1. What lies is at the heart of the allocation of goods and services in a free-market economy?

A. Concerns of equity or equal distribution among individuals.

B. The order or command of the ruling government or dictator.
C. The price mechanism.
D. None of the above

2. The phrase 'ceteris paribus' is best expressed as

A. 'all else equal.'
B. 'everything affects everything else.'
C. 'scarcity is a fact of life.'
D. 'there is no such thing as a free lunch.'

3. The former Soviet Union was an example of:

A. a command economy
B. free-market/capitalism
C. dictatorship
D. a mixed economy

4. The 'law of demand' implies that ceteris paribus

A. as prices fall, quantity demanded increases.
B. as prices fall, demand increases.
C. as prices rise, quantity demanded increases.
D. as prices rise, demand decreases.

5. The quantity demanded (Qd) of a soft drink brand A has decreased. This could be because:
A. A’s consumers have had an increase in income.
B. the price of A has increased.
C. A’s advertising is not as effective as in the past.
D. the price of rival brand B has increased.

6. Suppose the demand for good Z goes up when the price of good Y goes down. We can say
that goods Z and Y are
A. perfect substitutes.
B. unrelated goods.
C. complements.
D. substitutes.

7. Which of the following is consistent with the law of supply?

A. As the price of calculators rises, the supply of calculators increases, ceteris paribus.
B. As the price of calculators falls, the supply of calculators increases, ceteris paribus.
C. As the price of calculators rises, the quantity supplied of calculators increases, ceteris
paribus.
D. As the price of calculators rises, the quantity supplied of calculators decreases, ceteris
paribus.

8. It refers to the graphical representation of the relationship of price and supply.

A. Demand Curve
B. Supply Curve
C. Demand Schedule
D. Demand Function

9. This refers to the means through which society determines the answers to the basic
economic problems.
A. Market System
B. Economic System
C. Solar System
D. Market Equilibrium
10. It refers to the table which shows the various quantities the seller is willing to sell at various
prices.
A. Supply Curve
B. Supply Schedule
C. Demand Schedule
D. Demand Function

11. It refers to the graphical representation of the relationship of price and demand.
A. Demand Curve
B. Supply Curve
C. Demand Schedule
D. Demand Function

12. It refers to the table which shows the various quantities the consumer is willing to buy at
various prices.
A. Demand Curve
B. Supply Curve
C. Demand Schedule
D. Demand Function

13. It is the interaction between buyers and sellers of trading or exchange. It is where the
consumer buys and the seller sells.
A. Demand
B. Supply
C. Market
D. Market Equilibrium

14. It refers to the willingness of a consumer to buy a commodity at a given prices.

A. Demand
B. Supply
C. Market
D. Market Equilibrium

15. It refers to the quantity of goods that a seller is willing to offer for sale.
A. Demand
B. Supply
C. Market
D. Market Equilibrium

16. There are three fundamental questions every society must answer. Which of the following
is/are one of these questions?
A. What goods and services are to be produced?
B. How are the goods and services to be produced?
C. Who will get the goods and services that are produced?
D. All of the above

17. "Capitalism" refers to:

A. the use of markets
B. government ownership of capital goods
C. private ownership of capital goods
D. private ownership of homes & cars

18. The fundamental economic problem faced by all societies is:

A. unemployment
B. inequality
C. poverty
D. scarcity
 19. If we compare GDP and GNP, then
A. GNP= GDP- net income from abroad
B. GNP= GDP+ net income from abroad
C. GNP= NNP- net income from abroad

20. Which of the following is the definition of GNP?

A. Total sales in the economy
B. Total monetary transactions in an economy
C. The market values of all goods and services produced in an economy
D. None of the above

21-30: Assume that the following figures were recorded for the last year. Compute the
capital formation, exports, imports, GDP and GNP. (2 points each)
Use the back of your paper for your solution.

Type of expenditure At current prices

1. Household final consumption 7,335,011
2. Government final consumption expenditure 900,192
3. Capital formation

a. Fixed Capital 1,941,019

1. Construction 969,470
2. Durable equipment 762,843
3. Breeding stock and orchard development 171,908
4. Intellectual property products 36,798

b. Changes in inventories 1,765

4. Exports
a. Exports of goods 3,313,897
b. Exports of services 877,989

5. Imports
a. Imports of goods 3,435,765
b. Imports of services 787,675

GDP

Net Factor Income from Abroad 1,798,564

GNP

---END OF EXAMINATION---
“Commit thy way unto the LORD; trust also in Him;
and He shall bring it to pass.”
Psalm 37:5