Part I: - Multiple choice

Instruction 1: - Choose the correct answer among given alternatives and write the letter of
your choice on the separate answer sheet provided (1point each)
1. Full employment means that
A. all persons in the labor force have a job.
B. the only unemployment is frictional unemployment.
C. the only unemployment is cyclical unemployment.
D. everyone has a job.
2. Inflation is associated with a decrease in
A. the average price level.
B. the purchasing power of money.

C. the GDP deflator.

D. the CPI.

3. In the first of the three stages of production the:

A. the total product curve has an increasing slope.
B. the marginal product curve has a negative slope.
C. the marginal product curve lies completely below the average product curve.
D. total product decreases.
4. The unemployment rate is obtained by calculating
A. labor force/unemployed.
B. unemployed/labor force,

C. employed/labor force,
D. unemployed/employed,

5. The loss of purchasing power of money during periods of inflation benefits

A. fixed income recipients,
B. savers.

C. borrowers,
D. lenders,

6. Which of the following form(s) of unemployment is (are) tolerable?

A. cyclical only,
B. frictional only,

C. cyclical and structural,

D. structural and frictional,

7. Which of the following is NOT excluded from GDP computation?

A. transactions of second hand items.
B. exports.

C. illegal transactions.
D. Unmarketable activities

E.
F.
8. Intermediate goods are excluded from GDP in order to avoid
A. including underground economy.
B. double counting.

C. Recession.
D. Inflation.

9. A 'recession' describes a situation when

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A. production, output, and living standards decline

B. the economy is no longer able to produce
C. general price levels are rapidly increasing
D. government discretionary spending is at a minimum
10. The condition for a firm to enter a market in perfect competition, is that the firm must have
A. Special technique of production.
B. a unique product protected by patents.

C. no significant barrier of any kind.

D. the ability to attract customers.

11. In perfect competition, what type of product is traded?

A. a unique product which other firms cannot copy.
B. homogeneous, absolutely standard product for all firms.
C. a similar product, but differentiated from firm to firm.
D. any product, differentiated or standardized.
12. When new firms enter an industry in perfect competition, all the firms in the industry will
experience
A. an increase in profits,
B. a decrease in costs.

C. a decrease in profits.
D. an increase in demand.

13. The elasticity of the demand curve of a firm in perfect competition is

A. perfectly elastic.
B. somewhat inelastic.

C. somewhat elastic.
D. perfectly inelastic.

14. Compared to demand, the marginal revenue of a firm in monopoly form of market is
A. above demand curve.
B. upward sloping.

C. below demand curve.

D. exactly one and the same.

15. Compared to perfect competition, the price and output of a monopoly is such that
A. price is lower and quantity is higher.
B. price and quantity are higher.

C. price and quantity are lower.

D. price is higher and quantity is lower.

E.
16. Which of the following is not a common barrier to enter an industry in pure monopoly?
A. lack of consumer demand.
B. Technology.

C. legal.
D. access to raw material.

17. Total fixed cost divided by quantity gives

A. rate of profit.
B. average fixed cost.

C. average total cost.

D. marginal fixed cost.

18. What characterizes the short run is that a business cannot change its
A. Supply.
B. product line.

C. variable costs.
D. Capacity.

19. Which of the following is NOT an example of a variable cost?

A. storage.

B. Wages.
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C. Electricity.

D. Rent.

20. Change in total cost divided by the change in output is equal to

A. marginal fixed cost.
B. marginal cost.

C. average total cost.

D. average fixed cost.

E.
F.
G. Part II: - Fill in the blank (5 marks)
H. Instruction 2: - Fill the appropriate phrase/word that fulfill the meaning of the
statement
21. That rate of unemployment which is strictly attributable to frictional and/or structural
reasons, and which is therefore tolerable or acceptable, is referred to as the ........... rate of
unemployment.
22. Unemployment which is acceptable because it is attributable to people changing jobs to find
higher pay, is known as ................. unemployment.
23. The form of unemployment which is looked upon as undesirable because it is due to a
potentially avoidable slowdown of economic activity, is known as ........... unemployment.
24. The total market value of all final goods and services produced in one country over the
period of one year is known as
25. The spending of households for purchase of final goods and services is called ..

I.
J. Part III. Short Answer parts
K. Instruction 3: - answer the following questions neatly and shortly.
26. what are the most known phases of business cycle
27. list the two causes of inflation
28. list at least two basic characteristics of Perfectly competitive market structure
29. list at least two basic characteristics of Monopoly market structure
30. what are the two time horizons of production
L. Part IV: - Workout Part
M.

Instruction 4: - answer the following questions neatly and shortly by using

the information available for each questions.

31. Use the table below to answer the following questions

N.
O.

P. Q.

R.

S.

T.

U.

V.

W.

X.

Y.

Z.

AA. AB.

AC.

AD. AE.

AF. AG.AH. AI. AJ.

AK. AL. AM. AN. AO.

AP. AQ. AR.

AS.

AT.

AU. AV.

AW. AX.AY. AZ. BA. BB. BC. BD. BE.

BF.

BG. BH. BI.

BJ.

BK.

BL. BM.

BN. BO.BP. BQ. BR. BS. BT. BU. BV.

BW.

BX. BY. BZ.

CA.

CB.

CC. CD.

CE.
A. Phase one level of production is from L=
B. Phase two level of production is from L=
C. Phase three level of production is from L=

to L =
to L =
to L =

CF.
32. Let the CPI was 120 in year 2006 and 150 in year 2007, what is the approximate percentage
change in prices between the two years? (1 mark)
33. Look at the following data: consumption = 813 billion; Net investment = 423 billion;
government purchases = 320 billion and the Net Export is 20billion. What is GDP? (2marks)
34. Suppose the civilian population equals 100,000; there are 62,600 employed persons and
8,100 unemployed persons. How many people are not in the labor force? (1 mark)

CG.
CH.
CI.
CJ.
35. The next table shows the output, Price, Total Revenue and Total cost schedule of the firm that
operate under monopoly market. Answer the following questions by using the given table.
CK.

CL.

CM.

CN.

CO.

output

Price

TR

MR

TC

CR.

CS.14

CP.A

CQ.

MC
CX.

CT.0

CU.

CV.

C
CW.

2
DC.

DD.

DE.

0
CY.

CZ.

DA.

DB.

1
DF.2

12
DG.

12
DH.

12
DI. 8

6
DJ. 8

6
DK.

4
DL.

DM.

10
DN.

20
DO.

DP.4

DQ.

4
DR.

2
DS.

3
DT.

8
DU.

24
DV.

DW.

12
DX.

4
DY.

4
DZ.

4
EA.

6
EB.

24
EC.

0
ED.

20
EE.35

5
EF. 7

8
EG.

20

-4

EH.
A. How much output has to produce so as to maximize its profit? 1 mark
B. What will be the maximum profit earned by this monopolist? 2 marks
EI.

EJ.
EK.
EL.

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