1.

The measurement of economic data:

A. mathematical
B. econometrics
C. business
D. statistics
Answer: B
2. An identity between two alternative:
A. behavioral
B. definitional
C. conditional
D. none
Answer: B
3. The relationship between the price of the commodity and quantity of the
commodity demanded :
A. supply
B. demand
C. elasticity
D. none
Answer: B
4. The relation of Price and quantity demanded:
A. negative
B. positive
C. no relation
D. none
Answer: B
5. The relationship between the price of the commodity and quantity of the
commodity supplied:
A. demand
B. equilibrium
C. supply
D. none
Answer: C
6. The wants satisfying power of a commodity:
A. consumption
B. saving
C. utility
D. interest
Answer: C
7. Consumption function is given C = 35 + .4 Yd , find MPC:
A. .4
 B. .6
C. .8
D. .7
Answer: A
8. The relationship between income and consumption:
A. consumption
B. saving
C. investment
D. none
Answer: A
9. The transformation of physical inputs in to physical outputs:
A. production
B. consumption
C. distribution
D. investment
Answer: A
10. The difference between total revenue and the total Cost:
A. cost
B. income
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C. profit
D. revenue
Answer: C
11. MPS + MPC =?
A. 2
B. 0
C. 1
D. 3
Answer: C
12. The difference between the present level of income and the past level of income:
A. saving
B. consumption
C. investment
D. none
Answer: C
13. The first derivative of the consumption function is:
A. marginal revenue
B. marginal cost
C. marginal propensity to consume
 D. none
Answer: C
14. Revenue function TR = 22x²+14, find Marginal revenue?
A. 44x
B. 40x
C. 22x
D. 54x
Answer: A
15. The addition to total cost:
A. mc
B. ac
C. tc
D. none
Answer: A
16. The proportionate change in quantity demanded and the proportionate change
in price is:
A. price elasticity
B. income elasticity
C. cross elasticity
D. none
Answer: A
17. MRSxy is equal to:
A. mux/muy
B. mpx/mpy
C. mrts
D. none
Answer: A
18. Marginal rate of technical substitution is equal to:
A. mux/muy
B. mpl/mpk
C. mrsxy/mrs
D. mrx/mry
Answer: B
19. The ratio of the proportionate change in the quantity purchased of a good to
the proportionate change in income:
A. price elasticity
B. income elasticity
C. cross elasticity
D. none
Answer: B
20. An increase in income lead to the increase in quantity demanded of the good:
A. negative good
B. positive good
C. superior good
D. normal good
Answer: C
21. The relationship between quantity demanded of a good and level of consumer’s
income:
A. engel function
B. consumption function
C. saving function
D. none
Answer: A
22. The proportionate change in quantity demanded by a good due to
proportionate change in the price of the other good:
A. price elasticity
B. income elasticity
C. cross elasticity
D. demand elasticity
Answer: C
23. Given the utility function U = 5x²+12x, find Marginal utility:
A. 5+12
B. 10x+12
C. 12x 10
D. 10x +12x
Answer: B
24. The first order derivative of Total Utility:
A. mu
B. tu
C. au
D. none
Answer: A
25. The transformation of physical inputs in to outputs:
A. production function
B. consumption function
C. saving function
D. none
Answer: A
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26. The intercept term,?1, is absent in.................. model.
A. regression through the origin
B. lin log model
C. log lin model
D. ols model
Answer: A
27. The lin log model and log lin model are ............. in parameters.
A. non linear
B. linear
C. functional
D. dependent
Answer: A
28. r2 in intercept less model is.... .............. negative.
A. always
B. sometimes
C. never
D. cannot say
Answer: B
29. The slope coefficient ,?2, of ............ model measures elasticity of Y with respect
to X.
A. regression through the origin
B. log log model
C. log lin model
D. clrm
Answer: B
30. . ....................... is a growth model.
A. alinear trend model
B. lin log model
C. log lin model
D. none of the above
Answer: A
31. In regression through the origin model, ......................... is absent.
A. the intercept term ,?1
B. the slope coefficient ,?2
C. error term
D. explanatory variables
Answer: A
32. Econometrics is concerned with
A. empirical support to economic theory
B. quantitative analysis of economic data
 C. use of tools of mathematics and statistical inference
D. all of the above
Answer: D
33. Which of the following is the combination of economic theory, mathematical
economics and economic statistics
A. econometrics
B. statistics
C. mathematics
D. quantitative economics
Answer: A
34. The first step in traditional econometric methodology is
A. statement of theory
B. forecasting
C. obtaining data
D. estimation of the model
Answer: A
35. Which of the following discipline express the economic theory in mathematical
form
A. econometrics
B. statistics
C. mathematics
D. mathematical economics
Answer: D
36. Keynes postulated ----- relationship between income and consumption
A. negative
B. positive
C. non linear
D. infinite
Answer: B
37. In the function, Q= ?+?P, the slope coefficient is
A. ?
B. ?
C. p
D. q
Answer: B
38. In the Keynesian linear consumption function Y=?1+?2X, Y represents
A. income
B. consumption expenditure
C. output
 D. price
Answer: B
39. In the Keynesian linear consumption function Y=?1+?2X, ?1 is
A. slope coefficient
B. intercept coefficient
C. output coefficient
D. none of the above
Answer: B
40. In the Keynesian linear consumption function Y=?1+?2X, the parameters of the
model are
A. ?1and ?2
B. . ?1and x
C. x and y d. y and D. ?2
Answer: A
41. In the Keynesian linear consumption function Y=?1+?2X, the marginal
propensity to consume is
A. ?1
B. x
C. y
D. ?2
Answer: D
42. if the model has only one equation, the model is called
A. single equation model
B. multiple equation model
C. variable equation model
D. none of the above
Answer: A
43. if the model has more than one equation, the model is called
A. single equation model
B. multiple equation model
C. variable equation model
D. none of the above
Answer: B
44. In the Keynesian linear consumption function Y=?1+?2X, the dependent
variable is
A. ?1
B. x
C. y
D. ?2
Answer: C
45. In the Keynesian linear consumption function Y=?1+?2X, the explanatory
variable is
A. ?1
B. x
C. y
D. ?2
Answer: B
46. the variable appearing on the left side of the equality sign is called
A. dependent variable
B. independent variable
C. explanatory variable
D. none of the above
Answer: A
47. In conventional model r2 is .............. negative.
A. always
B. sometimes
C. never
D. cannot say
Answer: C
48. the variable appearing on the right side of the equality sign is called
A. independent variable
B. explanatory variable
C. all of the above
D. none of the above
Answer: C
49. independent variables are also known as
A. explanatory variables
B. dependent variable
C. implicit variable
D. static variable
Answer: A
50. which is the explanatory variable in the Keynesian consumption function
A. income
B. consumption
C. price
D. output
Answer: A
51. If marginal revenue is Rs.25/- and elasticity of demand w.r.t price is 2, then the
average revenue is
A. 50
 B. 25
C. 75
D. 100
Answer: A
52. Cost is a function of
A. price
B. revenue
C. quantity
D. none of these
Answer: C
53. An example of fixed inputs of production is
A. land
B. organisation
C. both a and b
D. none of these
Answer: C

54. Total variable cost plus total fixed cost gives

A. total cost
B. average cost
C. marginal cost
D. none of these
Answer: A
55. Marginal cost of a function c = f(g) is
A. dc/dq
B. f\(q)
C. both a and b
D. none of these
Answer: C
56. The ratio of total cost to the quantity produced is called
A. average cost
B. marginal cost
C. total variable cost
D. none
Answer: A
57. Sum of explicit cost and implicit cost gives:
A. total cost
B. average cost
C. marginal cost
 D. none of these
Answer: A
58. For a unitary elastic supply curve, p s is
A. less than 1
B. more than 1
C. equal to 1
D. zero
Answer: C
59. Cross price elasticity may not always be
A. symmetrical
B. asymmetrical
C. both a and b
D. none
Answer: A
60. Luxury goods are:
A. price inelastic
B. price elastic
C. both a and b
D. none
Answer: B
61. If close substitutes are available, then the elasticity of demand will be
A. low
B. moderate
C. high
D. optimum
Answer: C
62. The relationship between supply and price is
A. negative
B. perfect
C. positive
D. none
Answer: C
63. The relationship between demand and price is
A. positive
B. negative
C. perfect
D. none
Answer: B
64. A given percentage change in price results in an equal percentage change in
sales, indicates:
 A. unitary price elasticity
B. inelastic price elasticity
C. elastic price elasticity
D. none
Answer: A
65. What is the order of differential equation = 10x + 5
A. first
B. second
C. third
D. fourth
Answer: A
66. A line for linear equation should begin from
A. origin
B. x axis
C. y axis
D. any of the above
Answer: D
67. Functional relationship between input and output is called
A. isoquants
B. isocost
C. input function
D. production function
Answer: D
68. Law of variable proportion explainsfor
A. short run
B. long run
C. medium run
D. none
Answer: A
69. In CES production function, the elasticity of substitution is
A. unity
B. zero
C. negative
D. constant
Answer: D
70. The highest power to which the derivative of highest order is raised in
differential equation is called.
A. trace
B. order
C. degree
 D. transpose
Answer: C
71. MRTS is the slope of
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A. production function
B. priceline
C. isocostline
D. isoquant
Answer: D
72. Second stage in return to scale is called
A. increasing returns
B. diminishing returns
C. constant returns
D. negative returns
Answer: C
73. Slope of Total product Curve is called
A. mp
B. ap
C. tc
D. mc
Answer: A
74. For a function y=f(x), x1>x2 ?f(x)1> f(x2) says that the function is
A. increasing
B. decreasing
C. constant
D. none of these
Answer: A
75. The points at which a curve is neither increasing not decreasing is called
A. turning point
B. stationery points
C. both a and b
D. none of these
Answer: C
76. The objects constituting a set are called
A. estimates
B. elements
C. set objects
D. none of these
Answer: A
77. Who is regarded as the founder of theory of sets?
A. adam smith
B. karl frederich gauss
C. george cantor
D. euller
Answer: D
78. A collection of well-defined distinct objects thought of as a whole is called
A. union
B. derivative
C. set
D. integral
Answer: C
79. “No two elements of a set are identical”. This statement is
A. always true
B. sometimes true
C. not true
D. all of the above is possible
Answer: B
80. A set containing no element is called
A. null set
B. empty set
C. void set
D. all the above
Answer: D
81. A set containing only one element is termed as
A. unit set
B. singleton set
C. both (a) and (b)
D. none of these
Answer: C
82. A set of totality of elements from all possible sets is called
A. union set
B. intersection set
C. universal set
D. unit set
Answer: C
83. If two sets contain the same distinct elements, then they are called
A. equal sets
B. unequal sets
C. equivalent sets
 D. all the above
Answer: A
84. If two sets contain same number of distinct elements but not the same elements
are called
A. equal sets
B. unequal sets
C. equivalent sets
D. all the above
Answer: B
85. Sets and set operations can be represented by drawing diagrams termed as
A. pie diagrams
B. venn diagrams
C. histogram
D. ogives
Answer: B
86. If every element of a set B is also an element of A, then
A. a is a subset of b
B. b is a subset of a
C. a is not a subset of b
D. b is not a subset of a
Answer: B
87. In Venn diagram, the universal set is represented by
A. points within a rectangle
B. points within a circle
C. both (a) and (b)
D. none of these
Answer: A
88. “Null set is a proper subset of all the non-null sets”. This statement is
A. always true
B. sometimes true
C. never true
D. true subject to some conditions
Answer: A
89. The set which contains all the elements of the two given sets A and B, avoiding
duplication, is called
A. intersection of a and b
B. union of a and b
C. set of a and b
D. none of these
Answer: B
90. Union of A with A, that is, A U A =
A. complement of a
B. a itself
C. cannot be determined
D. none of these
Answer: B
91. Union of A and the universal set is
A. a
B. a’
C. universal set
D. none of these
Answer: C
92. Union of A and a null set is equal to
A. intersection of a and null set
B. null set
C. both (a) and (b)
D. a
Answer: D
93. Union of A with B is same as union of B with A, that is, A U B = B U A is
termed as
A. associative law of union
B. cumulative law of union
C. reflective law
D. all the above
Answer: B
94. The associative law of union is
A. a u (b u c) = (a u
B. u c = a u b u c (b) a u b = b u a
C. a u b = a u c
D. b u c = b u a
Answer: A
95. If B is a subset of A, then A U B =
A. b
B. a
C. intersection of a and b
D. none of these
Answer: A
96. If a set C contain all the elements which are present in both the sets A and B,
then set C is called
A. union of a and b
 B. intersection of a and b
C. complement of a
D. complement of b
Answer: B
97. If two sets do not have any common element, then they are called
A. complement sets
B. joint sets
C. disjoint sets
D. none of these
Answer: C
98. A set containing all the elements of the universal set except those of set A is
called
A. complement of set a
B. complement of universal set
C. union of a and universal set
D. universal set itself
Answer: A
99. The set of all elements belonging to A but not to B is
A. b – a
B. a – b
C. a’
D. b’
Answer: B
100. The set of all subsets of a set A is called
A. power set of a
B. complement of a
C. both (a) and (b)
D. none of these
Answer: A
101. Given the marginal revenue function MR = 520 - 3Q 0.5 , find the corresponding
demand function and total revenue function.
A. 40,000 units and 4, 800,000 Birr
B. 2,000 units and 4, 800,000 Birr
C. 40,000 units and 800,000 Birr
D. 10,000 units and 4, 800,000 Birr
Answer: A
102. Suppose the marginal propensity to consume (MPC) out of income for the economy
as a whole is given as 4 5 and it is known that when income is zero, consumption is
 equal to 12 billion Birr. Find the function which relates aggregate consumption to
national income. Find the aggregate saving function of the economy.
A. C= (4/5) Y +12 and S = (1/5) Y -12
B. C= (2/5) Y +10 and S = (1/5) Y -12
C. C= (4/5) Y +12 and S = (4/5) Y -12
D. C= (4) Y +12 and S = (5) Y -12
Answer: A
103. A firm faces anon - linear demand function P = ( 650 - 0.25q) 1.5 .Determine the
marginal revenue (MR) function of this firm.
A. MR = (650 - 0.25q) 0.5
B. MR = (65 - 0.25q) 0.5 (50 - 0.625q)
C. MR = (650 - q) 0.5 (650 - 0.625q)
D. MR = (50 - 0.25q) 0.5 (650 - 0.625q)
Answer: A

The market demand and market supply functions under perfect competition are given as
P= 16 - Q 2 and P = 2 Q 2 + 4 respectively. Find the producer's surplus.

32 units
A. 3
B. 33units
C. 24units
D. 16units
Answer: A
104. A firm is a monopoly seller of good q and faces the demand schedule P = 200 - 2q,
where p is price in birr and the short run production function is given as q = 4L0.5
Determine the marginal revenue productivity of labor (MRP L ) function.
A. MRPL = 400 – 32L 0.5

L 0.5

B. MRPL = 400 – 32L 0.5

C. MRPL = 400 – L 0.5

L 0.5

D. MRPL = 40 – L 0.5

L 0.5

Answer: A
105. Suppose a company whose annual sales are currently 500,000 Birr has been
experiencing sales increase by 20% per year. Assuming this rate of growth continues,
what will be the total sales of the company in five years time?
A. 4,295, 694 Birr
B. 4,295, 694 Birr
C. 4,295, 694 Birr
D. 4,295, 694 Birr
Answer: A
106. A firm faces the production function Q= 12K 0.4 L 0.4 and assume it can purchase K
and L at pries per unit of 40 birr and 5 Birr respectively and it has a budget of 800
Birr. Determine the amount of K and L which maximizes output.
A. K=10 and L= 80
B. K=10 and L= 40
C. K=10 and L= 20
D. K=5 and L= 10
Answer: A
107. Suppose the utility function of the consumer is given by U  4 xy  y 2 and the budget
constraint is 2x+y = 6. Determine the amount of x and y which will optimize total
utility of the consumer.
A. 2 units of good x and 2 units of good y.
B. 4 units of good x and 2 units of good y.
C. 3 units of good x and 3 units of good y.
D. 3 units of good x and 2 units of good y.
Answer: A
108. Suppose a firm produces an output Q using labor L and capital K with production
function Q  10K 0.5 L0.5 . If the output is restricted to 200 units, price of labor is 10 birr
per unit, the price of labor is 10 birr per unit and Price of capital is 40Birr per unit,
and then determines the amount of L and K that should be employed at minimum
cost. Find the minimum cost.
A. K = 10 and L = 4(10) = 40,  = 4, Min. C = 800 birr
B. K = 10 and L = 4(10) = 40,  = 4, Min. C = 800 birr
C. K = 10 and L = 4(10) = 40,  = 4, Min. C = 800 birr
D. K = 10 and L = 4(10) = 40,  = 4, Min. C = 800 birr
Answer: A
109. Given the revenue and cost conditions of a firm as R  32x  x 2 and C  x 2  8 x  4 ,
where x output is. Suppose the minimum profit is  0  18 .Determine the amount of
the output which maximizes revenue with the given minimum profit. In this case, the
revenue function is concave and the cost function is convex.
 The Problem is

Maximize R  32x  x 2

Subject to x 2  8 x  4  32x  x 2  18

And x  0

A. revenue is maximized when x  8

B. revenue is maximized when x  11
C. revenue is maximized when x  12
D. revenue is maximized when x  10
Answer: A
110. Given the demand function Q d = 24 -2p

The supply function Q s = - 5 + 7 P

What happens to the equilibrium price P when  1 increases from 24 to 25 other things
being equal?

29 30
A. The equilibrium price increases from 9 to 9
29 30
B. The equilibrium price increases from 9 to 9
29 30
C. The equilibrium price increases from 9 to 9
29 30
D. The equilibrium price increases from 9 to 9
Answer: A
111. The point price elasticity of demand (ep) for a certain commodity can be denoted
except?
A. ep = ( )

B. ep = ( )
C. ep =

D. ep =

Answer: B
112. Given the total utility function for a single commodity U =f(X) which one of the
following is/are necessarily true.
A. MUX=
B. MUX=0 when U is maximum
C. MUX>0 when U is raising
D. MUX<0 when U is diminishing
E. All
Answer: E

113. The short run relationship b/n APL and MPL can be
A. APL-MPL=L*
B. APL-MPL=
C. APL+MPL=
D. MP- APL=L*
Answer: A
114. The short run relationship b/n AC and MC can be
A. AC-MC=Q*
B. AC+MC=Q*
C. AC+MC=
D. AC+MC=Q*
Answer: A

115. The average cost minimizing level of output and the minimum Average cost for the
average cost function AC=25q-1+0.1q2
A. q=5 and AC= 7.5
B. q=3 and AC= 7.5
C. q=6 and AC= 5
D. q=2 and AC= 10
Answer: A
116. What is the profit maximizing level of output for a firm with the total cost function
C=4+97q-8.5q2+1/3q3 and the total revenue function R= 5q-0.5q2
A. q=13
B. q=3
C. q=10
D. q=13 and 3

Answer: A
117. Given the total revenue function TR =f(Q) for a perfectly competitive seller which
one of the following is/are necessarily true.
A. MR=0 when TR is maximum
B. MR=MC when π is maximum under F.O.C
C. <0 when π is maximum under S.O.C
D. All
Answer: E
118. A firm uses 200,000 units of component in a year ,with demand evenly spread over
the year.in addition to the purchase price ,each order placed for a batch of component
costs birr 80. Each nits held in stock over a year costs birr 8.what is the optimum
order size?
A. 2000 units
B. 1000 units
C. 20,000 units
D. 10,000 units

Answer: A

119. For a non-linear demand function P= 1,800-0.6q2 and the corresponding marginal
revenue function MR=1,800-1.8 q2, then what is TR when q=10 units?
A. €17,400
B. €17,000
C. €15,000
D. €14,400
Answer: A
120. Referring Q,123 what is the change in TR when q increases from 10 units to 20
units?
A. €13,800
B. €12,400
C. €8,000
D. €13,400
E. Answer: A
121. Referring Q,123 the consumer surplus when q=10 units
A. €400
B. €800
C. €600
D. €200

Answer: A

122. Given the following national income mode,

 Y = C+ I 0 + G 0

C = 50 + 0.6 (Y-T)

T = 30 + 0.3Y

I 0 = 20

G 0 = 15

Then  , C and T are respectively.

A. Y  115.5 , C  80.52 and T = 64.65

B. Y  115.5 , C  80.52 and T = 64.65
C. Y  115.5 , C  80.52 and T = 64.65
D. Y  115.5 , C  80.52 and T = 64.65
Answer: A
123. In a simple Keynesian macroeconomics model with no government sector and
foreign trade, it is assumed that
Y = C+ I

C = a + by where, a>0, 0<b<1 i.e b=MPC

Then, the rate of change of national income in response to an increase in exogenously

determined investment (the result of multiplier) can be.

A. =
B. =
C. =
D. =
Answer: A
124. Investment can best defined mathematically
A. ( )
B. ( )
C. ( )
D. ( )
Answer: A