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Addis Ababa University Addis Ababa Institute of Technology

This document contains a model exam for Addis Ababa University's Addis Ababa Institute of Technology. The exam has three parts - multiple choice questions, short answer questions, and worked problems. The multiple choice questions cover topics like demand and supply, production possibilities frontiers, elasticities, and the business cycle. The short answer questions ask about changes in quantity demanded vs demand, reasons for monopoly, macroeconomic problems and goals, production stages, and positive vs normative economics. The worked problems involve calculating optimal output, profit, and elasticities for competitive firms and markets.

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Bukti Negal
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314 views3 pages

Addis Ababa University Addis Ababa Institute of Technology

This document contains a model exam for Addis Ababa University's Addis Ababa Institute of Technology. The exam has three parts - multiple choice questions, short answer questions, and worked problems. The multiple choice questions cover topics like demand and supply, production possibilities frontiers, elasticities, and the business cycle. The short answer questions ask about changes in quantity demanded vs demand, reasons for monopoly, macroeconomic problems and goals, production stages, and positive vs normative economics. The worked problems involve calculating optimal output, profit, and elasticities for competitive firms and markets.

Uploaded by

Bukti Negal
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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ADDIS ABABA UNIVERSITY

ADDIS ABABA INSTITUTE OF TECHNOLOGY


Model exam
Instructors: Naod Mekonnen (BA, MSc, MA) and Saba Haile (BA, MA)

Part I Multiple Choice


1. Which of the following can shift the demand curve for demand curve for DVD rental rightward?
A. A decrease in the rental price of VCR rentals.
B. A decrease in the price of DVD players.
C. A decrease in the price of cable TV service.
D. A decrease in the price of DVD rentals.
Use the following production possibilities frontier for questions 2-3 (Note that A and B are
points on the production curve and D is outside the production curve
A
B
D

2. As the economy moves from point A to point B, which of the following is true
A. The opportunity cost of computers is falling.
B. The opportunity cost of textiles is constant.
C. The economy is moving from an efficient point to an inefficient point.
D. The opportunity cost of computers is rising. e. None of the above
3. Which of the following is NOT true about the above graph:
A. Points A and B are both efficient points of production.
B. Point D could be produced if we could trade Computers and textiles with other countries.
C. Point C is attainable, but there will be some unemployed resources.
D. There are no unemployed resources in points A or B.
E. All of the above are true.
Use the following equations for questions 4-6:
Qd=80-3p and Qs=-20+2p
4. What is the equilibrium price and quantity in the market?
A. P = 20, Q = 20 B. P = 12,Q = 44 C. P = 100,Q = 20 D. P = 40,Q = 20
5. What is the own price elasticity of demand at the equilibrium?
A. 3 C. 6 C. 1 D. ½ E. –2
6. What is the elasticity of supply at the equilibrium?
A. 1 B. 5 C. ½ D. 2 E. 0
7. At what point on the demand curve Q = 120 − 6P is the own price elasticity of demand equal to
one
A. P = 0, Q = 120 B. P = 10,Q = 60 C. P = 15,Q = 30 D. P = 3,Q = 60
E. The own price elasticity is always less than one
8. Suppose that the demand curve is Qd = 50 − 2 P and the supply curve is Q s = 3 P. Suppose that
the government imposes a price ceiling of $12 a unit. Which of these is true about the
equilibrium quantity?
A. There is a shortage of 22 units.
B. There is a surplus of 22 units.
C. There is a surplus of 10 units.
D. There is a shortage of 10 units.
E. There is no surplus or shortage
Use the following information for questions 9-11. Suppose the demand for light bulbs is Qd
Y = 120−2P − 4 Pl + where Pl is the price of lamps and Y is income. Supply is defined by Q s
− 30+ 3 P. Initially, Y = 40 birr and 10 Pl = 10 birr.
9. What is the equilibrium price and quantity?
A. P = 20,Q = 30 B. P = 30,Q = 30 C. P = 24,Q = 42 D. P = 28,Q = 10 E. P = 30,Q = 60
10. What is the cross-price elasticity of demand for light bulbs with respect to lamps at the
equilibrium?
A. –2 B. 2 C. ½ D. – ½ E. –2/3
11. What is the income elasticity of demand for light bulbs at the equilibrium?
A. 1.5 B.¾ C. 4/3 D. ½ E. 2/3
12. A good with an income elasticity of –3, can be described as
A. Normal B. Substitute c. A complement D. inferior E. inelastic
13. The period of the business cycle in which real GDP is increasing is called the:
A. Expansion B. Peak C. Recession D. Trough E. Stagflation
14. A type of unemployment in which workers are in-between jobs or are searching for new and
better jobs is called A. Frictional B. Cyclical C. Structural D. Turnover

Part II Short Answer Question


Attempt only 4 of the following 6 short answer questions. Each Question is worth 4 marks.
Please provide a precise and clear answer on the attached answer-sheets. Write legibly!
1. What is the difference between a change in quantity demanded and a change in demand?
(Discuss briefly and illustrate using a graph).
2. Why monopoly market exits? list at least four reasons
3. What are the basic problems of macro economics and the objectives of macro economics?
4. What are the basic assumption
5. What is the difference between positive economics and normative economics
6. Show three stages of production in a clearly labeled diagram. At which stage does the
diminishing marginal product sets in? At which stage will you produce, assuming that you are
a rational producer?
Part III Workout Questions
1. Suppose a competitive firm has the following cost (C) and revenue (R) functions:
TC=100 + 40Q + Q2
MR = 100 − 4Q
Calculate the optimal output level (2 point)
A) What is the fixed cost?
B) What is the variable cost?
C) Determine the maximum profit/minimum loss (whichever is appropriate) at the
optimum output level (1 point)
2. In a market for a certain good, there are 100 identical individual consumers with inverse
demand function of d P = 5 −5Q. The good is supplied by 10 suppliers with each having a
supply function of Q P s =1+ 4.
A. What is the market clearing quantity and price? (2 point)
B. What is the elasticity of supply at the equilibrium point? (1.5 point)
C. Interpret your finding on (b) – the value of the price elasticity of supply at the
equilibrium point

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