Faculty of Business Administration

Student Name: …………………………………..

Index No.…………………….
Batch 16 Final-Semester 2 Examinations
Subject: Introduction to Economics
Date: 20 /11/2019 Time Allowed: 3 Hrs.
Answer ALL Questions
Question (1) (20 marks)
Choose the right answer:
1. Economic problem means in general how ……….. resources are allocated to satisfy
…… wants.
a. Unlimited - limited
b. Scarce - limited
c. Scarce - unlimited
d. Unlimited – limited

2. …………….. is all the possible combinations of the maximum amounts of two

goods/services that can be produced with a given amount of resources.
a. Demand curve
b. Supply curve
c. Production possibility frontier
d. All the above answers

3. A 20 percent increase in the quantity of pizza demanded results from a 100 percent
decline in its price. The price elasticity of demand for pizza is
a. 0.2
b. 2.0
c. 5.0
d. 20.0

4. When producers expect the price of their product to increase in the future,
The supply curve of this product will shift to…..
a. Left.
b. Right.
c. Either left or right.
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 d. None of the above answers.
5. If the price of one good increases by 3 percent and the quantity demanded of another
good increases by 2 percent, the cross-price elasticity is _______ and the two goods
are ______________.
a. 2/3, substitutes.
b. 2/3, complements.
c. 3/2, complements.
d. 3/2, substitutes.
6. …………. refers to the various quantities of a good or service that consumers are
willing and able to purchase at alternative prices.
a. Production.
b. Supply.
c. Demand
d. equilibrium
7. When Sudan builds a dam using few machines and a great deal of labor, it is answering
the___________ question.
a. “what to produce”
b. “how to produce”
c. “where to produce”
d. “for whom produce”
8. The two reasons behind inverse relation in demand law are
a. Substitution and price effect
b. Quantity and price effect
c. Substitution and income effect
d. Quantity and income effect

9.If a piece of farmland can be used to grow cotton, corn, or sugarcane. An increase in
price of sugarcane may result in …………. supply of cotton and corn. Points outside the
frontier are efficient.
a. increase
b. decrease
c. no change
d. all the above answers are incorrect
10. Collective ownership of the means of production (through workers' unions or the
state) is a characteristic of:
a. Socialism.
b. Capitalism.

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 c. Both socialism and capitalism.
d. None of the above.
Question (2) (30 marks):
State whether each of the following statements is TRUE or FALSE and briefly
explain your answer. (any answer not explained will not be considered).
1. The socialism system involves private ownership of the means of production. ( )
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When total utility reach the maximum, marginal utility has a negative value. ( )

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Cross-price elasticity of demand measures the responsiveness of the demand for a good
to a change in its price. ( )

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The Cardinal utility approach assumed that utility cannot be measured. ( )

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When demand for specific product is elastic and the producers targeting to maximize
total revenues, they must increase the price of this product. ( )

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2. If income elasticity of demand of specific good has a negative value the good will be
normal good. ( )
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When the price of a substitute good for good X falls, keeping other things constant, the
demand for good X will fall. ( )

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A shortage in the market occurs when the price is set above the equilibrium price
quantity. ( )

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Luxuries goods always have inelastic demand. ( )

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An increase in the cost of producing of wheat, will shift the supply curve for wheat to the
left. ( )

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Question (3) (10 marks):

1. The table below shows an individual marginal utility (MU) schedule for
commodity X and commodity Y. if the price of X is $ 2 and the price of Y is $ 1
and an individual income is $ 11 per time period:
Quantity MUX MUY
1 90 50
2 80 40
3 70 30
4 60 20
5 50 15
6 40 10

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Required: How can this consumer rearrange his income to buy the suitable contribution
of commodities X and Y to maximize his total utility and to reach the equilibrium
situation?
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Question (4) (6- marks)

Assume demand schedule for good x is

Px Qdx

10 100

20 70

1. Is demand for good X elastic or inelastic? Why?

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 _______________________________________________________________________
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2. Calculate the total revenues at different price levels.
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3. Explain the relationship between change in price and change in total revenue? Why
this relation happened?
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Question (5) (4- marks)

1- List the main factors affecting price elasticity of demand.

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list the main factors affecting
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Best wishes

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