Principal’s Health and Business College

Business Faculty
Introduction to Economics Mid-Exam for E-Learning Plat form

General Transaction:

- Attempt all the questions and please send us your answer in clear and visible way
- Send the answers to Mr. Yared D. @yaredoo or contact him @0983756942
- Be on time for your answers, and the questions are purposefully bulky in nature.
- You can reply the answers before 10:00 o’clock of 24-09-2012, no reply is acceptable after 10:00 o’clock of 25-09-12012
- Your answer is not submitted unless you get “Thank you ----------(Your name)-----, Received” answer from your advisor
or your co-advisors.
- For those who submit in person, they will receive the coming test while submitting this booklet.
- The exam result will be given as of Ginbot 24, 2012.

Full Name Destaye Negash Department Business Division Extension

Part one: Write True for Correct statement and False for incorrect one
1- When there is an equal increase in prices of two goods, there will be an upward shift of budget line.
2- The aim of economics is to study how to satisfy the unlimited human needs up to the maximum possible
degree by allocating the resources efficiently
3- The great advantage of capitalist economy is its tendency of unbalance economic growth among individuals,
regions and countries.
4- When a price exceeds the equilibrium price, there will be a tendency of being surplus units
5- Capitalist economy is the best fit for any country and any firm in the world as it fasters economic growth.
6- Economic system is a legal and institutional framework within which various economic activities take place
7- Macroeconomics is concerned with the economic behavior of individual decision making units such as households,
firms, markets and industries
8- A decrease in cost of inputs cause an increase in the supply of the product
9- The word and concept of scarcity refers to shortage of resources.
10- The cross-price elasticity of demand for complementary goods is negative
11- The degree of responsiveness of the supply to change in price is known as inelasticity of supply.
12- Elasticity is a measure of responsiveness of a dependent variable to changes in an independent variable.
13- A problem of economics that deals with what to produce is known as problem of allocation of resource.
14- Two goods are said to be related if a change in the price of one good affects the demand for another good.
15- Utility is the total satisfaction a consumer gets from consuming some specific quantities of a commodity
at a particular time.
16- The desire of the consumer that has ability to pay but is not will to pay is known as demand.

Part two: Choose the best answer among the given alternatives
17- A curve shows different combinations of two goods which yield the same utility (level of satisfaction) to
the consumer.
A- Philips curve C- Production Possibilities Curve
B- Budget curve D- Indifference curve
18- When both demand and supply increases;
A- Product quantity increases C- Product price will decrease
B- Product price will increase D- Product quantity will decrease
19- One is the advantage of capitalist economy
A- Centralization of economic power C- High rate of capital formation
B- Difficulty of entrepreneurship growth D- Less utilization of productive resources
Answer Question #20 to #23 based on the following given assumptions. Given market demand: Qd=
400 - 2P, and market supply: P =( Qs /4) + 60
20- What is market equilibrium price?
A- 320 C- 80
B- 26.67 D- 106.67
21- What is equilibrium quantity?
A- 213.33 C- 160
B- 186.67 D- 240
22- Calculate the economic status if the price is birr 150
A- Deficit of 260 units C- Excess of 260 units
B- Deficit of 86.67 units D- Excess of 87.67 units
23- Calculate the economic status if the price is birr 90
A- Shortage 100 C- Shortage by 86.67
B- Excess by 86.67 D- Excess by 100
24- Which one of the following is correct for changes due to change on consumers income keeping
the prices constant:
A- Makes consumer to buy less C- No change on pattern of purchase
B- Makes consumers to buy more D- Causes up ward shift in budget line
25- One among the following is not a property of indifference curve
A- Crossing each other C- Preferred to a lower one
B- Convex to the origin D- Negative slopping
26- _____ is a known scientist who is generally known as a father of Economics
A- David Ricardo C- Milton Friedman
B- Alfred Marshall D- Adam Smith
27- Which of the following is not part of a units of major economic decision making in a closed
economy
A- Government C- Households
B- Firms D- None
28- Suppose that the price of a commodity is Br. 25 and the quantity demanded at that price is 500
units of a commodity. Now assume that the price of the commodity falls to Br. 40 and the
quantity demanded rises to 880 units. What type of product is this?
A- Luxury product C- Inferior products
B- Necessity product D- Normal product
29- One among the following is not true about the concept of economics
A- Human needs are limited B- Allocation should be efficient
 C- Studies about scarce resource D- Studies about allocation of resource
30- Among the following one is not a determinant of supply of a product
A- Participants in sales market C- Weather condition
B- Technology D- None
31- Command economy have the following characteristics except
A- State control all activities C- Private property right
B- Demolish exploitation of labor D- Less profit motives
32- The basic economic problem is due to
A- Limited wants and resources C- Limited resource and unlimited
B- Unlimited resource and limited wants
wants D- Unlimited resources and wants
Answer question #33 and #34 based on the following statement. A consumer consuming two
commodities X and Y has the utility function U(X, Y) = XY + 4X. The prices of the two
commodities are 22 birr and 14 birr respectively. The consumer has a total income of 600 birr to
be spent on the two goods.
33- What is utility maximizing quantities of good X and Y? (with nearest approximation)
A- 45 and 15 C- 13 and 23
B- 15 and 45 D- 23 and 13
34- What is the MRS X ,Y at equilibrium
A- 17/23 C- 19/15
B- 49/15 D- 27/13
35- One among the following may not be included under the scope of the economics
A- Industry C- Environment
B- Transport D- None
36- The following factors make price elasticity of demand but one
A- Availability of substitutes C- Type of goods
B- Time variations D- None
37- One among the following is not part of scarce resource
A- Sunshine C- Machines
B- Land D- Human resource
38- Market equilibrium occurs when:
A- When market demand exceeds supply C- When market supply and demand are
B- When market supply exceed demand unequal
D- What market supply and demand are equal.
39- _______is a curve that shows the various possible combinations of goods and services that
the society can produce given its resources and technology.
A- Philips curve C- Production Possibilities Curve
B- Budget curve D- Indifference curve
40- A problem of economics that deals with for whom to produce is known as
A- Problem of choice of techniques C- Problem of distribution of product
B- Problem of allocation of resource D- None
41- Consider the following data which shows the changes in quantity demanded of good
NL45 in response to changes in the price of good XP65.
 Unit price NL45 XP65
90 6000
70 4000
What can you say about the two goods?
A- Unrelated goods C- Complementary goods
B- Substitute goods D- Inferior goods
42- One is not a feature of capitalist economy
A- Income inequalities C- Competition
B- Major role of government D- Private property right
43- Write two approaches of measuring consumer’s utility
44- The principle of demand, which states that , price of a commodity and its quantity demanded are inversely
related
45- _____ is a social science which studies about efficient allocation of scarce resources so as to attain the
maximum fulfillment of unlimited human needs

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