Economics concepts worksheet with answers

In economics, the short run is a period in which:

1. AAt least one factor of production is fixed
2. BThe firm must make a loss
3. CPrices cannot change
4. DAll factors of production can be varied

Economies of scale occur when:

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

According to the law of demand, when the price of a normal good rises (other things equal):

1. AThe quantity demanded rises
2. BSupply falls
3. CThe quantity demanded falls
4. DDemand shifts to the right

A country has 950 employed people and 50 unemployed people seeking work. Its unemployment rate is:

1. A5.3%
2. B5%
3. C95%
4. D50%

The law of diminishing marginal returns states that:

1. ATotal output always falls as more workers are hired
2. BConsumers get less satisfaction as prices rise
3. CAdding more of a variable input to a fixed input eventually lowers the extra output per unit added
4. DLong-run average costs always fall as output rises

The price of petrol rises sharply. What happens to the demand curve for large cars?

1. AIt becomes vertical
2. BIt shifts to the left
3. CThere is a movement along it
4. DIt shifts to the right

A regulator forces a natural monopoly to set price equal to marginal cost. The likely problem is that:

1. AOutput falls below the monopoly level
2. BThe firm makes very large profits
3. CThe firm makes a loss because average cost is above marginal cost
4. DConsumers face a shortage, because demand exceeds supply at that price

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

1. A75% above marginal cost, as a share of price
2. B25% above marginal cost, as a share of price
3. C4 times marginal cost
4. DEqual to marginal cost