Bright College

Course: Micro- Economics Assignment

I. Choose the best answer for the following questions.

1. Which of the following is not a feature of a capitalistic economy?

A. right to private property
B. maximum social welfare
C. freedom of enterprise
D. inequality of income
2. Which of the following is not a feature of a command economy?
A. right to private property
B. collective ownership
C. central economic planning
D. maximum social welfare
3. A closed economy does not allow:
A. Sale of goods to households B. sale of goods to government
C. sale of goods to other countries D. sale of goods among different business firms of
the country
4. Demand reflects the quantity that consumers:
A. want at alternative prices.
B. need at alternative prices.
C. are willing and able to buy at alternative prices.
D. can buy at alternative prices.
5. A price change:
A. affects the consumer’s ability to buy the good.
B. affects the consumer’s willingness to buy the good.
C. changes the tastes of consumers.
D. all of the above.
6. Which one of the following is not held constant in defining the demand schedule?
A. income C. Prices of the good in question
B. prices of related goods D. Number of consumers

7. A movement along a demand curve can be caused by a change in:

A. income C. expectation about future prices
B. the price of a substitute or complement D. the price of the good in question
8. Any point lying on a production possibility curve indicates:
A. inefficient utilization of resources
B. full utilization of resources
C. unattainable combination of goods to be produced
D. none of these
9. A production possibility curve is:
A. a horizontal straight line
B. a vertical straight line
C. an upward sloping curve
D. a downward sloping curve

10. The process of using different factors of production in order to make goods and services
available is known as:

A. Investment C. Consumption
B. Production D. Resource
11. Any good or service that comes out of a production process is known as:
A. Output C. Labour
B. Input D. Economic resource
12. When the short-run average product of labour is declining but positive, the marginal
product of labour is:
A. Negative C. Zero
B. Declining D. Any of these is possible
13. When the short-run marginal product of labour is greater than the average product of
labour:
 A. APL is increasing C. APL is equal to zero
B. APL decreasing D. None of these
14. When the short-run, MPL is negative:
A. TP is also negative C. TP is rising at a constant rate
B. TP is declining D. TP is rising but at a diminishing rate
15. Suppose the average product of 6 workers is 150 units of a good and that of seven
workers are 170 units. The MP of the seventh worker equals:
A. 200 B. 270 C. 290 D. 220
16. Price competition is usually found in:

A. Oligopoly C. Perfect competition

B. Monopolistic competition D. All of the above

17. In the short run, a perfectly competitive firm maximizes its profit if:

A. TC is less than TR C. MR = MC = AR and MC is falling

B. MR = MC = AR and MC is rising D. A and C

II. Write true if the statement is correct and false if the statement is incorrect for the
following questions.

1. Macroeconomics deals with the behavior of individual economic units.

2. Microeconomics is also known as the theory of income and employment.
3. Demand refers to the amount of commodity which an individual buyer is willing and able
to buy at a given price and during a given period of time which includes a mere desire of
wanting to purchase.
4. The deductive method involves a movement from general to particular.
5. Normative economics involves value judgments.
6. Economic laws are not permanent and general.
7. Land is an example of a free resource and it is a private property in Ethiopia.
8. By labour, we mean only the physical labour involved in the production of goods and
services.
 9. The demand curve for the product of a monopolist is the same as the demand curve for
the industry.
10. The minimum acceptable long-run price is that price which equals the minimum ATC of
production.
11. Under monopoly, the sale of an additional unit increases total revenue by the price of that
unit.
12. In economics, normal profit is not considered as cost.
13. The monopolist’s power is unlimited because he/she can determine both price and
quantity at the same time.
14. Under perfect competition, an equilibrium price is one where P = MC.
15. The demand curve for a firm under perfect competition is downward sloping.
16. The law of demand expresses the functional relationship between the price of a
commodity and its quantity demanded in which price and demand are observed to be
inversely related.
17. All markets with many sellers and many buyers are perfectly competitive.
18. A change in price of coffee may affect the demand for tea.
19. The demand for sugar may increase due to an increase in population.
20. A decrease in supply refers to a rightward shift in supply curve.
21. The only factor that can cause a change in quantity demanded is the price of the
commodity.
22. Giffen goods are a special category of inferior goods.
23. A rise in the price of normal goods leads to a fall in quantity demanded.
24. A change in income causes a change in quantity demanded.
25. An increase in demand leads to a fall in equilibrium price.

III. Write detailed answers to the following questions.

1. How has economics been defined in modern times? As part of your answer and describe
the nature of economics. Should it be treated as a science or an art?
2. What do you understand by microeconomics and macroeconomics? Discuss the major
concerns, components and analytical tools of each of them.
3. When is the market said to be in a state of equilibrium?
4. If nothing is supplied, even at a marginally reduced price, what will be the elasticity of
supply?
5. When supply remains unchanged, what is the effect of change in demand on price?
6. Describe the four categories of economic resources.
7. Discuss the concept of opportunity cost and explain how opportunity cost can be
calculated.
8. What is monopoly? Explain the important characteristics of monopoly markets and state
the main reasons for the existence of monopoly.
9. What is capitalism? Describe its main features. What are the merits and problems of
capitalistic economy?
10. Discuss the basic characteristics of a command economy and mention its major
advantages and disadvantages.
 Answer Sheet

I. Choose

1. _____ 2. ______ 3.______ 4. ______ 5. ______ 6. _______ 7. _______ 8. _______

9. ______ 10. _______ 11. _______ 12.________ 13._______ 14.________ 15._______ 16._____

17. ________

II. True/False

1. ____________ 2. ___________ 3. __________ 4. __________ 5. ____________

6. ____________ 7. ___________ 8. ___________ 9. ___________ 10. ____________

11. ____________ 12. ___________ 13. _________ 14. __________ 15. ____________

16. _____________ 17. __________ 18. __________ 19. ___________ 20. ___________

21. ____________ 22. _____________ 23. _________ 24. ___________ 25. ___________

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