GULELLE SUB-CITY EDUCATION OFFICE ECONOMICS MODEL EXAMINATION

FOR THE ETHIOPIAN UNIVERSITY ENTRANCE EXAMINATION (EUEE) (2012 E.C)

TIME ALLOWED. 2 HOURS
GENERAL DIRECTIONS
IN THIS EXAMINATION, THERE ARE A TOTAL OF 80 MULTIPLE CHOICE QUESTIONS.
READ CAREFULLY AND SELECT THE BEST ANSWER AND BLACKEN ONLY THE LETTER
OF YOUR CHOICE. YOU ARE ALLOWED TO WORK ON THE EXAM ONLY 2 HOURS.
1. Which of the following statement is incorrect?
A. If two demand curves are linear and intersection each other then coefficient of
elasticity would be same on different demand curves at the point of intersection.
B. On linear demand curve, all the forms of elasticity can be depicted.
C. If two demand curves are linear, and parallel to each other than at a particular price
the coefficient of elasticity would be different on different demand curves.
D. The price elasticity of demand is expressed in terms of relative not absolute, changes
in price and quantity demanded.
2. Which one of the following best describes the structure of the agricultural sector in Ethiopia?
A. The small holder, commercial and pastoral systems are equally dominant.
B. The pastoral farming system is the dominant system
C. The small holder farming system is the dominant system
D. The commercial farming system is the dominant system
3. If the demand for a good is inelastic, an increase in its price will cause total expenditure of
the consumers of the good to:
A. Increase B. Decrease C. Become zero D. Remain the same
4. Which one of the following policies was not exercised under the imperial regime?
A. Control of large scale farms by the government
B. Import substitution strategy
C. Diversification of export and trading partner in the international market.
D. Imposition of high tariff on imported good to protect infant industries.
5. The horizontal demand curve parallel to X-axis implies that the elasticity of demand is
A. Equal to zero C. Zero
B. Infinite D. greater than zero but less than infinity
6. The cost of one thing in terms of the alternative given up is called
A. Real cost C. production cost
B. Physical cost D. Opportunity cost
7. Which of the following statements is false?
A. The words „ceteris paribus‟ Mean other things remaining the same
B. Testing economic models is rarely tricky
C. An economic model is theory based on key variables and expressed in formal terms.
D. An economic model is tested by seeing how accurate its prediction are
8. Which of the following are not the most important cash crops in Ethiopia?
A. Coffee B. Chat C. Sugar cane D. hides and skins
9. Which of the following statements about the use of resources is not one of the key questions
in economics?
A. For whom are resources used
B. For what are resources used
C. Where are resources used
D. How are resources used
10. Demand for a commodity refers to:
A. Need for the commodity
B. Desire for the commodity
C. Desire for the commodity the amount that the commodity demanded at particular
price and at a particular time.
D. Quantity demand of that commodity
11. Assume that consumers income and the number of sellers in the market for good X both falls.
Based on this information, we can conclude with certainty that the equilibrium:
A. Price will decrease C. Quantity will increase
B. Price will increase D. quantity will decrease
12. Which one of the following was the development strategy of the Derg regime
A. Nationalization of the medium and large scale enterprises.
B. Keeping low level of tariff protection
C. Proving high tax incentives for investors
D. Facilitating easy access to domestic credit for all
13. Which of the following statements is true?
A. Governments have no influence over market prices
B. Macroeconomics is concerned chiefly with individual markets
C. Micro economics is concerned chiefly with the economy as whole
D. When economists study the price in a market, their chief aims are to understand why
the price is what it is and why it may change.
14. Which of the following will not shift country‟s production possibility frontier?
A. Purchase of new capital by firms
B. The introduction of new machinery
C. A fall in un employment
D. An increase in the age at which people retire
15. Government created price floors are typically
A. Shifting the demand curve to the right
B. Helping producers
C. Helping consumers
D. Raising government revenue
16. Which of the following types of economy describes the economy of Ethiopia?
A. A command economy C. A planned economy
B. A market economy D. A mixed economy
17. Which of the following statements is a positive statement?
 A. The UK government ought to split-up some of the largest UK banks to promote more
competition in the banking sector
B. One of the largest industries in UK is the financial sector
C. The Euro zone ought to allow members countries in difficulty to stop using Euro and
use currencies of their own instead
D. Bankers‟ bonuses should be taxed.
18. Which respect to fiscal policy, if the government thought unemployment was too high, it
could successfully combat it by
A. Cutting taxes and lowering governments pending
B. Raising taxes and lowering government spending
C. Cutting taxes and raising government spending
D. Raising taxes and raising governments pending
19. A tariff is better than a quota because
A. Quotas hurt domestic producers and tariffs hurt foreign producers
B. Tariffs producers tax revenue
C. It does not distort trade as much
D. Quotas are inflexible
20. What determines the nature and extent of specialization between countries?
A. The supply of gold in foreign markets
B. Exchange rates
C. The balance of payments
D. Comparative advantage
21. In the short run, when the output of affirm increases, its average fixed cost:
A. Decreases C. remain constant
B. Increases D. first decreases and then rises
22. Which of the following commodity has got inelastic demand, i.e. d<1?
A. Whisky C. Car
B. Perfume D. Insulin
23. Almaz spends an hour shopping and buys a sweater for Birr 300. The opportunity cost of the
sweater is:
A. The best alternative use of an hour plus Birr 300 C. Birr 300
B. An hour D. one hour plus Birr 300
24. When total utility begins to decline, Marginal utility becomes:
A. Negative B. Positive C. Declining D. Zero
25. Which of the following is not a constraint of the education sector of Ethiopia?
A. Disparity between regions
B. Low participation rate
C. Mortality rate
D. Quality of education
26. Given the mountainous topography of Ethiopia which type of transport services has strategic
role
A. Road transport C. Domestic Air transport
 B. Water transport D. Rail way transport
27. Which of the following is not the major indicator of the performance of the health sector in
Ethiopia?
A. Life expectancy
B. Pupil teacher ratio
C. Access to safe water
D. Infant mortality rate
28. Utility is best described as
A. Combination of pain and pleasure
B. The difference between marginal benefit and marginal cost
C. The difference between demand and supply
D. The enjoyment consumers derive from the choices they make
29. Among the eight millennium development goals which of the following goals are directly
linked with the health sector
A. Ensuring environmental sustainability
B. Empower ring women and promoting gender equality
C. Achieving universal primary education
D. Combating HIV Aids and malaria
30. Which of the following factors were not responsible for the introduction of modern education
in Ethiopia?
A. The development of the manufacturing sector
B. The establishment of foreign embassies
C. The establishment of a strong central government and seat of power
D. The emergence of the imperial government
31. Interims of foreign exchange contribution which one of the following industrial group has
least contribution?
A. Wood and furniture C. Food and beverage
B. Paper and printing D. leather and footwear
32. The __________ argument states that profit margins in the industrialized sector are higher
than those in agriculture.
A. Employment C. Linkage
B. Saving D. Development
33. When the average product and marginal product curve intersects each other
A. Marginal product begins to decline
B. Total product reaches its maximum
C. Average product reaches its maximum
D. Marginal cost reaches its minimum
34. Convexity of indifference curve exhibits
A. The law of diminishing marginal rate of substitution
B. The law of diminishing marginal rate of technical substitution
C. Downward sloping
D. Upward sloping
35. When economists talk about the short run and long run, they are referring to:-
A. The degree of flexibility in the choice of inputs
B. How long it takes to sell a product
C. How long it takes to produce a product
D. It refers to a specific calendar period such as a month or a year
36. The value of GDP can be found by adding together
A. Wages, investment, government purchases, and depreciation
B. Consumption, government purchases, transfer payments and net exports
C. Government purchases, consumption, net exports and investment
D. Wages, consumption, investment and imports
37. If in some range of production, average cost is falling the firm is experiencing
A. Decreasing returns to scale C. increasing returns to scale
B. Constant returns to scale D. it is impossible to say
38. If Susan builds cars and loses her job because a robot takes her place on the factory line,
what type of unemployment is she experiencing?
A. Dynamic (cyclical) C. structural
B. Frictional D. seasonal
39. Which of the following is a limitation of GDP, which tends to overstate GDP?
A. Non-marketed activity is not included in GDP
B. GDP places no value on leisure
C. Ecological costs are not netted out of GDP
D. Intermediate goods are not counted in GDP
40. If there is a rise in disposable income, there will be
A. Down ward shift in the consumption function.
B. Down ward movement in the consumption function
C. Upward movement in the consumption function
D. Upward shift in the consumption function
41. Which of the following is different from the rest?
A. Open market operation C. Discount rate
B. Bank rate D. Tax rate
42. Which component of the expenditure budget of the Ethiopian government is the highest?
A. Health C. Capital budget
B. Education D. Recurrent Budget
43. All of the following are investment except
A. A department store adding to its inventories
B. Purchasing a share of Amhara bank
C. A restaurant owner buying tables
D. An automobile manufacturing purchasing a new plant
44. Perfect competitors and monopolistic competitors are similar in one of the following features
A. Zero economic profit in the long run
B. Having horizontal demand curves
C. Rely on advertising to attract buyers to their good
 D. Zero economic profit in the short run
45. In which one of the following market structures individual firms do not have power to
decide?
A. Oligopoly C. Competitive
B. Monopoly D. Monopolistically competitive
46. Total cost of production increases from Birr 500 to Birr 600 when output increases from 20
to 30 Units and fixed costs are 200. Which of the following is true?
A. AC is rising C. Total variable cost rises by Birr 100
B. AFC is Birr 10 D. AVC rises by Birr 10
47. Which one are not the bases of international trade?
A. Unequal distribution of capital
B. Unequal distribution of natural resources
C. Willingness of a country to undertake trade between countries
D. The existence of economies of scale
48. A group of firms acting together to determine price and output decisions is
A. Price leadership C. duopoly
B. Carter D. Conscious parallelism
49. Which one of the following is a distinctive features of a monopolistically competitive
market?
A. Independent price policy
B. Product differentiation
C. Free entry and exit of firms
D. No- price competition
50. Which of the following statements is true about trade restrictions?
A. Quotas are the newly emerging types of restriction in foreign trade
B. Specific tariffs are tariffs imposed on each unit imported
C. Advalorem tariff is based on each unit imported
D. Compounded tariff is based on monetary value
51. The best indicator of the economic well being of a society is
A. Per capita income C. Nominal GDP
B. Real GDP D. GDP at market price
52. Which of the following is not the advantage of bi-modal agricultural strategy?
A. It supports individual rights to acquire land
B. It reduces outgoing migration from rural areas
C. It promotes large scale diversification
D. It allows the transfer of technology
53. All of the following are the objectives of comprehensive package projects, except
A. Raising the living standard of the poor peasants by raising per-capita income
B. Encouraging peasant participation in the development process to solve problems
C. To facilitate agricultural exports and to create new employment opportunities
D. Enhancing employment opportunities by adopting labor-intensive technology
54. Which of the following are the main factors that contributed to the introduction of modern
industries in Ethiopia?
A. The construction of Ethio - Djibuti rail way
B. The fall of the imperial government
C. The EPRDF‟s industrial development strategy
D. The industrial development strategy of imperial government
55. ADLI primarily aims at
A. Developing the industrial sector to bring about economic development
B. Developing the agricultural sector to bring about industrialization
C. Giving priority to the development of social over head
D. Focusing only on the development of the agricultural sector at the expense of the
industrial development
56. Which of the following is not the determinates of consumption expenditure at individual and
national levels
A. The nature of individuals
B. Distribution of income
C. The level of personal income
D. The level of income tax
57. The economic cost of unemployment is
A. Dependence on families C. loss of out put
B. Increasing suicide rate D. high competition for limited jobs
58. Stagflation is a combination of
A. Decreasing unemployment and increasing inflation
B. Decreasing unemployment decreasing inflation
C. Increasing unemployment and Increasing inflation
D. Increasing unemployment and decreasing inflation
59. Which of the following is a contractionary fiscal policy instruments?
A. Decrease tax rate C. increase government expenditure
B. Open market purchase D. encourage public borrowing
60. A country facing trade deficit, where imports are much greater than exports, which of the
following tends to reduce the deficit?
A. Devaluation of domestic currency
B. Revaluation of domestic currency
C. Fixing the exchange rate
D. Floating the exchange rate
61. An investment which is made irrespective of income level is
A. Induced investment C. Autonomous investment
B. Change in the price of the commodity D. Marginal investment
62. If MPC equals 0.6 MPS equals_______
A. 0.2 B. 0.4 C. 0.8 D. 1.6
63. Which of the following is the “Motto” of Ethiopian Air Lines?
A. Ethiopian link to the world
 B. Increase foreign exchange earnings
C. Increase the number of passenger from time to time
D. Africa‟s link to the world
64. A movement along supply cure of a product is caused by
A. Change in factor prices C. decrease in sales tax
B. Change in the price of the commodity D. Advance in technology
65. Which one of the following costs increases as output increases in the short run?
A. Cost on factory building C. rent of land
B. Over head cost D. cost of labor
66. Which one of the following statements is true?
A. Real GDP can grow when prices increase
B. Nominal GDP can grow only when there is growth in output
C. Real GDP is GDP measured at base year price
D. Nominal GDP is GDP measured at constant price
67. Which one of the following is an expansionary policy instrument?
A. Increasing discount rate C. increasing cash reserve ratio
B. Open market sale D. decreasing tax rate
68. When does quantity supplied of a product increase?
A. When the price of the product increases
B. When the price of factors of production increases
C. When the price of related goods decreases
D. When the price of the product decrease
69. Which one of the following best expresses the relationship between consumption and saving?
A. Saving is equal to consumption plus income
B. Over-time , consumption is dependent only on income
C. Consumption is equal to income plus saving
D. At breakeven point between income and consumption there is no saving
70. Which one of the following factors in most likely to cause inflation?
A. A decrease in government revenue
B. A decrease in wages
C. A decrease in government expenditure
D. A reduction in investment

Questions 71-75 are to be attempted by the sighted candidates only

71. If a monopolist demand curve is given by P=90-6Q, what will be his/her total revenue when
quantity emanded is 5 units?
A. 240 B. 60 C. 300 D. 250
72. Suppose the market demand function for good X is given by Qd =20-P and the market supply
function for good X is Qs=4+p. what are the equilibrium quantity and price respectively?
A. 6 and 6 C. 8 and 12
B. 12 and 8 D. 4 and 8
73. If the consumption function of a given individual is given as C=450+0.80Yd. If the
individuals disposable income for a specific period was 5000 Birr, the saving of the
individual during the same period is
A. 1000 B. 4450 C. 550 D. 4550

Use the following information to answer questions 74-75

 Government purchases Birr 4980

 Consumption spending Birr 3650
 Imports Birr 2000
 Exports Birr 1500
 Net factor income from abroad Birr 200
 Deprecation Birr 300
 Change in stock Birr 365
 Gross fixed capital formation Birr 1235
74. What is gross domestic product (GDP)?
A. 9000 B. 9730 C. 9900 D. 9930
75. Gross national product (GNP) equals
A. 9730 B. 9630 C. 9900 D. 9930

Questions 76-80 are to be attempted by the visually impaired candidates only

76. Periodic fluctuations in economic activities are called________

A. Inflation C. unemployment
B. Business cycle D. economic growth
77. Which one of the following is true about floating exchange rate?
A. It is determined by the market forces
B. It is pegged to other currencies
C. It is determinate by the government
D. It is hybrid of fixed and floating system
78. When the short run marginal product of labor is negative
A. Total product is rising at a constant rate
B. Total product is declining
C. Average product is less than marginal product
D. Total product is rising but at a decreasing rate
79. Which one of the following is the main objective of the planned for accelerated and
sustainable development to end poverty (PASDEP)?
A. Building common residential houses for the poor people
B. Selling government institution to foreigners to created free market
C. Building modern and productive agricultural economic sector
D. Nationalization of private companies for sustainable development
80. Marginal revenue is defined as
A. Total revenue minus the level of output
B. The change in total revenue caused by selling one additional unit of output
C. Price times quantity
D. Total revenue divided by the level of output