Wollo University

College Of Business and Economics

Department Of Economics

Introduction to Economics final exam Time allowed: 1;40

Course code: Econ 1011
wight:60%
Name ___________________________________IDNo. _____________Section____
PART I: Write true if the statement is correct and false otherwise (1.5Pt. each)
1.__Law of supply states that, quantity supplied of a good is directly related to that good’s price, other things
constant.
2. Economic problem is the problem of scarcity and choice.
3. Economics is both science and art
4. The economic problem is the problem of scarcity and choice.
5. Scarcity is the imbalance b/n our wants and the means to satisfy these wants.
6. Economics is a branch of natural science which studies about efficient allocation of scarce resource.
7. The quantity supplied in a market is the sum of the quantity supplied by all the sellers.
8. A resources is scarce resource if, the available resource to the society is less that what a society
needs at zero price.
9. Firms are buyers of factor of production in the product or output market.
10. When the firm expects a decreases in the price of goods in the future, then, they will supply less
to the markets currently.
11. Scarcity is a fundamental concept in economics and applies to all societies
12. Macroeconomics is concerned with the economic behaviour of individual decision making
units.
13. One of the basic economic question what to produce states the way or technique of producing a
give output.
14. If a producer expects higher price in the future, the current supply decreases.
15. Deductive reasoning is a logical way of arriving at a specific correct statement starting from
correct general statement.
16. Two goods are said to be substitutes if change in price of one affects the demand for the other in
the same direction.
17. In command economy, private ownership of resources is encouraged.
18. The economic problem with what to produce refers to the amount and type of product to be
produced.
19. Quantity demanded is the quantity of goods that will be bought at various prices.
20. When two goods are substitutes, the price one good and the demand for another move in the
same direction.
PART II- Choose the best answer among the following alternatives (1.5 pts. each)
1. Which one is false about the PPF?
A. All points inside the PPF are technically efficient.
B. All points outside the PPF are unattainable.
C. It shows the maximum possible output that can be produced.
D. None
2. Which one is true about the effect of a decrease in supply while the demand is constant on
equilibrium?

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 A. Price decreases and quantity C. Both price and quantity decreases.
increases. D. Both price and quantity increases.
B. Price increases and quantity
decreases.

3. Which one is false about business firms?

A. Producers of goods and services C. Tax payers
B. Consumers of inputs (resources) D. None
4. Which one is false about the effect of an increase in both demand and supply on equilibrium
(Hint: increase in supply is greater than increase in demand)

A. Both price and quantity C. Price decreases and quantity

decreases. decreases.
B. Both price and quantity D. None
increases.

5. Which one of the following is addressed by macroeconomic theory?

A. Individual economic entity C. Overall economic problems
B. Price of a commodity D. None
6. From the three fundamental economic problems, which one deal with identify potential
customers.
A. What to produce C. For whom to produce
B. How to produce D. When to produce

7. When input price of a good increase, the goods

A. Supply decrease. B. Supply is constant. C. Supply increase. D. Supply increase.
8. Which one is true?
A. Scarcity is specific problem.
B. Shortage is universal problem.
C. Scarcity is imbalance between our wants and the means to satisfy our wants. D.A and C
9. Which one is incorrect?
A. If a consumer expects higher future price, current demand increases.
B. For normal goods when income increases, demand increases.
C. Market demand is the summation of individual demand.
D. None
10. The price of the physical or mental activities of human being and the price of equipment’s is
called__________ and__________ respectively
A. Land , capital C. Labour , capital
B. Wage , interest D. Wage, rent
11. Which of the following statement is incorrect:
A. when goods are substitutes , a fall in the price of the one (ceteris paribus) lead to a fall in the
demand of its substitutes
B. when commodities are complements, a fall in the price of one (other things being the same)
will cause the demand of other to rise
C. as the income of the consumer increase, the demand for the commodity always increase, vice
versa
D. all are correct
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12. Scarcity in economics refers to:
A. A situation where unlimited resources are available
B. Limited resources and unlimited wants
C. Equal distribution of resources among individuals
D. A short-term problem
13. Which of the following determinants of supply is different form the other?
A. High cost of raw material C. Rise in tax
B. Bad weather condition D. Large number of sellers
14. The production possibility frontier curve is concave to the origin, because of
A. An increasing opportunity cost C. A decreasing opportunity cost
B. A constant opportunity cost D. Unlimited human wants
15. One of the following is correct about the two-sector circular flow model
A. Households are the suppliers of goods and services
B. Firms are the suppliers of factors of production
C. Households are the suppliers of inputs
D. Firms are the suppliers of products and inputs
16. Which of the following is correct about utility?
A. It is the power of money to satisfy human wants
B. Utility and usefulness are synonymous
C. Utility is the same from place to place
D. Utility is subjective
17. When market equilibrium is achieved?
A. Market demand > market supply
B. Market supply < market demand
C. Market demand = market supply
D. Market demand greater or equal to market supply
18. Which of the following is determents of supply?
A. Consumer preference
B. Income
C. Sellers expectations of price of the product
D. Consumer expectation of income
19. Which of the following statement is positive economics?
A. Inflation is the overall and sustained increase in price of commodity
B. Internal dispute is the major economic problem in Ethiopia
C. Increase in money supply is the cause for money supply
D. It is better to give job opportunities for unemployed in Ethiopia
20. The supply curve for perfectly elastic supply is?
A. Horizontal parallel to the quantity axis
B. Vertical parallel to the price axis
C. Up ward
D. Downward
21. What is the decision of firm in product market?
A. Selling of resource
B. Buying of resource
C. Selling of product
D. Buying of product
22. Which of the following is scarce resource?
A. Sunshine
B. Air
C. Land
D. None

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 23. ------- is a curve which shows different combination of the two goods which a country can produce
using its resource and technology.
A. Opportunity cost C. Economic resource
B. Production possibility curve D. Economic growth
24. Which of the following are the correct steps of deductive reasoning?
A. Problem identification, specification of assumption, formulation of hypothesis, testing hypothesis
B. Problem identification, data collection, establishing relationship b/n variables
C. Establishing r/p b/n variables
D. Testing the validity of theory
25. Which of the following is incorrect about diminishing marginal utility?
A. It works when the preference of the consumer is constant
B. It works in homogenous product
C. It works when the measurement is different
D. All

Part III: Provide short answers for the following questions

1) List two determinants that affect demand and support your evidence with examples. ?(1.5 pt)
2) What is the difference between market economy and command economic system? ?(1 pt )
Answer Sheet
Part I: true / false
1. __________2___________3_________4___________
5_______6____________7_____________8___________
Part II: Multiple choices
1. _______2_______3________4________5_______6__________
_7________8______9_________10____________11_________ 12_______