GABST COLLEGE OF DISTANCE EDUCATION UNIT

MICROECONOMICS (ECON 2161) FINAL EXAM

Name_______________________________ ID.No__________ Department______________Year_____ Term____

Part I: Write True if the statement is correct and False if the statement is incorrect on the space provided (1.5 pt each)

__________ 1. In microeconomics we study an individual, firm and a household.

__________ 2. Technological efficiency is achieved when resources are not wasted in production process.
__________ 3. If demand is price inelastic, then buyers do not respond much to a change in price
__________ 4. A positive gain from business after subtracting expenses is profit.
__________ 5. Market failure is the ability of a market to establish an equilibrium price.
__________ 6. For a monopoly firm, always “Price = average revenue”
__________ 7. If marginal costs are greater than average fixed costs, average fixed costs are rising as production increases.

__________ 8. If average total cost is decreasing in the short run Marginal cost is greater than average total cost
__________ 9. Total fixed cost is the fixed cost per unit of output.
__________ 10. Presence of close substitutes is one of the main features of pure monopoly market.
__________ 11. Presence of government intervention is one of the main features of perfectly competitive market.
__________ 12. Game theory is the theory that examines the choice of optimal strategies in conflict situations.

Part II: Choose the best answer from the given alternatives (1.5 pt.each)
______ 1. A normal good can be defined as one which consumers purchase more of as

A. Prices fall B. Prices rise

C. Incomes fall D. Incomes increase

______ 2. When demand for a good is inelastic, consumer expenditures on the good

A. Increase when price increases B. Decrease when price increases

C. Do not change when price increases D. Are not related to price elasticity of demand
E. Are relatively more elastic

______ 3. A single seller or producer having the control over the market is called as
A. Perfect Competition B. Monopoly
C. Monopolistic Competition D. Oligopoly

______ 4. Change in total costs associated with one more unit of output is known as
A. Total variable cost B. Total fixed cost
C. Total cost D. Marginal cost.

______5. Perfect competition occurs in a market where there are

A. A few firms producing identical goods. B. A few firms producing goods that differ somewhat in quality.

C. Many firms producing identical goods. D. Many firms producing goods that differ somewhat.

_____6. At a firm break-even point, definitely it’s

A. Total revenue equals its total opportunity cost. B. Marginal revenue exceeds its marginal cost.

C. Marginal revenue equals its average variable cost. D. Marginal revenue equals its average fixed cost.

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_____ 7. Name the market structure in which many companies sell products that are similar but not identical. 

A. Monopoly B. Traditional system

C. Oligopoly D. Monopolistic competition

______ 8. The desire to own something and the ability to pay for it called __________. 

A. Demand B. Capital
C. Allocation D. Opportunity cost

______ 9. The full-production level of our economy implies                         .

A.  An efficient allocation of our resources B.  Zero unemployment

C.  Our plant and equipment being operated at 100% capacity D.  A high unemployment rate

______ 10. If we are operating inside our production possibilities curve

A. There is a recession going on B. There is NOT a recession going on

C. There is less than full employment D. There is inflation

Part III: Match with best alternatives (1.5 pt.each)

Match- I
_______1. Marginal Profit
_______2. Marginal Cost
_______3. Perfect Competition
_______4. Pure monopoly
_______5. Substitute goods
_______6. Giffen goods
_______7. Ceteris paribus
_______8. Complement goods
_______9. Normal good
______10. Subsidy
______11. Opportunity cost
______12. Black market
Match- II
A. Price maker
B. A good used in conjunction with another good
C. Illegal market
D. Many buyers and many sellers
E. When price falls, demand decrease
F. Extra benefit of adding one unit
G. All else equal
H. Demand increase as income increase
I. The highest-valued alternative that we give up to get something
J. Cost of producing one more unit
K. A payment made by the government to a producer
L. Juice and cold drink

Part IV: Fill the space provided (1.5 pt.each)

1. _________________ is goods having negative income elasticity.

2. _________________ is a measure of satisfaction an individual gets from the consumption of the commodities.
3. _________________ is an institution that brings buyers and sellers together.
4. _________________ is the act of creating goods/services which have exchange value for sale.
5. _________________ is a curve that shows all possible efficient combinations of inputs that can yield equal level of output.
6. ___________________________ is the blend of competition and monopoly.
Wishes all the best
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