2016 E.C ECONOMICS GRADE 12th MODEL EXAM

Welcome to your 2016 E.C ECONOMICS GRADE 12th MODEL EXAM

2016 E.C ECONOMICS GRADE 12th MODEL EXAM

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THIS EXAM PAPER CONTAINS ECONOMICS EXAMINATION. IN THIS

EXAMINATION, THERE ARE A TOTAL OF 80 MULTIPLE CHOICE QUESTIONS. CAREFULLY SELECT THE BEST ANSWER AND BLACKEN ONLY THE LETTER OF YOUR CHOICE ON THE SEPARATE ANSWER SHEET PROVIDED. FOLLOW THE INSTRUCTIONS ON THE ANSWER SHEET AND THE EXAMINATION PAPER CAREFULLY. USE ONLY PENCIL TO MARK YOUR ANSWERS; YOUR ANSWER MARK SHOULD BE HEAVY AND DARK, COVERING THE ANSWER SPACE COMPLETELY. PLEASE ERASE ALL UNNECESSARY MARKS COMPLETELY FROM YOUR ANSWER SHEET.

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Directions: Each of the following questions is followed by four possible alternatives. Read each question carefully and blacken the letter of your best choice on the separate answer sheet provided.

1.

Identify the best statement about, why we study Economics?

To balance the gap b/n the unlimited human wants and the scarce economic resources

To begging foreign aids from developed to developing countries

To promote social interdependence between developed and developing countries.

To know the political and cultural interest of developing countries

2.

Which of the following is a microeconomic issue?

Inflation dramatically increased in Ethiopia in the previous year.

The price of edible oil increased in Ethiopia over the last 2 Months

Unemployment rate soared in Ethiopia in recent year.

The Ethiopian economy experienced rapid economic growth last year.

3.

Currently, the Ethiopian economic system is applied a type of :

Command or socialist economic system

Traditional /Religious economic system

Capitalist or free market economic system

Mixed or hybrid economic system

4.

For a rational consumer, total utility (TU) will be a maximum when

Marginal Utility( MU) is Zero (0)

Marginal utility (MU) = Total Utility (TU)

Marginal Utility (MU) = Average Utility (AU)

Average Utility (AU) is Zero (0)

5.

Which of the following statements best represents a key principle of classical economics?

Aggregate demand plays a minimal role in influencing economic activity and employment levels.

Government intervention is essential for stabilizing the economy and ensuring full employment.

The market tends to naturally achieve full employment and equilibrium without significant government intervention.

Inflation is primarily caused by excessive government spending and budget deficits

6.

Ethiopian Civil Service University’s’ business college decides to increase tuition fees aiming to get higher total revenue. This strategy will however work if the demand for education at that business college is

Price – inelastic demand

Perfectly elastic demand

Unit elastic demand

Price – elastic demand

7.

Among the following alternative which is TRUE about theory of cost.

Average variable cost is greater than average cost as output increase.

Average variable cost is the sum total of average cost and fixed cost

Average fixed cost increase as output decrease

Average fixed cost become zero if output increase in a greater proportion

8.

Indifference curves are convex to the origin because we assumed that two consumption goods are:

Perfect complements

Perfect substitutes

Imperfect substitutes

Unrelated

9.

A market structure in which characterized by the existence of few firms is called …

Pure monopoly Market

Perfectly competition Market

Oligopoly Market

Monopolistically competitive Market

10.

Food, salt and medicines are categorized under

Normal goods

Prestige goods

Inferior goods

Necessity goods

11.

All are an examples of positive economics EXCEPT

The policy maker have to suggest the government about quality of education

The government have to eradicate good governance problem in our country

Minimum wage laws causes unemployment

The government should increase the salary of civil servant

Given: The consumer buys 100 Kg of Teff and 20 liters of oil and 50 Kg of meat per year and assume that the price of these basket of goods in the different years, which is birr 20, birr 10 and birr 150 in 2010 E.C respectively and in 2011E.C the price becomes birr 25, birr10 and birr 200 respectively, then

12.

The Inflation rate between 2010 E.C and 2011E.C from the above given information is:

100%

131%

31%

50%

13.

Which of the following is True about stages of production?

In stage one (I) TP increase at decreasing rate

In stage one (I) MP is less than AP.

In stage two (II) MP is greater than AP

In stage two (II) TP increase at decreasing rate

14.

Which of the following statements best represents a difference between the classical and Keynesian schools of economic thought?

Both the classical and Keynesian schools advocate for minimal government intervention in the economy.

The classical school emphasizes that markets tend to reach full employment and equilibrium on their own, while Keynesian economics suggests that markets may remain in disequilibrium for prolonged periods.

Keynesian economics advocates for a laissez-faire approach to market regulation, while the classical school supports active government involvement in regulating prices and wages

The classical school asserts that aggregate demand is the primary driver of economic activity, whereas Keynesian economics emphasizes the significance of supply-sidepolicies

15.

All of the following are an example of explicit cost EXCEPT.

Lending rate of Bank

Expanse of transport and publicity

Rent of his own Building

Rent of factory Building

16.

Which of the following could be reason for decreasing return to scale (DRS)?

difficulty in management and coordination

great division of labor

The use of productive machinery

The use specialization man power

17.

From the following alternative which type of GDP truly reflect the performance and level of economic growth of in an economy.

Real GDP

Green GDP

Nominal GDP

GDP deflator

18.

Which of the following is Normative Economics?

The Ethiopian economy grew on average at an annual rate of 10% on the last 10 years

The global price of food items are increasing from time to time

The government should be minimize the macroeconomics problems in Ethiopia

The salary of teachers are less than the salary of Commercial Bank of Ethiopia employees

19.

Which of the following is the best measure of inflation?

Average Price Index

Producers Price Index

Wholesale Price Index

Consumer Price Index

20.

Suppose that Chaltu is a typist she does not know how to operate computer lost her job because a firm replaced all the typewriters by personal computers. Chaltu is a type of:

Structural Unemployment

Frictional unemployment

Disguised unemployment

Cyclical unemployment

21.

The two major service providers that help Ethiopia earn considerable foreign exchange compared to other service providers are

National Lottery and Ethio – Telecom

National Museum and Ethio - Telecom

National Museum and National Lottery

Ethiopian Air Line and Ethiopian Shipping Lines.

22.

Which one of the following curves shows the relationship between equilibrium quantities of two goods and the various levels of income?

demand curve

indifference curve (IC)

price consumption curve (PCC)

income consumption curve (ICC)

23.

Which of the following is True about production period?

In long run all inputs can be fixed

Short run refer to a production period less than one year

In short run fixed inputs can be changed

In the long run all inputs can be changed

24.

An externality is defined as:

An additional cost that is imposed by the government on producers.

A cost or benefit that arises from production and falls on someone other than the producer, or a cost or benefit that arises from consumption and falls on someone other than the consumer.

The additional amount that consumers have to pay to consume an additional amount of a good or service.

An additional gain received by consumers from decisions made by the government.

25.

Identify the wrong statement about production possibility curve (PPC)?

PPC curve is Convex to origin to indicate an decreasing opportunity cost

All points that lies inside PPC are attainable but inefficient

All points that lies on the PPC are both efficient& attainable

All points that lies outside the PPC are unattainable but desirable

26.

Individual demand and supply function for a commodity are given respectively as Qd = 1000 - 20P and Qs = 500 + 30P. What are the market equilibrium price (P) and equilibrium quantities (Q) respectively?

1000 and - 20

500 and 30

800 and 10

10 and 800

27.

A common access resource is:

Non-rival and non-excludable

Rival and non-excludable.

Non-rival and excludable.

Regulated and excludable.

28.

Which of the following is Not concern of macro economics?

It deals about the national income& product accounts.

It deals basic elements of demand, supply & elasticity.

It concerns about the international trade & balance of payment.

It concerns the government policy instruments.

29.

Ethiopia needs new economic policy reform because of the:

Poor economic performance due to corruption.

equitable distribution of income

high saving and investment rate

fast structural transformation

30.

One of the following is False regarding price elasticity?

Insulin is less elastic than coffee.

The longer time period is more elastic than short time period.

Salt is more price elastic than sugar.

Luxury goods are more price elastic than necessity goods.

31.

Which one of the following Business cycle phases have correct order?

Boom → Expansion → Depression → Contraction

Recovery → Peak → Recession → Trough

Peak → Trough → Recession → Recovery

Trough → peaks → Recession → Recovery

32.

Which one of the following is an example of economic resource?

Mountain stream

Wind

Time

Sun light

33.

The estimate total population of Ethiopia in the year 2009 E.C was 107,022,456. Out of this population 45% was below the age of 15 and 3% was above the age of 65. What was the Dependency Ratio (DR) in the year 2009E.C?

A. 48 %

52 %

100 %

92.3 %

34.

A simplified representation of a complex reality is called

Economic model

Economic law

Economic fact

Economic system

35.

Which one of the following is correct Ascending order of market structure based on its number of producers?

Monopolistically competitive → Pure monopoly → Perfectly competitive → Oligopoly

Oligopoly → pure monopoly → Monopolistically competitive → Perfectly competitive

Perfectly competitive → Monopolistically competitive → Oligopoly → pure monopoly

Pure monopoly → Oligopoly → Monopolistically competitive → Perfectly competitive

36.

The economic problem” what to produce” is a question of

the types of goods to be produced

the amount of goods to be produced

distribution of goods & services towards the customer

the technique of production

37.

Dissaving means:

that saving and investment are equal

the same thing as disinvesting

that households are spending more than their current incomes

that disposable income is less than zero

38.

Demand refers to:

the amount of goods consumers wants to buy

the amount of a commodity consumers are willing and able to buy at a given price

the amount of goods & services consumers are able to but not willing to buy

the amount of goods sellers offer for sale at a given price during a specific year.

39.

A firm’s total cost function is given by: TC = 300 + 6Q + 4Q2. When Q = 4 Units. What are the marginal cost (MC), average Variable cost (AVC) and average cost respectively?

38, 75 and 88 Birr per kilogram respectively

97, 22 and 38 Birr per kilogram respectively

300, 88 and 388 Birr per kilogram respectively

38, 22 and 97 Birr per kilogram respectively

40.

Which of the following products is most likely to be the most price elastic?

Medicine goods

Necessity goods

Luxury goods

Addicts goods

41.

A good that is rival and non-excludable is a:

Common resource.

Public good.

Private good.

Government good

42.

An increase in expected future income would:

increase today’s desired consumption

increase future consumption

lead to no change in consumption

decrease today’s desired consumption

43.

Which one of the following is not obstacle for the economic development of LDCs?

Corruption & lack of good governance

Vicious circle of poverty

Economic, political & social stabilities

Racism & conflict (war)

44.

A situation in which people are engaged in job but these job do not measure up to their capabilities, efficiency and qualifications.

Under employment

Disguised unemployment

Full employment

Unemployment

45.

The ability to produce a goods at a lower opportunity cost than another producers is called

Absolute advantage

Autarky

Free Trade

Comparative advantage

46.

Mercantilists are :

Recommended free international trade for all countries.

Recommended international trade based on the status of the trade balance.

Argue that international trade is not important for the development of a country.

Proposed that international trade should be based on the absolute advantage of economies.

47.

If a good is a public good,

No one can be excluded from enjoying its benefits.

Consumers must pay a high price to enjoy its benefits

Economies of scale exist over the entire range of output for which there is a demand.

Anyone can be excluded from enjoying its benefits.

48.

The recurrent up & downs movement of the level of economic activity over several years is

Inflation

Business Cycle

Unemployment

Budget Deficit

49.

The income earned by Chinese working in Ethiopia is:

Part of Ethiopia’s GDP

Part of China’s GDP

Part of Ethiopia’s GNP

Part of China’s Income to abroad

50.

Which of the following is a key assumption of perfectly competitive market?

There are barriers to enter the market

Firms can influence market price

Very large number of sellers and buyers

Commodities have few sellers

51.

One of the following is True about return to scale:

Under constant return to scale, a one unit increase in all inputs leads to more than on unit increase in output

Under decreasing return to scale , a one unit increase in all inputs leads to more than one unit increase in output

Under decreasing return to scale, a one unit increase in all inputs leads to more than one unit increase in output

Under increasing return to scale, a one unit increase in all inputs leads to more than one unit increase in output

52.

In monopolistic competition firm maximize profit at the level of output at which

Marginal Revenue (MR) = Average Cost (AC)

Marginal Revenue (MR) = Marginal Cost (MC) and MC is falling

Marginal Revenue (MR) = Average Revenue (AR)

Marginal Revenue (MR) = Marginal Cost (MC) and MC is raising

53.

Free riding can occur if a good is:

Non-excludable and Non-rival.

Non-excludable and Rival.

Excludable and Rival.

Excludable and Non-rival.

54.

In economic analysis, we often distinguish between private cost and social cost

Social cost=Private cost –External cost.

Private cost= Social cost +External cost.

Social cost=Private cost + External cost.

External cost= Social cost + Private cost

55.

Which of the following is True statement?

Cardinalist believe that utility can’t measure but can rank it.

Marginal utility is the same as total utility

Ordinalists believe that utility can’t measured in cardinal number but can rank it

Marginal utility is the sum of each total utility

56.

Ethiopia’s import goods and services are greater than its exports, as a result, Ethiopia is under:

Positive value of trade

Trade balance

Trade deficit

Favorable foreign trade

57.

A devaluation of the Ethiopian Birr may have inflationary consequences in the Ethiopian Economy mainly because it

Increase the costs of imported goods.

Increase the costs of export

Discourage exports

Decrease the international competitiveness of Ethiopian producers

58.

59.

According to absolute advantage theory of Adam Smith:

All countries should engage in international trade

International trade should take place only when countries have absolute advantage

Poor countries do have a strong potential to trade with rich countries

International trade should be regulated and there should be no free trade.

60.

The primary use of national income accounting is to

Present yearly data that can be understood only by accountants.

Measures the value of goods and services produced in an economy in a year.

Determine whether there is a fair and equitable distribution of income in an economy in a year.

Assess the economic efficiency of specific industries in an economy in a year.

61.

Duopoly is

A market structure where there are more than two sellers

A market structure where there are only two buyers

A market structure where there are many sellers

A market structure where there are only two sellers

62.

………...is imposed on selected goods such as luxury goods, Cigarettes and Alcohols.

Sur tax

Withholding tax

Stamp duties

Excise duties

63.

Which type of market structure makes normal economic (zero) profit in the long run?

Oligopoly Market

Perfectly Competitive Market

Monopolistically Competitive

Pure Monopoly Market

64.

Which of the following is NOT instruments of expansionary fiscal policy?

Expanding gov.t expenditure

Reduction of tax rates

Expanding monetary base.

Increase in subsidies

65.

Which of the following is True about the difference between nominal GDP and real GDP?

Nominal GDP is based on the current price, while real GDP is based on the current population.

Nominal GDP is computed on the basis of constant price, while real GDP is computed on the basis of current prices

Nominal GDP is based on constant price, while real GDP is based on constant population

Nominal GDP is computed on the basis of current price, while real GDP is computed on the basis of constant price

66.

What one the following is correct matched money payments for the factors of production?

Land → interest, labor → wage, capital → salary, entrepreneur → profit

Land → rent, labor → wage, capital → interest, entrepreneur → profit.

Land → wage, labor → interest, capital → rent, entrepreneur → profit.

Land → rent, labor → wage, capital → salary, entrepreneur → profit.

67.

In the expenditure approach, GDP equals

C+ Ig + G + (M + X)

C+ Ig + G + (M - X)

W/S + R + I + P + IBT + D

C +Ig +G + (X - M)

68.

An economy has a consumption function of C = 50 + 0.75Yd. Then, the economy’s saving function will be

S = 50 + 0.25Yd

S = -50 + 0.25Yd

S = -50 - 0.25Y_d

S = -50 + 0.75Y_d

69.

All are the possible reasons for the existence of huge investment takes place in Addis Ababa City Except one.

Addis Ababa has a better supply of skilled labor than other regions.

Addis Ababa has better infrastructure than other regions.

Addis Ababa has difficult door-to-door business than other regions

Addis Ababa is the capital city of Ethiopia, Africa and the home of AU.

70.

The total market value of all final goods and services produced during a year, by citizen of a country is known as:

Net National Product( NNP)

Net National Product(NNP)

Gross National Product(GNP)

Gross Domestic Product( GDP)

71.

When the annual inflation rate is increasing by the dual/ triple-digit, this inflation rate is called

Hyperinflation

Galloping inflation

Running inflation

Walking inflation

The following questions (71-75) are for Sighted Candidates Only

Use the following information to answer questions 71 – 72, (use expenditure approach method)

72.

Gross Domestic product (GDP) Gross national product(GNP) equals to:

Birr 381 Million & Birr 383 Million

Birr 357.6 Million & Birr 389.4 Million

Birr 404.4 Million & Birr 402.4 Million

Birr 394 Million & Birr 366 Million.

73.

Given the production function Q = L ² what is the average product of labor (AP_L) for

L= 5, and, the marginal product of labor (MP_L) between L = 5 and L = 6

AP = 5 and MP = 6

AP =5 and Mp = 5

AP = 6 and MP = 5

AP = 1 and MP = 5

74.

The profit maximizing output for the revenue function is R (Q) = 80Q - 2Q2 and cost Function is C (Q) = Q2 - 40Q + 200 is

10

40

30

20

75.

Based on the information given on question No 73, what is the maximum profit?

1000

200

800

-200

Answer Question No 75 based on the given information below, Suppose the production for a profit maximizing firm is given as TP = K^0.7 L^0.3,assuming the price of capital and labor are 28 birr and10 birr respectively and the budget of the firm is 4,000 birr.

76.

The equilibrium combination n of labor and capital respectively is…

120 and 100

28 and 10

100 and 120

10 and 28

Item 76 to 80 are to be attempted by visually impaired candidates only. (2Mark for each)

77.

Which of the following could be reason for decreasing return to scale(DRS)

The use specialization man power

Great division of labor

The use of productive machinery

Difficulty in management and coordination

78.

Among the following mathematical equation of consumption and saving which is WRONG written.

C + S = 1

APS=1-APC

APC+APS=1

MPC=1-MPS

79.

The underling concept of Economics is

Opportunity cost

Security

efficiency

Choice

80.

A closed economy (Autarky) does not allow

Sale of goods to government

Sale of goods to domestics Firms

Sale of goods to house hold

Sale of goods to other countries

81.

After the assessment and analysis made by different experts the Great Renaissance Dam of Abay (GRDA) will expect to generates:

6,450 MW

5, 520 MW

2,000 MW

1O, 000 MW

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