. DThe total amount consumers spend on a good

A progressive tax is one where:

1. AThe proportion of income paid falls as income rises
2. BThe proportion of income paid in tax rises as income rises
3. CEveryone pays the same percentage of income
4. DEveryone pays the same amount of tax

The phrase "ceteris paribus" means:

1. AOther things being equal
2. BThe government does not intervene
3. CThe price is fixed
4. DSupply equals demand

Comparative advantage means a country should specialise in goods it can produce:

1. AMore cheaply in absolute terms than every other country
2. BWith the most workers
3. COnly for its own consumption
4. DAt a lower opportunity cost than other countries

A negative externality occurs when:

1. AThe government taxes a product
2. BA firm makes a loss
3. CA third party bears a cost not paid by the producer or consumer
4. DConsumers pay more for a product than it costs the firm to produce

A minimum wage set above the equilibrium wage in a competitive labour market is predicted to cause:

1. AA fall in the wage rate
2. BNo change in employment
3. CA shortage of labour
4. DA surplus of labour (unemployment)

Moral hazard arises when:

1. ATwo firms collude on price
2. BOne party changes behaviour after a contract because they do not bear the full consequences
3. CPrices are too high for poor consumers
4. DA buyer cannot observe product quality before buying, so low-quality sellers dominate the market

According to prospect theory (Kahneman and Tversky), people typically:

1. AFeel losses more strongly than equal-sized gains
2. BPrefer risk when facing gains of any size
3. CTreat losses and gains of the same size as equally important
4. DAlways maximise expected monetary value