Addis Ababa University

Department of Economics
___________________________________________________________
Mid-term Exam for the Course Introduction to Economics (Econ 1011)
Max. Marks: 30% Time allotted: 1 hour Date: March , 2024
Name: __________________________ dep’t______________ ID No. ___________Section: _______
General Instructions!!
 Write your name and ID No. on the space provided in above and in the answer sheet!
 Put your answers on the answer sheet provided only!
 Using mobile, lecture note and any paper during exam is strictly forbidden!
 Any attempt of cheating will result “zero” grade!
 No need of circling answers in multiple-choice part!
Part – I write True if the statement is correct, and false if the statement is incorrect on the answer sheet provided
(1 Point each)
1. Scarcity of resources created three major problems that only poor society faces; these economic
problems are what, how and for whom to produce.
2. Production possibility frontiers are concave to the origin due to the law of increasing opportunity cost
3. When an increase in the price of one good lower the demand for another good, the two goods are
called complements
4. An increase in the price of pizza will shift the demand curve for pizza to the left
5. Necessity goods tend to have inelastic demands, whereas luxuries have elastic demands
6. If price of a good falls, the supply curve will shift to the left

Part-II Multiple Choices: choose the best alternative for each of the following questions and write on the space
provided (1 points each)
1. A percentage change in quantity demanded divided by a percentage change in price is called
A. Income elasticity of demand C. Price elasticity of supply
B. Price elasticity of demand D. Elasticity of substitution
2. Which one of the following is not correct about the elasticity of demand?
A. The cross–price elasticity of demand for unrelated goods is zero
B. Point price elastic of demand for luxury good is greater than one
C. Income elasticity of demand for inferior good is positive
D. Point price elastic of demand for necessity good is positive but less than one
3. Which determinant of demand shifts the demand curve of the commodity to the right?
A. A decrease in price of substitute goods C. Higher future price expectation
B. A decrease in income D. An increase in price of complementary goods
4. Which one of the following is true about the Production Possibility Frontier (PPF)?
A. Any point inside the PPF suggests that resources are being utilized efficiently but not attainable.
B. Any points outside the PPF curve are efficient and attainable with the current level of resources.
C. Any point outside the PPF suggests that resources are not being utilized efficiently but attainable.
D. All points on the PPF are attainable and efficient with the current level of resources.
5. When the price of a commodity falls from Birr 10 per unit to Birr 9 per unit, its quantity supplied falls
by 20%. The price elasticity of supply is:
A. 4 B. 1.5 C. 2 D. 10

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6. Which one of the following statements cannot be an example of positive economics?
A. Increasing money supply leads to higher prices.
B. What will be the effect of higher cigarette taxes on the number of smokers?
C. The current inflation rate in Ethiopia is 16 percent
D. Females ought to be given job opportunities.
7. Which of the following best defines fiscal capital as a factor of production?
A. The gifts of nature that businesses use to produce goods and services.
B. The knowledge and skills that people obtain from education and use in production of goods and
services.
C. Financial assets used by businesses
D. Instruments, machines, and buildings used in production
8. Which of the following statements is correct?
A. If demand increases and supply decreases, equilibrium price will fall.
B. If supply increases and demand decreases, equilibrium price will fall.
C. If demand decreases and supply increases, equilibrium price will rise.
D. If supply declines and demand remains constant, equilibrium price will fall
9. A movement along a demand curve can be caused by a change in______?
A. Income of a consumer C. The price of related goods
B. Own price of a product D. Taste and preference of the consumer
10. If the demand function for a certain commodity is given by Q = 10 – 0.2P, where Q is the quantity
demanded of the commodity and P is the price of the commodity, what is the price elasticity of
demand when price is equal to 10 birr per unit?
A. Inelastic C. Elastic
B. Perfectly inelastic D. Unitary elastic
11. When ETHIOPIA builds a dam using few machines and a great deal of labor, it is answering the
________ part of one of the three big economic questions.
A. ʺwhatʺ B. ʺhowʺ C. ʺwhereʺ D. ʺfor whomʺ
12. Which of the following is an example of movement along a supply curve?
A. The quantity of apples offered for sale increases as the price of apples rises.
B. An apple orchard burns down in an accidental fire, decreasing the number of suppliers on the
market.
C. Thanks to good weather conditions, apple growers enjoy a bumper crop this year.
D. The price of fertilizer increases, making it more expensive to produce apples.
13. Which of the following is an opportunity cost of attending college?
A. Poor examination results C. Your degree awards
B. Income you might earn doing something else D. None of the above
14. One of the following correctly predicts the situation when a market price is set below the market
equilibrium price. Which one?
A. Excess demand exists, which will create upward pressure on the price
B. Excess supply exists, which will create downward pressure on the price
C. Surplus exists, which will create upward pressure on the price
D. Shortage exists, which will create downward pressure on the price

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15. A branch of economics that study economics at the household, firm and industries level is:
A. Microeconomics C. Development economics
B. Macroeconomics D. Political Economics
16. All combinations above production possibility curve are
A. Unattainable due to unlimited resource
B. Unattainable due to limited resource
C. Attainable due to available resources
D. Attainable but inefficient use of resource
17. If cross elasticity of demand is negative, goods are_____.
A. Complementary C. Not related
B. Substitutes D. Competitive
18. Which of the following is not covered within microeconomics is
A. the behavior of households C. the purchasing decisions of a consumer
B. the pricing decisions of a firm D. National income of a country

part III: Work out Questions (Show All Steps of Calculation Clearly)
Qs
1. Given market demand: Q d =25−0.5 p and market supply P= +10:, where “Q” is quantity, and
2
“P” is the price of the product:
a. Calculate the market equilibrium price and quantity (2 points)
b. Determine, whether there is surplus or shortage at P= 30 and P= 40. (2 points).
c. Find the elasticity of demand at equilibrium and interpret your result. (2points)

Answer Sheet for Part-I & Part-II

Name----------------------------------------------ID-----------------------section……… dept’________

True/False Multiple choice

1. 1. 7. 13.

2. 2. 8. 14.

3. 3. 9. 15.

4. 4. 10. 16.

5. 5. 11. 17.

6. 6. 12. 18.

Note: for the workout part you may use the back space

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