Economics concepts worksheet with answers

Economies of scale occur when:

1. ALong-run average cost falls as output increases
2. BA firm produces less to cut costs
3. CPrices rise as the firm grows
4. DTotal costs fall as output increases

A good for which demand rises when income rises is called:

1. AA Giffen good
2. BA public good
3. CA normal good
4. DAn inferior good

GDP measures:

1. AThe total market value of final goods and services produced in a country in a period
2. BThe government's budget
3. CThe value of all exports only
4. DThe total wealth and savings held by a country's citizens and firms at the end of a year

A price ceiling set below the equilibrium price typically causes:

1. ANo change in the market
2. BAn increase in supply
3. CA surplus
4. DA shortage

A negative externality occurs when:

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

In a simple closed economy without taxes, the MPC is 0.8. The Keynesian spending multiplier is:

1. A0.8
2. B5
3. C8
4. D1.25

The Laffer curve illustrates that:

1. AHigher tax rates always increase tax revenue
2. BLower tax rates always reduce tax revenue, whatever the starting rate
3. CBeyond some point, raising tax rates can reduce total tax revenue
4. DTax revenue is unrelated to tax rates

In the Mundell–Fleming model with perfect capital mobility and a floating exchange rate:

1. ABoth policies have no effect on output
2. BMonetary policy is effective but fiscal policy is largely ineffective
3. CFiscal policy is effective, but monetary policy is largely ineffective
4. DBoth policies are equally effective