TRUE OR FALSE Say True if the statement is correct and False if it is incorrect.(1 point each) 1.

Marginal revenue is the additional amount of product the firm produces by using one
more unit of inputs.

2. Inflation is a situation when purchasing power of money improves.

3. A firm with minimum AVC of 20 units shall continue its production when price is 18 units.

4. When a country eliminates natural level of unemployment it achieves full employment.

II MULITIPL CHOICE (1.5 each) Choose the correct answer 1. A monopolistic competition has got its monopoly power due to A. standardized product C. free entry and exit B. identical product D. economies of scale E. none

2. In pure competition a rational firm should produce up to A. P=min AVC B.P=min AFC C. P=min AC D. none

3. Assume Mr. X who was a manager of company Y voluntarily switching his job and now he is actively searching for job .Then Mr. X is facing A. structural unemployment C. frictional unemployment B. cyclical unemployment D. all

4. Which of the following is true about breakeven point? A. a firm covers variable cost only B. a firm covers total cost

C. a firm enjoys positive economic profit D. it is economical to leave the market 5. Pure competition is a market model in which: A. firms are price setter B. firms obtain long run abnormal profit
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C. MR Curve and AR curve coincides D. all

E. none

6. A phase of business cycle where there exists intensive use of resource is A. boom B. trough C. recession D. none

7. Which of the following is /are not trait of monopolistic competition A. differentiated product B. Non price competition

C. unlimited power over customers who prefer their product D. all E. none

8. Which one of the following explains inflation well? A. increase in price of coffee only B. increase in price of banana only C. increase in average price level of commodities D. all 9. Sometimes people prefer to engage in informal sectors because these are A. government subsidized sectors C. illegal D. all B. free from tax E. none

10. The importance of national income accounting is A. it helps us to measure the level of out put B. it helps us to observe the trend of the economy C. it provides information to formulate polices D. to explain the cause of good or bad performance of the economy E. all

11. Which the following group is not included in labor force according to Ethiopian context A. students C. unemployed B. Disabled D. employed E.A & B F. C& D

12. One is true about pure monopoly A. there is only one buyer in the market B. both buyer & seller are price makers
C. both buyer & seller are price takers

D. there is free entry & exit E. none 13. If the firm is pure monopoly, then A. its MR curve is its demand curve B. its MR curve lies below price line C. P=MR=AR D. the market demand curve is different from its demand curve 14. The firm can maximize profit or minimize loss at output level which results in A. the minimum positive difference b/n TR & TC B. the maximum negative difference b/n TR & TC C. when MC intersects price while MC is rising D. when MC intersects price while MC is falling 15. Which of the is true about perfectly competitive firm A. when price increase its profit increase B .when its cost increases its profit also increase C. when AC>P, the firm gets normal profit D. when AC=P the firm gets supper normal profit
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16. Pure monopoly exists due to, A. low cost of production for new entrants B. free entry but not exit C. control over essential raw materials D. existence of close substitution E. all F. none

17. All are invalid about pure competitive market except? A. the buyer demands any quantity of a commodity at given price B. the seller sells any quantity of a commodity at given price C the price is the average revenue curve of the seller D. the average revenue curve is downward E. all but, D. 18. Which one of the following is incorrect about GNP? A. it is equal to zero if the economy is closed B. it is greater than GDP if the NFI is positive C. it is equal to GDP if a country has no interaction with the rest of the world D. it is greater or less than GDP depending on NFI E. none 19. All are true for both perfectly competitive and monopolistically competitive market except: A. easy entry and exit C. price taking B. no collusion among buyers and sellers D. all E. none

20. All of the following is/are incorrect about oligopoly market except:
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A. there is no obstacle for new entrant firm B. firms are making their decision independently C. produces and supply homogeneous product only D. all E. none

21. The demand curve for pure monopoly firm is A. vertical B. down ward C. horizontal D. upward E. none

22. Homogeneity of product in perfect market implies A. the buying or selling decision of a single buyer or seller cant affect the price of the commodities B. the buyer is indifferent about from whom to buy the commodity C. both buyer and seller are well informed about price of the product D. as no collusion among buyers and sellers 23. Suppose total cost function of a perfectly competitive firm is given by TC=0.5Q2-7Q+25. Then what is the optimum level of output and the corresponding profit respectively at AR of 5 units A. 21&0 24. GDP is A. value of currently produced final goods irrespective of where it is produced B. market value of intermediate goods c. value of currently produced final goods by domestically owned factors of production D. all E. none B. 47&31 C. 12&47 D.21&38 E. none

III. MATCHING (1 point each) A 1, change in demand pattern B A, disposable income B, public good C, Difference in education 2, non-marketed output 3. Income inequality 4. Aggregation of consumption &saving 5.Homogeneous & differentiated product D, personal income E, Monopolistic market F, oligopoly G, structural unemployment

IV, WORK OUT (5%) 1. Assuming the following hypothetical data for nation X{In million} Personal consumption expenditure-----------------------------------200 Wage---------------------------------------------------------------------------100 Social security contribution-----------------------------------------------60 Subsidy-------------------------------------------------------------------------30 Net interest income on government bond-----------------------------40 Private investment-----------------------------------------------------------200 Export----------------------------------------------------------------------------120 Import-----------------------------------------------------------------------------100 Factor income received from abroad--------------------------------------80 Net domestic product----------------------------------------------------------500 Factor income paid to foreigners --------------------------------------------80 Personal income tax--------------------------------------------------------------20 Government purchase of commodities---------------------------------------260 Retained corporate profit---------------------------------------------------------300 IBT---------------------------------------------------------------------------------------10 Then calculate: A, GDP using expenditure approach B, GNP and what do you say about the economy C, personal income & disposable income D, if the size of population is 20 what will be the PCI of the society E, depreciation (capital allowance)