MTU AgEc Dep’t AgEc Model Exit Exam Key Answer

1. Which one of the following choice is equivalent to Minimize Z:

A. Maximize (Z)
B. Minimize (-Z)
C. Maximize (-Z)
D. None of the above

The correct answer is C. Maximize (-Z).

In linear programming, the objective is to either maximize or minimize an objective function. In

this case, if you want to minimize Z, you can achieve the same result by maximizing (-Z). This is
because maximizing a negative value is equivalent to minimizing the positive value.

So, if the objective is to minimize Z, you can reframe it as maximizing (-Z) to achieve the same
optimization goal. The other options, maximize (Z) and minimize (-Z), would not be equivalent
to minimizing Z.

2. One of the following investment theories asserts that net investment in period t is a function
of the change in total output (Yt) and the capital output ratio.
A. Inventory theory of investment
B. Tobin-Q theory of investment
C. Internal fund theory of investment
D. Accelerator theory of investment

The correct answer is D. Accelerator theory of investment.

The accelerator theory of investment asserts that net investment in a given period (t) is
influenced by the change in total output (Yt) and the capital-output ratio. According to this
theory, when total output increases (Yt), there is a higher demand for capital goods to support the
increased production. This increase in demand for capital goods leads to higher net investment.

The accelerator theory suggests that investment is driven by changes in output levels rather than
changes in interest rates or other financial factors. It emphasizes the relationship between output
and investment, where the rate of change in investment is proportional to the rate of change in
output. The capital-output ratio represents the amount of capital required to produce a unit of
output.

The other options listed, such as the inventory theory of investment, Tobin-Q theory of
investment, and internal fund theory of investment, are different investment theories that focus
on different factors influencing investment decisions.

3. One of the following is false about the assumption of the theory of Absolute advantage
A. Labour is the only factor of production and is homogenous
B. Labour is free to move between nations but immobile between industries within a nation
C. No transportation costs involved in international trade

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MTU AgEc Dep’t AgEc Model Exit Exam Key Answer

D. None of the above

The correct answer is D. All options (A, B and C) are the assumption of the theory of Absolute
advantage.

4. Which of the following is false about monopolistically competitive market structure?

A. It is not a perfect competition because the products are not homogenous but
differentiated, and the price is not uniform
B. It is perfect competition because of the presence of a large number of firms and freedom
of entry
C. It is not a monopoly because the producer is not a single individual, there is no restriction
on entry and exit, and the goods are close substitutes
D. None of the above

The false statement about the monopolistically competitive market structure is: B. It is perfect
competition because of the presence of a large number of firms and freedom of entry.

Option B is incorrect because the monopolistically competitive market structure is not

considered perfect competition. While there are similarities between the two, there are key
differences that distinguish them.

In a monopolistically competitive market, products are differentiated, meaning that each firm
produces a slightly different product that is seen as unique by consumers. This differentiation
allows firms to have some control over the price of their product, as they can differentiate it
through branding, quality, or other factors.

Additionally, monopolistically competitive markets do not have a large number of firms like
perfect competition. Instead, there are typically a moderate number of firms competing in the
market.

Furthermore, while entry and exit are generally free in a monopolistically competitive market,
there are still barriers to entry, such as the need for product differentiation and establishing a
customer base.

Therefore, the correct answer is B. It is perfect competition because of the presence of a large
number of firms and freedom of entry.

5. With the evolution of money, the system of "exchange of goods for goods" refers to:
A. The stage of legal/tender money
B. The stage of barter system
C. The stage of commodity money
D. A and B

The correct answer is B. The stage of barter system.

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In the early stages of human civilization, before the development of a standardized form of
money, people relied on the barter system as a means of exchange. In a barter system, goods and
services are directly exchanged for other goods and services without the use of money. For
example, if a farmer wanted to obtain clothing, they would have to find someone who was
willing to trade clothing for the farmer's agricultural produce.

This system of "exchange of goods for goods" was prevalent before the emergence of
legal/tender money, which is the type of money that is recognized by the government as a valid
form of payment for goods and services (option A). Commodity money (option C) refers to a
type of money that has intrinsic value, such as gold or silver, but it does not necessarily involve
the direct exchange of goods for goods.

Therefore, the correct answer is B. The stage of barter system.

6. Natural resource economics covers the study of the following except:

A. Allocation of resources among different economic sectors
B. Problems of managing common-pool national resources
C. Understanding resources market
D. Determining optimal rates of extraction

The correct answer is A. Allocation of resources among different economic sectors.

Natural resource economics is a field of study that focuses on the economic aspects of natural
resources, their utilization, and their impact on the economy and society. It involves analyzing
the sustainable management and optimal utilization of natural resources.

The topics covered in natural resource economics include:

B. Problems of managing common-pool national resources: This refers to the challenges and
issues related to the management of resources that are collectively owned, such as forests,
fisheries, and water bodies. It examines how to prevent overexploitation and ensure sustainable
use of these resources.

C. Understanding resources market: This involves the study of the market dynamics and
economic principles that govern the production, distribution, and consumption of natural
resources. It includes analyzing factors such as supply and demand, pricing mechanisms, and
market structures specific to natural resources.

D. Determining optimal rates of extraction: This focuses on determining the most efficient and
sustainable rates of extraction for renewable and non-renewable resources. It involves evaluating
the trade-offs between current consumption and future availability of resources, considering
factors like extraction costs, resource depletion, and environmental impacts.

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However, allocation of resources among different economic sectors, which involves the
distribution and allocation of resources within the economy, is not specifically a part of natural
resource economics. It falls more under the domain of general resource allocation and
macroeconomics.

Therefore, the correct answer is A. Allocation of resources among different economic sectors.

7. ____________ is the value of all final goods based on the prices existing during the time
period of production.
A. Nominal GDP
B. Real GDP
C. GDP deflator
D. A and B

The correct answer is A. Nominal GDP.

Nominal GDP represents the value of all final goods and services produced within an economy
during a specific time period, usually a year, based on the prices that were prevailing at the time
of production. It is calculated by multiplying the quantities of goods and services produced by
their respective market prices.

Nominal GDP does not take into account changes in the price level over time, which means it
does not reflect the impact of inflation or deflation. Therefore, it represents the value of goods
and services using current market prices.

On the other hand, real GDP (option B) adjusts for changes in the price level by using a constant
set of prices, usually from a base year, to calculate the value of goods and services produced.
Real GDP provides a more accurate measure of economic growth because it eliminates the
influence of price changes.

The GDP deflator (option C) is a measure that reflects changes in the overall price level of goods
and services produced in an economy. It is calculated by dividing nominal GDP by real GDP and
multiplying by 100. The GDP deflator is used to calculate the inflation rate and to adjust nominal
GDP to obtain real GDP.

8. Which of the following may not be the cause for equilibrium change in monopolistic
competitive market?
A. Equilibrium through product differentiation
B. Equilibrium through entry of new firms
C. Equilibrium through price competition
D. Equilibrium through both price competition and entry of new firms

The correct answer is A. Equilibrium through product differentiation. In a monopolistic

competitive market, product differentiation is a key characteristic where firms differentiate their

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products through branding, packaging, or other means to create a perceived uniqueness. This
product differentiation can lead to a stable equilibrium in the market. On the other hand, options
B, C, and D (equilibrium through entry of new firms, equilibrium through price competition, and
equilibrium through both price competition and entry of new firms) can all cause changes in the
equilibrium of a monopolistic competitive market.

9. The terms "undeveloped" and "underdeveloped" are used interchangeably but these two
terms are different. Which one of the following is not describe the term "underdeveloped"
countries?
A. No potentialities of development
B. Third World countries
C. No prospect of development
D. Poor or backward countries

The correct answer is A and C.

The term "underdeveloped" is often used to describe countries that are characterized by a lower
level of economic development, limited industrialization, and lower standards of living
compared to more developed countries. However, it is important to note that the term
"underdeveloped" does not necessarily imply that these countries have no potential for
development or lack prospects for improvement.

10. If the value of Durbin-Watson's d statistic is 0, it is an indication of:

A. Negative autocorrelation
B. Positive autocorrelation
C. No autocorrelation
D. None of the above

If the value of Durbin-Watson's d statistic is 0, it is an indication of option B: positive

autocorrelation.

The Durbin-Watson statistic is used in statistical analysis to test for the presence of
autocorrelation in the residuals of a regression model. Autocorrelation refers to the correlation
between the error terms (residuals) of the model at different time points or observations. It is
important to detect autocorrelation because it violates one of the assumptions of linear
regression, which assumes that the error terms are independent.

The Durbin-Watson statistic ranges from 0 to 4, with a value around 2 indicating no

autocorrelation. A value of 0 suggests perfect positive autocorrelation, meaning that there is a
perfect positive relationship between the residuals at consecutive time points. This indicates that
the error terms are not independent and are influenced by the previous error term.

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MTU AgEc Dep’t AgEc Model Exit Exam Key Answer

11. Which of the following is true

A. Some projects may give high return in the early stage will be very sensitive to changes in
discount factor as compared to the latter.
B. Some projects may give high return in the later stage will be less sensitive to changes in
discount factor as compared to the early.
C. Some projects have shorter life will be less sensitive to changes in discount factor as
compared to the other.
D. All of the above

The correct answer is C.

12. According to the Rostow's stages of growth, which one of the following is false about the last
stage?
A. Extensive use of durable consumer goods
B. The attention of the society shifted from supply to demand
C. Social changes in attitudes, expectations and values such as renaissance and reformation
D. Shift from problems of production to problems of consumption and welfare

According to Rostow's stages of growth, the false statement about the last stage is: C. Social
changes in attitudes, expectations, and values such as renaissance and reformation.

In Rostow's stages of growth, the last stage is referred to as the "Age of High Mass
Consumption." This stage is characterized by a shift from problems of production to problems of
consumption and welfare. The focus of society transitions from increasing production and
industrialization to the extensive use of durable consumer goods and the improvement of living
standards.

The correct answer is C because Rostow's stages of growth do not specifically mention social
changes such as renaissance and reformation in relation to the last stage. While social changes
can occur during any stage of development, Rostow's theory primarily focuses on economic and
structural changes that drive the process of economic growth and development.

Therefore, option C is the false statement.

13. Which of the following is concerned with discovering and testing certain variables with
respect to their association or disassociation?
A. Diagnostic
B. Descriptive
C. Descriptive and diagnostic
D. Exploratory

The correct answer is D. Exploratory.

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Exploratory research is concerned with discovering and testing certain variables with respect to
their association or disassociation. It aims to explore new ideas, concepts, or relationships
between variables. This type of research is often conducted when there is limited existing
knowledge or when the topic is relatively unexplored.

On the other hand, descriptive research focuses on describing and summarizing data or
phenomena, without necessarily testing specific associations. Diagnostic research aims to
identify the causes or reasons behind certain phenomena or behaviors. Descriptive and diagnostic
research are more focused on analyzing existing data or phenomena rather than exploring new
variables or relationships.

Therefore, the correct answer is D. Exploratory.

14. Total marginal cost equals:

A. The sum of total extraction cost and total user cost
B. The sum of total extraction cost and marginal user cost
C. The sum of marginal extraction cost and total user cost
D. The sum of marginal extraction cost and marginal user cost

The correct answer is D. The sum of marginal extraction cost and marginal user cost.

Total marginal cost represents the additional cost incurred by producing one more unit of a good
or service. It consists of two components: marginal extraction cost and marginal user cost.

Marginal extraction cost refers to the additional cost of extracting or producing one more unit of
a resource or input. It takes into account factors such as labor, materials, and equipment required
for extraction or production.

Marginal user cost refers to the additional cost incurred by the consumer or user of the good or
service for consuming one more unit. It includes factors such as the price of the good or service,
transportation costs, and any other costs associated with its use.

Therefore, the total marginal cost is the sum of these two components: marginal extraction cost
and marginal user cost.

The correct answer is D. The sum of marginal extraction cost and marginal user cost.

15. Variables in the problem whose values are to be determined by solving the model. These
variables are:
A. Decision variables
B. Uncontrollable variable
C. Objective Function
D. None of the above

The correct answer is A. Decision variables.

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Decision variables are the variables in a mathematical model that represent the quantities or
values that we want to determine or optimize. They are the variables that we have control over
and can manipulate to achieve our desired outcome. In other words, decision variables are the
unknowns in the model that we are trying to solve for.

Uncontrollable variables, on the other hand, are variables that are not within our control and
cannot be manipulated. They are typically external factors or parameters that influence the
problem but are not part of the decision-making process.

The objective function is a mathematical expression that represents the goal or objective of the
problem. It is typically formulated in terms of the decision variables and is either maximized or
minimized to achieve the desired outcome. The objective function guides the optimization
process by providing a measure of how well a particular solution satisfies the problem's
objectives.

So, in this case, the variables whose values are to be determined by solving the model are
referred to as decision variables (Option A).

16. Which one of the following is NOT true about county's indifference curve
A. No two indifference curves cross each other
B. Indifference curves increase in utility as the curve moves northeast
C. All points on indifference curves have the same level of utility
D. None of the above

The correct answer is D. None of the above. All of the statements A, B, and C are true about an
indifference curve.

17. The valuations inputs and outputs of financial analysis differs from economic analysis of the
project, because
A. There are different market imperfections;
B. Some goods are public goods by their nature (may not totally have market or the price
consumers are willing to pay are less).
C. There are government interventions of various kinds
D. All of the above

The correct answer is D. All of the above.

The valuations of inputs and outputs in financial analysis and economic analysis of a project
differ due to various factors, including market imperfections, public goods, and government
interventions.

A. Market Imperfections: Financial analysis focuses primarily on the financial aspects of a

project, such as cash flows, costs, and revenues. It assumes perfect markets, where prices are
determined by supply and demand. However, in reality, markets can be imperfect, with factors

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MTU AgEc Dep’t AgEc Model Exit Exam Key Answer

such as monopolies, externalities, information asymmetry, and transaction costs affecting the
prices and quantities of goods and services. Economic analysis takes these market imperfections
into account and considers their impact on the project's valuation.

B. Public Goods: Some goods and services have characteristics of public goods, which means
they are non-excludable and non-rivalrous. These goods may not have a well-defined market or a
price that consumers are willing to pay. Financial analysis may not fully capture the value of
these public goods, while economic analysis considers their broader societal benefits and costs.

C. Government Interventions: Government interventions can significantly influence the

valuations of inputs and outputs in both financial and economic analysis. These interventions can
take various forms, such as regulations, subsidies, taxes, and incentives. Financial analysis may
focus on the direct impacts of government interventions on costs and revenues, while economic
analysis considers the broader effects on the overall economy, market dynamics, and social
welfare.

Therefore, all of the options mentioned in the question (A, B, and C) contribute to the differences
in valuations between financial analysis and economic analysis of a project.

18. What is the meaning of the term 'heteroscedasticity'?

A. The errors have non-zero mean
B. The errors are not linearly independent of one another
C. The variance of the dependent variable is a constant
D. The variance of the errors is not constant

The correct answer is D. The variance of the errors is not constant.

Heteroscedasticity refers to a situation in which the variance of the errors (or residuals) in a
statistical model is not constant across all levels of the independent variables. In other words, the
spread or dispersion of the errors varies systematically as the values of the independent variables
change.

When heteroscedasticity is present, it violates one of the assumptions of ordinary least squares
(OLS) regression analysis, which assumes that the errors have constant variance, also known as
homoscedasticity. Homoscedasticity assumes that the spread of the errors is the same at all levels
of the independent variables.

Heteroscedasticity can have several implications on regression analysis. It can lead to inefficient
and biased estimates of the regression coefficients, affecting the reliability and significance of
statistical tests. Additionally, it can affect the accuracy and precision of prediction intervals.

To detect heteroscedasticity, various graphical and statistical tests can be employed. Scatterplots
of the residuals against the predicted values or the independent variables can provide visual

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indications of heteroscedasticity. Statistical tests, such as the Breusch-Pagan test or the White
test, can formally test for the presence of heteroscedasticity.

If heteroscedasticity is detected, there are several methods to address it, such as transforming the
variables, using weighted least squares regression, or employing robust standard errors.

So, in summary, heteroscedasticity refers to the situation where the variance of the errors in a
statistical model is not constant (Option D).

19. Under Rostow's stages of growth model, at which stage growth become at its normal
condition
A. The Drive to Maturity
B. The Pre-Condition for Take-Off
C. The Age of High Mass Consumption
D. The Take-Off

The correct answer is D. The take- off stage is where growth becomes at its normal condition and
the values and interests of the traditional society make a decisive breakthrough.

20. Which of the following is not a substitute good for Coca Cola?
A. Pepsi Cola
B. Bread
C. Fanta
D. Sprite

Based on the information provided, the correct answer would be B. Bread.

Substitute goods are products that can be used as alternatives to each other. In this case, Coca
Cola is a beverage, and options A, C, and D are all beverages that can serve as substitutes for
Coca Cola. However, bread is not a beverage and therefore cannot be considered a substitute for
Coca Cola.

So, the correct answer is B. Bread.

21. Which one of the following is not the importance of agricultural marketing?
A. It widens the market for the product by taking them to remote corner the country
B. It doesn't contribute for the growth of a nation
C. It leads to the optimization of resource use and output management
D. It helps in the growth of agro based industries

The correct answer would be B. It doesn't contribute to the growth of a nation.

Agricultural marketing plays a crucial role in the overall development of a nation's economy.
Here are the correct importance of agricultural marketing:

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MTU AgEc Dep’t AgEc Model Exit Exam Key Answer

A. It widens the market for the product by taking them to remote corners of the country:
Agricultural marketing helps in reaching agricultural products to different regions, including
remote areas. This ensures that farmers have access to a wider customer base and can sell their
products more effectively.

C. It leads to the optimization of resource use and output management: Agricultural marketing
helps in optimizing the use of resources by ensuring efficient production, distribution, and
utilization of agricultural products. This leads to better resource management and increased
productivity.

D. It helps in the growth of agro-based industries: Agricultural marketing provides a steady

supply of raw materials to agro-based industries. This promotes the growth of these industries,
which in turn contributes to the overall economic development of a nation.

Therefore, the correct answer is B. It doesn't contribute to the growth of a nation.

22. Which one of the following is incorrect about poverty?

A. It is a multidimensional concept that seeks to measure levels of deprivation
B. It is a measure of deprivation of the basic needs that requires to have a basic standard of
living
C. Poverty can be in terms of a lack of resources or in terms of capabilities
D. None of the above

The correct answer would be D. None of the above.

All of the statements mentioned in options A, B, and C are correct about poverty. Let's go
through each statement to understand why:

A. It is a multidimensional concept that seeks to measure levels of deprivation: Poverty is not

solely defined based on income or material deprivation. It is a multidimensional concept that
considers various aspects of deprivation, including access to education, healthcare, housing,
sanitation, clean water, and other basic necessities.

B. It is a measure of deprivation of the basic needs that requires having a basic standard of
living: Poverty is often measured by assessing the extent to which individuals or households lack
access to basic needs essential for a decent standard of living. These basic needs may include
food, shelter, clothing, healthcare, education, and other fundamental requirements.

C. Poverty can be in terms of a lack of resources or in terms of capabilities: Poverty can be

understood both in terms of a lack of material resources (such as income, assets, and resources)
as well as in terms of capabilities (the freedom and ability to function and participate fully in
society). This perspective, known as the capability approach, emphasizes that poverty is not just
about income or resources but also about the ability to live a fulfilling life.

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Therefore, the correct answer is D. None of the above.

23. Which of the following is the determinant of the demand for a variable factor?
A. Price of the factor
B. MPP of the factor
C. Prices of other factors
D. All of the above

The correct answer is D. All of the above.

When determining the demand for a variable factor of production, multiple factors come into
play. Let's go through each option to understand why:

A. Price of the factor: The price of the variable factor is an important determinant of its demand.
As the price of the factor increases, all else being equal, the demand for the factor decreases.
Conversely, as the price of the factor decreases, the demand for the factor increases.

B. MPP (Marginal Physical Product) of the factor: The marginal physical product of the factor
refers to the additional output produced by employing one more unit of the variable factor while
keeping other factors constant. The MPP of the factor influences the demand for the factor. If the
MPP is high, firms have an incentive to employ more of the variable factor, increasing its
demand. Conversely, if the MPP is low, firms may reduce the demand for the factor.

C. Prices of other factors: The prices of other factors of production also affect the demand for a
variable factor. The relative prices of other factors can influence the cost of production and the
profitability of employing the variable factor. If the prices of other factors change, it can impact
the demand for the variable factor.

Therefore, all of the options mentioned (A, B, and C) are determinants of the demand for a
variable factor. Thus, the correct answer is D. All of the above.

24. Okun's Law shows an inverse relationship between:

A. Prices and quantity demanded
B. Inflation and unemployment
C. Unemployment and real output
D. Interest rates and borrowing

The correct answer is C. Unemployment and real output.

Okun's Law describes the relationship between changes in the unemployment rate and changes in
the real output (Gross Domestic Product, or GDP) of an economy. According to Okun's Law,
there is an inverse relationship between unemployment and real output. Specifically, when the
economy is experiencing a higher level of unemployment, the real output tends to be lower, and
vice versa.

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MTU AgEc Dep’t AgEc Model Exit Exam Key Answer

It is important to note that Okun's Law is an empirical observation rather than a strict economic
law. It suggests that there is a relationship between unemployment and real output, but the exact
magnitude of the relationship can vary across different countries and time periods.

Therefore, the correct answer is C. Unemployment and real output.

25. The difference between national income and net national product is:
A. Inventory investment
B. Net investment
C. Depreciation
D. Indirect business taxes

The correct answer is C. Depreciation.

National income and net national product (NNP) are two measures used to assess the economic
performance of a country. The main difference between them lies in the treatment of
depreciation.

National income represents the total income earned by individuals, businesses, and the
government within a country's borders. It includes wages, salaries, profits, rents, and other forms
of income. National income does not account for depreciation, which refers to the wear and tear
or obsolescence of capital goods over time.

On the other hand, net national product (NNP) is derived from national income by subtracting
depreciation. NNP accounts for the reduction in the value of capital goods due to depreciation. It
represents the net output or income generated by an economy after accounting for the loss of
value in its capital stock.

Therefore, the correct answer is C. Depreciation.

26. Identify the wrong statement about export subsidy

A. It is designed to increase the volume of trade
B. Consumers in the exporting country suffer as international terms of trade moves against
them
C. It includes especial tax exemptions and provision of capital at lower interest rates to help
domestic producers of export commodity
D. None of the above

The wrong statement about export subsidy is option D: None of the above.

Export subsidy is a government policy that provides financial assistance or incentives to

domestic producers to promote and increase the volume of exports. It aims to make the exported
goods more competitive in international markets by reducing their production costs or increasing
their selling prices.

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Let's examine the other options to see why they are correct:

A. It is designed to increase the volume of trade: This statement is correct. Export subsidies are
implemented with the goal of boosting the quantity of exports from a country. By providing
financial assistance or incentives to domestic producers, it becomes more attractive for them to
export their goods, leading to an increase in the volume of trade.

B. Consumers in the exporting country suffer as international terms of trade move against them:
This statement is also correct. When a country implements export subsidies, it can artificially
lower the price of exported goods, making them more competitive in international markets. As a
result, the terms of trade may shift in favor of the importing countries, causing consumers in the
exporting country to face higher prices for the subsidized goods or reduced availability of those
goods in the domestic market.

C. It includes special tax exemptions and provision of capital at lower interest rates to help
domestic producers of export commodities: This statement is correct as well. Export subsidies
can take various forms, including tax exemptions or reductions, access to capital at lower interest
rates, or direct financial assistance to support domestic producers of export commodities. These
measures aim to reduce production costs and enhance the competitiveness of the exported goods
in the global market.

Therefore, the correct answer is option D: None of the above.

27. Which one of the following statement explains product differentiation for a given product?
A. Use of improved packaging for the product
B. Improving the quality of the product
C. Opening of a retail store near customers location
D. All of the above

The correct answer is D: All of the above.

Product differentiation refers to the process of distinguishing a product from its competitors in
the market by offering unique features, characteristics, or benefits that make it more appealing to
consumers. It involves creating perceived differences between products that make customers
perceive them as distinct and valuable.

Let's examine each statement to see how they relate to product differentiation:

A. Use of improved packaging for the product: Improving the packaging of a product can be a
strategy for product differentiation. Packaging plays a crucial role in attracting consumers'
attention, communicating the brand image, and creating a positive perception of the product. By
using improved packaging, such as innovative designs, eco-friendly materials, or convenient
functionality, a company can differentiate its product and make it more appealing to consumers.

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B. Improving the quality of the product: Enhancing the quality of a product is another common
approach to product differentiation. By improving the features, performance, durability, or
reliability of a product, a company can create a competitive advantage and differentiate itself
from competitors. Higher quality can be perceived by consumers as an indication of superior
value and may justify a higher price or attract more loyal customers.

C. Opening of a retail store near customers' location: While the opening of a retail store near
customers' location may not directly impact the product itself, it can still contribute to product
differentiation. By providing convenient access to the product through a nearby retail store, a
company can enhance the overall customer experience and differentiate itself from competitors
who may not have a physical presence in the same area. The convenience factor can be a
significant driver for consumer choice and loyalty.

28. Suppose equilibrium output is yo and the price level is po for an aggregate demand and a
classical long-run aggregate supply curve. An increase in government spending will result in:
A. An increase in the equilibrium level of output and the price level
B. An increase in the equilibrium level of output and a decrease in the price level
C. An Increase in the equilibrium level of output and no change in the price level
D. An increase in the price level and no change in equilibrium output.

29. Why do you need to review the existing literature?

A. Because without it, you could never reach the required word-count
B. To make sure you have a long list of references
C. To find out what is already known about your area of interest
D. To help you in your general studying

The correct answer is C. To find out what is already known about your area of interest.

Reviewing the existing literature is an essential step in any research or academic work. It helps
you understand what has already been studied, discovered, and published on a particular topic.
By reviewing the literature, you can:

1. Gain knowledge: Reading previous research allows you to understand the current state of
knowledge in your field. It helps you build a foundation of understanding and identify any gaps
or unanswered questions.

2. Identify research gaps: Reviewing existing literature helps you identify areas that have not
been extensively studied or where conflicting results exist. This can guide you in formulating
research questions and objectives.

3. Avoid duplication: By knowing what has already been done, you can avoid duplicating
previous research efforts. This ensures that you contribute something new and meaningful to the
field.

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4. Build on existing work: Reviewing the literature allows you to identify key theories,
methodologies, and findings that you can build upon in your own research. It provides a
framework for your study and helps you position your work within the broader academic
context.

5. Formulate hypotheses: Literature review helps you develop informed hypotheses or research
questions. By understanding the existing knowledge, you can make predictions and design
experiments or studies that address gaps or test existing theories.

So, reviewing the existing literature is not just about word count or having a long list of
references (answers A and B). It is primarily about gaining knowledge, identifying research gaps,
avoiding duplication, building on existing work, and formulating hypotheses (answer C). It also
helps you in your general studying by providing a solid foundation of knowledge and
understanding in your area of interest (answer D).

30. Data on numerical values of variables over a period of time is:

A. Pooled data
B. Cross-section data
C. Panel data
D. Time series data

The correct answer is D. Time series data.

Time series data refers to data that is collected and recorded over a period of time, typically at
regular intervals. It involves observing the values of variables over consecutive time periods,
such as days, months, or years. This type of data is commonly used in various fields, including
economics, finance, meteorology, and social sciences.

Time series data is characterized by its temporal dimension, where the order and timing of
observations are important. It allows for the analysis of trends, patterns, and relationships over
time. Examples of time series data include stock prices, GDP growth rates, temperature readings,
and monthly sales figures.

On the other hand, let's briefly discuss the other options as well:

A. Pooled data: Pooled data refers to data that combines observations from different sources or
groups without considering the time dimension. It is often used in cross-sectional studies where
data is collected at a specific point in time from different individuals or entities.

B. Cross-section data: Cross-section data refers to data collected at a specific point in time from
different individuals, entities, or units. It provides information about a particular characteristic or
variable for a given set of subjects or entities.

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C. Panel data: Panel data, also known as longitudinal data, combines both the time dimension
and the cross-sectional dimension. It involves observing the same individuals, entities, or units
over multiple time periods. Panel data allows for the analysis of both individual-level and time-
related effects.

In summary, when data involves numerical values of variables recorded over a period of time, it
is referred to as time series data (answer D).

31. One of the following is not correct about the theories of International Trade
A. The comparative advantage principle asserts that relative cost difference between trading
partners is the basis for international trade.
B. The Heckscher-Ohlin trade theory asserts that each country should specialize in a
commodity whose production requires intensive use of its abundant factor of production
C. According to absolute advantage principle, absolute cost difference between trading
partners is the basis for international trade
D. The Heckscher-Ohlin trade theory asserts that each country should specialize in a
commodity whose production requires intensive use of its scarce factor of production

The correct answer is C. According to the absolute advantage principle, absolute cost difference
between trading partners is the basis for international trade.

The absolute advantage principle is not correct regarding the theories of International Trade. The
absolute advantage principle, introduced by Adam Smith, states that countries should specialize
in producing goods in which they have an absolute advantage. Absolute advantage refers to a
country's ability to produce a good more efficiently or with fewer resources compared to another
country. However, this principle does not provide a comprehensive explanation for international
trade patterns.

On the other hand, let's briefly discuss the other options:

A. The comparative advantage principle asserts that the relative cost difference between trading
partners is the basis for international trade. This principle, developed by David Ricardo, suggests
that countries should specialize in producing goods in which they have a comparative advantage.
Comparative advantage refers to a country's ability to produce a good at a lower opportunity cost
compared to another country. This principle is widely accepted and forms the basis for
understanding international trade patterns.

B. The Heckscher-Ohlin trade theory asserts that each country should specialize in a commodity
whose production requires intensive use of its abundant factor of production. This theory,
developed by Eli Heckscher and Bertil Ohlin, states that countries will specialize in and export
goods that require the intensive use of their abundant factors of production, such as labor or
capital. This theory helps explain trade patterns based on differences in factor endowments
between countries.

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D. The correct statement is that the Heckscher-Ohlin trade theory asserts that each country
should specialize in a commodity whose production requires intensive use of its scarce factor of
production. The Heckscher-Ohlin theory argues that countries will specialize in and export goods
that require the intensive use of their relatively abundant factors of production, while importing
goods that require the intensive use of their relatively scarce factors of production.

In summary, the incorrect statement about the theories of International Trade is that the absolute
advantage principle suggests that absolute cost difference between trading partners is the basis
for international trade (answer C).

32. It is argued that defining property right solve the problem of externalities when few parties
are involved, which of the following corrective measures are related with this policy?
A. Tradable pollution permit
B. Quota
C. Coasian bargaining
D. Pigouvian tax

The correct answer is C. Coasian bargaining.

When it comes to solving the problem of externalities, such as pollution, the policy related to
defining property rights can be addressed through Coasian bargaining.

Coasian bargaining, named after economist Ronald Coase, suggests that if property rights are
clearly defined and transaction costs are low, parties involved in an externality can negotiate and
reach an efficient outcome without government intervention. In this scenario, the affected parties
can bargain and come to an agreement on how to internalize the externality and allocate
resources efficiently.

Now, let's briefly discuss the other options as well:

A. Tradable pollution permits: Tradable pollution permits, also known as cap-and-trade systems,
involve the government setting a limit (quota) on the total amount of pollution allowed. Permits
are then issued to firms, which can trade or sell their permits to others. This system provides
economic incentives for firms to reduce pollution and allows for flexibility in achieving overall
pollution reduction targets.

B. Quota: A quota is a government-imposed limit on the quantity of a good or service that can be
produced, imported, or consumed. While quotas can be used as a corrective measure to regulate
production or consumption, they are not directly related to defining property rights to solve
externalities.

D. Pigouvian tax: A Pigouvian tax, named after economist Arthur Pigou, is a corrective tax
imposed by the government on activities that generate negative externalities, such as pollution.
The tax is designed to internalize the external costs and encourage firms or individuals to reduce

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their harmful activities. It is a policy tool to address externalities but not directly related to
defining property rights.

In summary, the corrective measure related to defining property rights and solving externalities
when few parties are involved is Coasian bargaining (answer C). Tradable pollution permits
(answer A), quota (answer B), and Pigouvian tax (answer D) are also policy measures to address
externalities but are not directly related to defining property rights.

33. Which one of the following statements is true;

A. Marketing includes all of the activities necessary to move a product from producers to the
consumers
B. Marketing costs are incurred by farmers when they take their product to the market and
by traders as they move the product down the marketing chain to the consumer
C. Agricultural product marketing can be productive by creating utility
D. All of the above

The correct answer is D. All of the above.

All the statements mentioned in options A, B, and C are true when it comes to marketing:

A. Marketing includes all of the activities necessary to move a product from producers to
consumers. Marketing involves various activities such as product development, pricing,
promotion, distribution, and selling. It encompasses the entire process of bringing a product or
service to the market and making it available to consumers.

B. Marketing costs are incurred by farmers when they take their product to the market and by
traders as they move the product down the marketing chain to the consumer. In the agricultural
context, marketing costs refer to the expenses incurred during the process of getting agricultural
products from producers to consumers. These costs can include transportation, storage,
packaging, advertising, and other expenses involved in the marketing activities.

C. Agricultural product marketing can be productive by creating utility. Marketing agricultural

products creates utility by adding value to the products. This can be achieved through activities
such as branding, packaging, processing, and promoting the products to meet consumer needs
and preferences. By creating utility, marketing enhances the desirability and value of agricultural
products in the marketplace.

Therefore, all of the statements mentioned in options A, B, and C are true, making option D the
correct answer.

34. Which of the following cornponents of Sustainable Livelihood Framework influence access
to livelihood resources and determine composition of livelihood strategy portfolios?
A. Activities and livelihood strategies
B. Institutions, organizations and social relations

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C. Trends and shocks

D. Livelihood resources

The component of the Sustainable Livelihood Framework that influences access to livelihood
resources and determines the composition of livelihood strategy portfolios is D. Livelihood
resources.

Livelihood resources refer to the assets and capabilities that individuals, households, or
communities possess, which can be used to pursue and sustain their livelihoods. These resources
can be categorized into five main types:

1. Natural resources: These include land, water, forests, fisheries, and other natural assets that
can be utilized for various livelihood activities.

2. Physical resources: These encompass infrastructure, tools, equipment, and other tangible
assets that are necessary for livelihood activities.

3. Financial resources: This refers to the availability of money, savings, credit, and other
financial assets that enable individuals to invest in their livelihoods and cope with shocks or
uncertainties.

4. Human resources: This includes the skills, knowledge, education, health, and labor capabilities
of individuals, which are crucial for engaging in livelihood activities.

5. Social resources: These encompass social networks, social capital, and social support systems
that provide access to information, knowledge sharing, and collaboration opportunities for
livelihood activities.

Access to these livelihood resources plays a significant role in shaping the livelihood strategies
that individuals or households adopt. The composition of livelihood strategy portfolios, in turn,
determines how individuals combine and utilize different resources to meet their livelihood
needs and achieve sustainable livelihood outcomes.

Options A, B, and C are also important components of the Sustainable Livelihood Framework,
but they are not directly related to influencing access to livelihood resources and determining the
composition of livelihood strategy portfolios.

A. Activities and livelihood strategies: This component focuses on the specific livelihood
activities, income-generating strategies, and diversification options that individuals or
households undertake to sustain their livelihoods.

B. Institutions, organizations, and social relations: This component examines the formal and
informal institutions, organizations, and social networks that shape access to resources, provide
governance structures, and influence livelihood outcomes.

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C. Trends and shocks: This component considers the external factors such as economic trends,
environmental changes, and shocks (e.g., natural disasters, economic crises) that can impact
livelihoods and necessitate adaptive strategies.

I hope this clarifies the correct answer for you! Let me know if there's anything else I can help
with.

35. Currently the market for telecommunication. service in Ethiopia is entirely controlled by
Ethio- Telecom and Safaricom Ethiopia companies. What type of market structure do these
companies represent in the current telecommunication market of Ethiopia?
A. Monopoly
B. Duopoly
C. Oligopoly
D. None of the above

Based on the information provided, the market structure represented by Ethio-Telecom and
Safaricom Ethiopia in the current telecommunications market of Ethiopia is B. Duopoly.

A duopoly is a market structure in which there are only two dominant firms that have significant
control over the market and compete with each other. In this case, Ethio-Telecom and Safaricom
Ethiopia are the only two companies controlling the telecommunications market in Ethiopia,
indicating a duopoly market structure.

Option A, monopoly, refers to a market structure where there is a single dominant firm with no
or very limited competition. Since there are two companies in the market, it does not qualify as a
monopoly.

Option C, oligopoly, is a market structure characterized by a small number of large firms that
dominate the market. While duopoly is a specific type of oligopoly, it is distinguished by the
presence of only two dominant firms. Therefore, the correct term for this scenario is duopoly
rather than a general oligopoly.

So, the correct answer is B. Duopoly. If you have any more questions, feel free to ask!

36. According to the New Keynesian economists, prices and wages are not flexible as opposed to
the classical economists'
A. True
B. False
C. A and B
D. None of the above

According to the New Keynesian economists, prices and wages are generally considered to be
sticky or not fully flexible in the short run, in contrast to the classical economists who believed in
flexible prices and wages.

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So, the correct answer is A. True.

New Keynesian economists argue that in the short run, prices and wages are slow to adjust to
changes in demand and supply conditions. They believe that there are various frictions and
rigidities in the economy that prevent prices and wages from adjusting immediately to clear
markets. These frictions can include factors such as menu costs, labor market imperfections, and
coordination problems.

On the other hand, classical economists, who follow the classical school of thought, believe in
the flexibility of prices and wages. They argue that markets are efficient and that prices and
wages adjust quickly to clear markets, ensuring equilibrium.

Therefore, New Keynesian economists emphasize the role of nominal rigidities in the economy
and the need for government intervention, such as monetary policy, to stabilize the economy in
the short run.

So, the correct answer is A. True. Let me know if you have any further questions!

37. In solving integer programming problem (IPP) using Gomory's Fractional Cut method, the
first step is:
A. Solving the IPP as an ordinary LPP by ignoring the restriction of integer values of the
decision variables;
B. Constructing the new (Gomorian) constraint;
C. Testing the integrality of the optimal solution;
D. None of the above

In solving an Integer Programming Problem (IPP) using Gomory's Fractional Cut method, the
first step is option A: Solving the IPP as an ordinary Linear Programming Problem (LPP) by
ignoring the restriction of integer values for the decision variables.

Gomory's Fractional Cut method is a technique used to solve integer programming problems by
iteratively adding constraints known as Gomory cuts. These cuts are derived from the fractional
values of the decision variables in the optimal solution of the linear programming relaxation of
the IPP.

To apply Gomory's Fractional Cut method, the first step is to solve the IPP as an ordinary LPP
by ignoring the requirement that the decision variables must take integer values. This means
solving the linear programming relaxation of the IPP, where the decision variables can take
fractional values.

Once the linear programming relaxation is solved, the optimal solution will have fractional
values for the decision variables. The second step, which is not mentioned in the options
provided, involves constructing a Gomorian cut. This cut is derived from the fractional values of
the decision variables in the optimal solution.

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The Gomorian cut is then added as a new constraint to the original IPP, which restricts the
solution space and ensures that the next iteration will have an improved integer solution. This
process is typically repeated until an integer solution is obtained.

38. A type of market integration when firms at the same level of marketing function combine
(form a union) to reduce their effective number and the extent of actual competition in the
market is refers to:
A. Vertical integration
B. Conglomeration
C. Horizontal integration
D. All of the above

The correct answer is C. Horizontal integration.

Horizontal integration refers to the consolidation of companies operating at the same level of the
marketing function. It involves firms in the same industry coming together to combine their
resources, expertise, and market share. By doing so, they aim to reduce competition and increase
their market power.

Vertical integration, on the other hand, involves the merger or acquisition of companies at
different stages of the production or distribution process. This allows for greater control over the
supply chain and can lead to cost savings and increased efficiency.

Conglomeration refers to the merger or acquisition of unrelated businesses or companies

operating in different industries. This strategy is often employed to diversify a company's
portfolio and reduce risk.

So, the correct option is C. Horizontal integration, as it specifically addresses the combination of
firms at the same level of the marketing function to reduce competition.

39. Which one of the following is True?

A. The discount rate is weighted average of the return necessary to attract equity capital on
the one hand and the borrowing rate on the other
B. All projects that have a negative NPV are accepted
C. All project IRR less that market interest rate are accepted
D. All except B

The correct answer is D. All except B.

A. The discount rate is not necessarily a weighted average of the return necessary to attract
equity capital and the borrowing rate. The discount rate is typically determined by considering
the cost of capital, which is a combination of the cost of equity and the cost of debt. It is used to
calculate the present value of future cash flows in order to determine the net present value (NPV)
of a project.

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MTU AgEc Dep’t AgEc Model Exit Exam Key Answer

B. It is not true that all projects with a negative NPV are accepted. In fact, projects with a
negative NPV are generally considered unfavorable because they indicate that the project's cash
outflows exceed its cash inflows. Accepting projects with negative NPV would result in a loss
for the company.

C. It is not true that all projects with an internal rate of return (IRR) lower than the market
interest rate are accepted. The IRR is the discount rate that makes the NPV of a project equal to
zero. Projects with an IRR lower than the market interest rate would have a negative NPV and
would typically be rejected.

Therefore, the correct answer is D. All except B.

40. Feasible solution is a solution which satisfies

A. All constraints and non-negativity conditions simultaneously
B. Some of the constraints
C. Non-negative restriction
D. Technical constraints

The correct answer is A. Feasible solution refers to a solution that satisfies all constraints and
non-negativity conditions simultaneously.

In various problem-solving contexts, such as linear programming or optimization problems,

constraints are imposed to define the limitations or restrictions on the variables involved. A
feasible solution is one that meets all of these constraints and satisfies any non-negativity
conditions.

For example, in a linear programming problem, constraints can include limitations on resources,
capacities, or other requirements. A feasible solution would be one that adheres to these
constraints and does not violate any non-negativity conditions, such as having negative quantities
for decision variables.

Therefore, option A is the correct answer as it accurately describes a feasible solution by

considering both the satisfaction of constraints and non-negativity conditions simultaneously.

41. Which of the following is not one of the major parts of the research report?
A. Method
B. Abstract
C. Results
D. Footnotes

The correct answer is D. Footnotes.

The major parts of a research report typically include:

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MTU AgEc Dep’t AgEc Model Exit Exam Key Answer

A. Method: This section outlines the methodology and procedures used in the research study. It
provides details on the research design, data collection methods, sample size, and any statistical
analyses used.

B. Abstract: The abstract is a concise summary of the research report. It typically includes the
research objective, methodology, key findings, and conclusions. The abstract is usually placed at
the beginning of the report to provide readers with a quick overview of the study.

C. Results: The results section presents the findings of the research study. It includes data
analysis, statistical tests, and any significant results or trends observed. This section often
includes tables, graphs, or charts to visually represent the data.

D. Footnotes: Footnotes are not typically considered one of the major parts of a research report.
Footnotes are additional information or explanations that are provided at the bottom of a page,
typically indicated by superscript numbers or symbols within the main text. They are used to
provide additional context, references, or clarifications.

Therefore, the correct answer is D. Footnotes, as it is not one of the major parts of a research
report.

42. Suppose consumption is $10 million when disposable income is $10.5 million, and
consumption is $10.5 million when. disposable income is $11.5 million, the marginal
propensity to consume is
A. 0.75
B. 0.50
C. 1.00
D. None

To calculate the marginal propensity to consume (MPC), we need to determine the change in
consumption divided by the change in disposable income.

In this case, when disposable income increases from $10.5 million to $11.5 million, consumption
increases from $10 million to $10.5 million. The change in consumption is $10.5 million - $10
million = $0.5 million. The change in disposable income is $11.5 million - $10.5 million = $1
million.

Now we can calculate the MPC:

MPC = Change in Consumption / Change in Disposable Income

MPC = $0.5 million / $1 million

MPC = 0.5

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Therefore, the correct answer is B. 0.50. The marginal propensity to consume is 0.50, indicating
that for every additional dollar of disposable income, 50 cents will be consumed.

43. An example of a product that produces both positive and negative externalities is:
A. Beautification
B. Large highways
C. Pollution
D. None of the above

The correct answer is C. Pollution.

Positive externalities refer to the benefits that are enjoyed by third parties as a result of a
particular economic activity. Negative externalities, on the other hand, are the costs or harms
imposed on third parties due to the same economic activity.

In the case of pollution, it can be seen as an example of a product that produces both positive and
negative externalities. The production of goods or services often involves the emission of
pollutants into the environment, such as air and water pollution. These pollutants can have
harmful effects on ecosystems, human health, and overall well-being, which represent negative
externalities.

However, in some cases, pollution can also result in positive externalities. For example, the
presence of certain pollutants in the atmosphere can contribute to the formation of clouds and
precipitation, which can have positive effects on agriculture and water resources.

Therefore, pollution is an example of a product that produces both positive and negative
externalities. Options A and B (beautification and large highways) do not inherently produce
both positive and negative externalities, and option D states that none of the above options are
correct, which is not accurate in this case.

44. Accepting a false null hypothesis results in which type of error:

A. Hypothesis error
B. Type I error
C. Structural error
D. Type II error

The correct answer is B. Type I error.

In hypothesis testing, a null hypothesis (H0) is a statement that assumes there is no significant
difference or relationship between variables. Type I error occurs when we reject the null
hypothesis when it is actually true, meaning we mistakenly conclude that there is a significant
difference or relationship when there isn't.

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Type I error is also known as a "false positive" or an "alpha error." It is the error that occurs
when we make a wrong decision by rejecting the null hypothesis and concluding that there is a
significant effect or relationship in the data when, in reality, there is not.

On the other hand, Type II error (option D) occurs when we fail to reject the null hypothesis
when it is actually false. This error is also known as a "false negative" or a "beta error."

Options A and C do not accurately describe the type of error that occurs when accepting a false
null hypothesis.

Therefore, the correct answer is B. Type I error.

45. Among the core values of development, which one of the following concerned about the
ability to meet basic needs of people?
A. Self-Esteem
B. Welfare
C. Freedom from Servitude
D. Sustenance

The correct answer is D. Sustenance.

Among the core values of development, sustenance refers to the ability to meet the basic needs
of people. It encompasses ensuring access to food, clean water, shelter, healthcare, and other
essential resources necessary for survival and well-being.

Self-esteem (option A) is a psychological concept related to an individual's perception of their

own worth and value.

Welfare (option B) generally refers to the overall well-being and quality of life of individuals or
communities. While welfare can encompass meeting basic needs, it is a broader concept that
includes social, economic, and environmental factors.

Freedom from servitude (option C) focuses on ensuring individuals are free from forced labor,
slavery, or any form of servitude. It is related to human rights and ensuring that people have the
freedom to make choices and live without coercion.

Therefore, the correct answer is D. Sustenance, as it specifically addresses the ability to meet the
basic needs of people, which is a fundamental aspect of development.

46. Which one of the following methods that can be used to test and find the optimal solution in
transportation problem:
A. Hungarian method
B. VAM method
C. MODI method
D. None of the above
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MTU AgEc Dep’t AgEc Model Exit Exam Key Answer

The correct answer is option C, the MODI method. The MODI (Modified Distribution) method
is a commonly used technique to find the optimal solution in transportation problems. It is an
iterative process that helps determine the improvement potential for each unused cell in the
transportation table. By identifying the cell with the maximum improvement potential (MODI),
the method allows for the allocation of units to that cell, leading to an improved solution.

Options A and B, the Hungarian method and the VAM (Vogel's Approximation) method, are
also used in solving transportation problems, but they are not specifically designed to find the
optimal solution. The Hungarian method is used for solving assignment problems, while the
VAM method is an initial allocation method used to find a feasible solution.

So, the correct answer is C, the MODI method.

47. In a linear regression model, Y= a+bX+ui:

A. Y is the independent variable; X is the dependent variable
B. Y is the regressor, X is the explanatory variable
C. Y is the regressand, X is the explanatory variable
D. Y is the independent variable; X is the outcome variable,

The correct answer is C. In a linear regression model, Y = a + bX + uᵢ, Y is the regressand, and X
is the explanatory variable.

In a linear regression model, we are trying to explain or predict the value of the dependent
variable (Y) based on the values of one or more independent variables (X). The regressand refers
to the dependent variable, which is the variable we are trying to model or predict. In this case, Y
is the regressand because it is the dependent variable that we are seeking to explain or predict.

On the other hand, X is the explanatory variable. It is the independent variable that we believe
has an influence on the value of the dependent variable. In this case, X is the explanatory
variable because it is the variable we use to explain or predict the value of Y.

So, the correct answer is C. Y is the regressand, and X is the explanatory variable in a linear
regression model.

48. The coefficient of slack or surplus variables in the objective function is

A. -M
B. 0
C. +M
D. None of them

The correct answer is B. The coefficient of slack or surplus variables in the objective function is
typically 0.

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In linear programming, slack or surplus variables are introduced to convert inequality constraints
into equality constraints. These variables represent the amount by which the left-hand side of an
inequality constraint falls short (slack) or exceeds (surplus) the right-hand side.

The objective function in linear programming represents the goal or objective to be optimized
(e.g., maximize profit or minimize cost). Since slack or surplus variables do not directly
contribute to the objective function, their coefficients are typically set to 0.

So, the correct answer is B. The coefficient of slack or surplus variables in the objective function
is 0.

49. The underdeveloped countries foreign trade orientation is characterized by the following.
Except,
A. Mostly oriented towards the export of primary products and import of manufacturing
products
B. The economy is often exposed to international price fluctuations & balance of payment
problem
C. Existence of export diversification in production of export commodities
D. It neglects the comparative advantage in production of export commodities

The correct answer is C. Existence of export diversification in the production of export

commodities.

Underdeveloped countries' foreign trade orientation is often characterized by certain patterns and
challenges. Let's go through the options:

A. Mostly oriented towards the export of primary products and import of manufacturing
products: This is a common characteristic of underdeveloped countries. They often specialize in
exporting primary products, such as agricultural goods or raw materials, while importing
manufactured goods.

B. The economy is often exposed to international price fluctuations and balance of payment
problems: Underdeveloped countries are more vulnerable to international price fluctuations due
to their reliance on primary product exports. Additionally, they may face challenges with their
balance of payments, which refers to the difference between the value of imports and exports.

C. Existence of export diversification in the production of export commodities: This statement is

incorrect. Underdeveloped countries often lack export diversification and rely heavily on a
limited range of primary products for their exports.

D. It neglects the comparative advantage in the production of export commodities: This is

another characteristic of underdeveloped countries. Due to various factors, such as lack of
infrastructure, technology, or investment, they may not fully exploit their comparative advantage
in the production of export commodities.

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MTU AgEc Dep’t AgEc Model Exit Exam Key Answer

Therefore, the correct answer is C. Existence of export diversification in the production of export
commodities.

50. A statement of the quantitative research question should:

A. Extend the statement of purpose by specifying exactly the question (s) the researcher will
address
B. Help the research in selecting appropriate participants, research methods, measures, and
materials
C. Specify the variables of interest
D. All the above

The correct answer is D. All of the above.

A statement of the quantitative research question should encompass multiple aspects to

effectively guide the research process. Let's go through the options:

A. Extend the statement of purpose by specifying exactly the question(s) the researcher will
address: The research question should provide a clear and specific focus for the study, extending
the broader statement of purpose. It helps to define the specific question(s) that the researcher
aims to answer through the research.

B. Help the researcher in selecting appropriate participants, research methods, measures, and
materials: The research question plays a crucial role in guiding the selection of various research
components, such as participants, research methods, measures, and materials. It helps ensure that
these aspects align with the research question and facilitate the collection of relevant data.

C. Specify the variables of interest: The research question should clearly identify the variables of
interest that the researcher intends to investigate. It helps to define the main constructs or factors
that will be examined and analyzed in the study.

Therefore, the correct answer is D. All of the above. A statement of the quantitative research
question should extend the statement of purpose, help in selecting appropriate research
components, and specify the variables of interest.

51. Cost or market price method used to value the asset in its current market price and commonly
used for valuing current assets.
A. True
B. False
C. A and B
D. All of the above

The correct answer is B. False.

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The cost or market price method is not used to value assets at their current market price. Instead,
it is used to value assets at either their cost or their market price, whichever is lower. This
method is commonly used for valuing inventory or assets that are held for sale.

Under the cost or market price method, if the market price of an asset is lower than its cost, the
asset is valued at the lower market price. However, if the market price is higher than the cost, the
asset is valued at its cost.

Therefore, the correct answer is B. False. The cost or market price method is not used to value
assets at their current market price.

52. When the income approach is used to measure GDP, the major components of GDP are
A. Consumption, investment, government purchases, private investment and Personal
savings.
B. Consumption, investment, indirect business taxes, and depreciation.
C. Employee compensation, rents, interest, self-employment income, and corporate profits.
D. Employee compensation, corporate profits, depreciation, and indirect business taxes.

The correct answer is C. Employee compensation, rents, interest, self-employment income, and
corporate profits.

53. Which project stages or phases is/are very important for project success?
A. Preparation and analysis
B. Implementation project design
C. Ex-post evaluation
D. All are equally important

All of the mentioned stages or phases are important for project success. Let's discuss each one in
more detail: a. Preparation and analysis: This stage involves defining the project objectives,
identifying stakeholders, conducting feasibility studies, and analyzing risks and constraints. It
sets the foundation for the project by ensuring that it is well-defined, feasible, and aligned with
the organization's goals. Proper preparation and analysis help in identifying potential challenges
and developing effective strategies to mitigate them, increasing the chances of project success. b.
Implementation project design: This phase involves developing a detailed project plan, allocating
resources, and executing the project activities. It includes tasks such as creating a work
breakdown structure, establishing timelines, assigning responsibilities, and monitoring progress.
A well-designed implementation plan ensures that the project is executed efficiently, resources
are utilized effectively, and project activities are completed within the defined timeframe. c. Ex-
post evaluation: This stage occurs after project completion and involves assessing the project's
outcomes, impacts, and lessons learned. It helps in determining whether the project objectives
were achieved, identifying areas of improvement, and capturing best practices for future projects.
Ex-post evaluation provides valuable insights into the project's success and enables organizations
to learn from their experiences, enhancing future project performance. While all these stages are

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important, their significance may vary depending on the nature and complexity of the project.
For example, for a small-scale project, the preparation and analysis phase may be relatively
shorter compared to a large-scale project. However, neglecting any of these stages can increase
the risk of project failure. Therefore, it is crucial to give equal attention and importance to all
these stages for project success.

54. Which one of the following is not the advantage of specialized farming system?
A. Productive resources like land, labour and capital are not fully utilized
B. It is more profitable to grow a crop on a land best suited to it
C. Less equipment and labour are needed
D. It allows better assembling, grading. processing, storing, transporting and financing of the
produce

The answer is option A. Productive resources like land, labour, and capital are not fully utilized.

55. Terms of trade implies the commodity the country could export and import
A. True
B. False
C. A and B
D. None of the above

The correct answer is B. False.

Terms of trade refer to the ratio at which a country's exports are exchanged for imports. It
represents the relative prices of a country's exports and imports. It does not directly imply the
specific commodities a country could export or import.

The terms of trade can be influenced by various factors such as supply and demand conditions,
exchange rates, trade policies, and global market dynamics. It is an important economic indicator
that reflects the competitiveness and profitability of a country's trade.

56. ___________ refers to the cost/value of self- owned or self-employed resource

A. Fixed cost X
B. Variable cost C
C. Implicit cost
D. None of the above

The correct answer is C. Implicit cost. Implicit cost refers to the opportunity cost of utilizing
self-owned or self-employed resources, which are not directly incurred or measured in monetary
terms. It represents the value of the next best alternative foregone by using those resources in a
particular way. Fixed cost and variable cost, on the other hand, are terms commonly associated
with explicit costs in business and accounting.

57. Which of the following is not a non-random sampling method?

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A. Cluster sampling
B. Accidental sampling
C. Quota sampling
D. Convenience sampling

The correct answer is A. Cluster sampling. Cluster sampling is a type of random sampling
method. In Cluster sampling, the population is divided into clusters, and a subset of clusters is
randomly selected to be included in the sample. Within the selected clusters, all individuals or
units are included in the sample. On the other hand, accidental sampling, quota sampling, and
convenience sampling are all non-random sampling methods: - Accidental sampling, also known
as convenience sampling, involves selecting individuals who are readily available or easily
accessible to the researcher. - Quota sampling involves selecting individuals based on pre-
defined quotas to ensure that the sample represents certain characteristics of the population. -
Convenience sampling involves selecting individuals who are easily accessible or convenient for
the researcher, without following a specific sampling plan.

58. The fundamental problem associated with public good are:

A. Free rider problem
B. Pricing problem: efficiency in public good requires different pricing for different
individual which is difficult to implement.
C. Information problem
D. All

The correct answer is D. All of the above. The fundamental problems associated with public
goods include the free rider problem, pricing problem, and information problem. The free rider
problem refers to the situation where individuals can benefit from a public good without
contributing towards its provision. This creates a disincentive for individuals to contribute,
leading to under-provision of the public good. The pricing problem arises because public goods
are non-excludable, meaning it is difficult to charge different prices to different individuals based
on their level of consumption. This makes it challenging to achieve efficiency in the provision of
public goods. The information problem relates to the difficulty in accurately assessing the
demand for and benefits of public goods. Since public goods are often non-rivalrous, it can be
challenging to gather information on individual preferences and willingness to pay, making it
difficult to allocate resources efficiently. Therefore, all of these problems are associated with
public goods.

59. Suppose the utility function of a person consuming two commodities X and Y with income
Birr 600 is given by 2X0.6Y0.4. If the per unit price of X is Birr 20 and per unit price of Y is
Birr 40, then which of the following is true?
A. The MRSX,Y at the optimum is 0.6
B. The marginal rate of substitution (MRSX,Y) at the optimum is 0.8
C. The utility maximizing level of consumptions are 30 units of X and 10 units of Y

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D. The utility maximizing level of consumptions are 25 units of X and 15 units of Y

To determine the correct answer, we need to find the utility-maximizing level of consumption for
commodities X and Y using the given utility function. The utility function is given as U(X, Y) =
2X^0.6 * Y^0.4, where X represents the quantity of commodity X consumed and Y represents
the quantity of commodity Y consumed. The consumer's income is Birr 600, and the prices per
unit for X and Y are Birr 20 and Birr 40, respectively. To find the utility-maximizing level of
consumption, we can use the concept of marginal utility. The marginal utility of X (MUx) is
given by the partial derivative of the utility function with respect to X, and the marginal utility of
Y (MUy) is given by the partial derivative of the utility function with respect to Y. MUx =
1.2X^(-0.4) * Y^0.4 MUy = 0.4X^0.6 * Y^(-0.6) To maximize utility, we set the marginal rate
of substitution (MRS) equal to the ratio of prices: MRS = MUx / MUy = (1.2X^(-0.4) * Y^0.4) /
(0.4X^0.6 * Y^(-0.6)) = 3Y/X The MRS at the optimum is equal to the ratio of prices, which is
40/20 = 2. Therefore, the correct answer is option A: The MRSX,Y at the optimum is 0.6.

60. If hiring an additional worker would increase a firm's total cost by less than its total revenue,
a profit maximizing firm should:
A. Hire that worker only if another worker leaves or is fired
B. Hire that worker only if the worker can raise the firm's productivity
C. Not hire that worker
D. Hire that worker

The correct answer is D. Hire that worker If hiring an additional worker would increase a firm's
total revenue more than it would increase its total cost, a profit-maximizing firm should hire that
worker. This is because the additional revenue generated by the worker will contribute to
increasing the firm's overall profit.

61. A formal document that presents the research objectives, design of achieving these
objectives, and the expected outcomes/deliverables of the study is called:
A. Research proposal
B. Research report
C. Research design
D. Research hypothesis

The correct answer is a. Research proposal. A research proposal is a formal document that
outlines the objectives, methodology, and expected outcomes of a research study. It provides a
detailed plan for conducting the research and serves as a blueprint for the study.

62. If the government increases the tax rate on goods and services,
A. GDP increases by the amount of increase in tax earning
B. A and B
C. Disposable income declines
D. Consumption of good and services increase

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The correct answer is option C: Disposable income declines, and the consumption of goods and
services decreases. When the government increases the tax rate on goods and services, it reduces
the disposable income of individuals and businesses. Disposable income is the amount of income
left after paying taxes, and when it decreases, people have less money to spend on goods and
services. As a result, the consumption of goods and services tends to decline. Increasing taxes
can have a negative impact on economic growth and can potentially lead to a decrease in GDP.
However, it is not accurate to say that GDP increases by the amount of the increase in tax
earnings (option A). The relationship between tax rates, GDP, and overall economic activity is
complex and depends on various factors, including the specific circumstances of the economy.

63. Number of basic allocation in any row or column in Assignment Problem should be:
A. Exactly one;
B. Only two;
C. At least one;
D. None of the above

The correct answer is a. Exactly one. In the Assignment Problem, which is a special case of
linear programming, the objective is to assign a set of tasks to a set of resources in the most
efficient way. Each task can be assigned to only one resource, and each resource can handle only
one task. Therefore, in any row or column, there should be exactly one basic allocation, meaning
that each task or resource is allocated to exactly one other task or resource. This ensures that all
tasks are assigned and all resources are utilized efficiently

64. In solving a LP model, the following condition needs to be satisfied, except

A. Objective and constraint functions have to be linear
B. Resources of the system should be found in limited quantity
C. The activities considered in the problem must be identifiable and measurable in
quantitative terms
D. None of the above

The correct answer is D. None of the above. In solving a Linear Programming (LP) model, all
the conditions mentioned in the options need to be satisfied. The objective and constraint
functions must be linear, the resources of the system should be limited, and the activities
considered in the problem must be identifiable and measurable in quantitative terms.

65. One of the following is not physical function of agricultural marketing

A. Transportation
B. Packaging
C. Standardization
D. Storage

The correct answer is C. Standardization. Standardization is not a physical function of

agricultural marketing. It refers to the process of establishing and maintaining uniformity and

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consistency in the quality, size, grading, and labeling of agricultural products. While
transportation, packaging, and storage are physical functions that involve the handling and
movement of agricultural products, standardization is more focused on ensuring consistency and
quality control.

66. If all firms have the same marginal external costs and marginal abatement costs, which form
of environmental regulation can result in the optimal level of pollution?
A. Cap-and-trade
B. Emissions limits
C. Emissions taxes
D. A and C

The correct answer is D. A and C. Both cap-and-trade and emissions taxes have the potential to
achieve the optimal level of pollution when all firms have the same marginal external costs and
marginal abatement costs. Cap-and-trade is a market-based mechanism where a cap is set on the
total amount of pollution allowed. Permits representing the right to emit a certain amount of
pollution are distributed among firms. Firms can buy and sell these permits in a market. This
system creates a financial incentive for firms to reduce their pollution levels. If all firms have the
same marginal abatement costs, they will trade permits until the marginal cost of abatement
equals the marginal external cost, resulting in the optimal level of pollution. Emissions taxes, on
the other hand, involve imposing a tax on each unit of pollution emitted. The tax is set at a level
that reflects the marginal external cost associated with pollution. If all firms have the same
marginal abatement costs, they will compare the cost of reducing pollution to the cost of paying
the tax. Firms will choose to reduce pollution until the marginal cost of abatement equals the tax
rate, again resulting in the optimal level of pollution. Therefore, both cap-and-trade and
emissions taxes can be effective forms of environmental regulation in achieving the optimal level
of pollution when firms face the same marginal external costs and marginal abatement costs.

67. Concept is of two types

A. None of the above
B. Abstract and coherent
C. Concrete and coherent
D. Abstract and concrete

The correct answer is D. Abstract and concrete.

Concepts can be classified into two types: abstract and concrete.

Abstract concepts are ideas or notions that do not have a physical or tangible existence. They are
often more general and can be difficult to visualize or perceive directly. Examples of abstract
concepts include love, justice, freedom, or happiness.

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Concrete concepts, on the other hand, refer to specific objects, things, or entities that can be
perceived through the senses. They have a physical or tangible existence and can be directly
observed or experienced. Examples of concrete concepts include a chair, a tree, a car, or a book.

68. The natural rate of unemployment consists of:

A. Only structural and cyclical unemployment
B. Only frictional and cyclical unemployment
C. Only frictional and structural unemployment
D. Only cyclical unemployment

The natural rate of unemployment consists of frictional and structural unemployment. Therefore,
option C. Only frictional and structural unemployment is the correct answer.

69. The ratio of Total Sum of Squares and Explained Sum of Squares is:
A. Co-efficient of correlation
B. Co-efficient of variation
C. Co-efficient of co-variation
D. Co-efficient of determination

The correct answer is D. Co-efficient of determination. The ratio of the Total Sum of Squares
(TSS) and the Explained Sum of Squares (ESS) is known as the Co-efficient of Determination. It
is a statistical measure that represents the proportion of the total variation in the dependent
variable that is explained by the independent variable(s).

70. Which of the following is an indicator social capital in the sustainable livelihood framework?
A. Shelter
B. Water resources
C. Affordable energy
D. Trust and membership in formal and informal groups

The correct answer is d. Trust and membership in formal and informal groups. In the sustainable
livelihood framework, social capital refers to the relationships, networks, and norms that enable
individuals and communities to collaborate, share resources, and support each other. Trust and
membership in formal and informal groups are essential indicators of social capital as they
reflect the level of social cohesion, cooperation, and collective action within a community.

71. Suppose nominal GDP in 1998 was less than real GDP in 1998. Given this information, we
know with certainty that:
A. Real GDP in 1998 was less than nominal GDP in the base year
B. The price level in 1998 was less than the price level in the base year
C. Real GDP in 1998 was less than real GDP in the base year
D. The price level in 1998 was greater than the price level in the base year

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The correct answer is B: The price level in 1998 was less than the price level in the base year. If
nominal GDP in 1998 was less than real GDP in 1998, we know with certainty that the price
level in 1998 was less than the price level in the base year. This is because real GDP is calculated
by adjusting nominal GDP for changes in the price level, using a price index such as the GDP
deflator. If real GDP is greater than nominal GDP, it means that the price level has decreased
since the base year.

72. Labor is the only variable factor whose market is perfect. True or false?
A. False
B. True
C. A and B
D. None of the above

The correct answer is a. False. Labor is not the only variable factor whose market is perfect.
Other factors of production, such as capital and land, also have markets that can be considered
perfect or imperfect depending on various factors.

73. Which of the following is/are the feature/s of poverty?

A. Lack of resources
B. Low quality of human resource
C. Most of income is used for basic needs
D. All of the above

The correct answer is D. All of the above All three options mentioned are features of poverty.
Lack of resources refers to the limited access to essential resources like food, water, healthcare,
education, and housing. Low quality of human resources suggests that individuals living in
poverty may have limited skills, education, and employment opportunities. Lastly, when most of
a person's income is used to meet basic needs such as food, shelter, and healthcare, it indicates a
state of poverty.

74. Objective plays an important role to define project cost and benefit. Hence, what is
fundamental objective of the private business firm?
A. Increase net income
B. Increasing national income
C. Improving balance of payments
D. All of the above

The fundamental objective of a private business firm is typically to increase net income. This is
achieved by generating profits and maximizing the financial returns for the owners or
shareholders of the firm. While increasing national income and improving the balance of
payments can indirectly benefit a private business firm, they are not typically considered the
primary objectives of the firm. Therefore, the correct answer would be option a. Increase net
income.

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75. In the linear regression model y=a + Bx +u

A. x is the regressor
B. y is the regressor
C. x is the regressand
D. None of the above

In the linear regression model y = a + Bx + u, the regressor is x. Therefore, option a. "x is the
regressor" is correct.

76. Which of the following is true

A. Marginal cost below average variable cost, average variable cost increase
B. Marginal cost intercepts average variable cost, average variable cost rich minimum point.
C. Marginal cost below average variable cost, average variable cost has positive slope
D. Marginal cost above average variable cost, average variable cost increase

The correct answer is B and D. Marginal cost above average variable cost, average variable cost
increase. In general, the relationship between marginal cost (MC) and average variable cost
(AVC) is as follows: - When MC is below AVC, AVC is decreasing. - When MC intersects
AVC, AVC is at its minimum point. - When MC is above AVC, AVC is increasing.

77. Discharges of chemicals from a paper plant that pollute a nearby river represent an example
of:
A. Internal costs
B. The underground economy
C. Transfer costs
D. Social costs

The correct answer is D. Social costs. Discharges of chemicals from a paper plant that pollute a
nearby river create negative externalities, impacting the environment and the people who rely on
the river for various purposes. These costs are not borne by the paper plant itself but are instead
imposed on society as a whole, making them social costs

78. If you are working in one of the research centers in the country and your organization is
going to initiate on-farm Farming Systems Research project in already selected research area.
If you are assigned to lead the initiated research project, what will be your first activity?
A. Recommendation
B. Testing
C. Diagnostic survey
D. Planning

If I am assigned to lead the initiated research project on-farm Farming Systems Research, my
first activity would be C. Diagnostic survey. A diagnostic survey is crucial to gain a
comprehensive understanding of the current farming systems in the selected research area. This

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survey involves collecting data through interviews, observations, and analysis of existing farm
records. The purpose of this activity is to identify the existing constraints, challenges, and
opportunities within the farming systems. By conducting a diagnostic survey, I will be able to
gather essential information about the farming practices, available resources, socio-economic
factors, and environmental conditions in the research area. This information will help in
identifying the specific research needs and priorities, as well as understanding the context in
which the project will be implemented. Based on the findings from the diagnostic survey, I can
then proceed with the subsequent activities such as planning, recommendation, and testing. The
survey will provide a solid foundation for designing appropriate interventions and strategies
tailored to the specific needs of the farmers in the research area.

79. Which one of the following are the main challenge associates with farm record keeping?
A. Fear of taxation
B. Complicated nature of agribusiness
C. Triple role of farmers
D. All of the above

D. All of the above All three options mentioned (fear of taxation, complicated nature of
agribusiness, and the triple role of farmers) are main challenges associated with farm record
keeping. Fear of taxation can be a challenge as farmers may be concerned about the tax
implications of accurate record keeping and may be hesitant to disclose their financial
information. The complicated nature of agribusiness, including factors such as crop rotation,
livestock management, input costs, and market fluctuations, makes it challenging to maintain
accurate and up-to-date farm records. The triple role of farmers, which involves simultaneously
managing the farming operations, financial aspects, and administrative tasks, can make record
keeping a daunting task, especially for small-scale farmers who often have limited resources and
time. Therefore, all of these factors contribute to the challenges associated with farm record
keeping.

80. Assume that you are assigned to undertake livelihood context analysis, which one of the
following tools most useful you will employ for learning about the community's population,
local poverty indicators, and number and location of households by type (ethnicity, caste,
female-headed, wealthy, poor, etc.)?
A. Village Social Map
B. Transects
C. Trend lines
D. Village Resources Map

The most useful tool for learning about the community's population, local poverty indicators, and
number and location of households by type would be the Village Social Map (option a). The
Village Social Map provides a visual representation of the community, including information
about the population, social groups, and household characteristics. It allows for a comprehensive

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understanding of the community's demographics and socio-economic dynamics. However, it is

important to note that the Village Social Map also has limitations. One limitation is that it may
not capture the dynamic nature of the community accurately. Population and household
characteristics can change over time, and the map may not always reflect the most up-to-date
information. Therefore, it is essential to supplement the information from the Village Social Map
with other tools and methods to ensure a comprehensive understanding of the livelihood context.

81. Which of the following is not true about collusive oligopoly?

A. Agreements have to be made secretly since open collusive action is commonly illegal in
most countries
B. They can agree to set certain prices or to share markets in certain ways
C. It can be cartel or price leadership
D. Agreements can be made freely as it is one form of market structure

The statement "Agreements can be made freely as it is one form of market structure" is not true
about collusive oligopoly. In collusive oligopoly, agreements are made secretly since open
collusive actions are commonly illegal in most countries.

82. Second step in problem formulation is:

A. Discussions
B. Survey
C. Statement of the problem
D. Understanding the nature of the problem

The correct answer is D. The second step in problem formulation is to understand the nature of
the problem. This involves exploring the problem and identifying its key characteristics. By
understanding the nature of the problem, researchers can gain insights into the underlying causes
and potential solutions.

Other steps in formulating a research problem may include identifying a general area of interest,
reviewing the context of the information, determining relationships between variables, and
generating alternative approaches. It is important to note that the process of formulating a
research problem consists of several steps and requires a reasonable level of knowledge in the
broad subject area within which the study is to be undertaken and the research methodology
itself.

83. One of the following is one of the limitations of conservation agricultural development
model?
A. The model does not include the sustainability concept
B. The model is pro-environment
C. The model focuses on utilizing underutilized grazing lands
D. Applying the model in slow production level

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The limitation of the conservation agricultural development model is that it does not include the
sustainability concept (option A).

84. Transport function of marketing creates:

A. Time utility
B. Possession utility
C. Form utility
D. Place utility

The transport function of marketing creates place utility. It involves the physical movement of
goods from one location to another, making products available at the right place for consumers to
purchase.

85. Suppose a firm develops new product. If the firm initially set high price accompanied by
heavy promotion to sell the product to smaller group of the society, what pricing strategy is
the firm following?
A. Market penetration pricing strategy:
B. Market skimming pricing strategy;
C. Discriminatory pricing strategy;
D. None of the above.

The pricing strategy that the firm is following in this scenario is B. Market skimming pricing
strategy. Market skimming involves setting a high price initially to target a smaller group of
customers who are willing to pay a premium for the new product. This strategy allows the firm to
maximize its profits before gradually lowering the price to attract a broader customer base.

86. The term which refers to a route through which agricultural products move from the
producers to the consumers?
A. Marketing channel;
B. Marketing cost;
C. Marketing margin;
D. None of the above.

The correct answer is option A. Marketing channel

87. Which of the following is not correct

A. The economic input and outputs of the project can be valued using shadow pricing
mechanism, if market is not perfectly competitive.
B. In financial analysis, the project inputs and outputs can be valued using efficient price, if
market is not perfectly competitive
C. The financial input and outputs of the project can be valued using market prices
D. In economic analysis, the project inputs and outputs can be valued using economics
prices, if market is not perfectly competitive.

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The correct answer is option B. In financial analysis, the project inputs and outputs cannot be
valued using efficient price if the market is not perfectly competitive. Efficient prices are
determined in perfectly competitive markets, where there is no market power or external
influences affecting prices. In imperfectly competitive markets, such as monopolies or
oligopolies, prices are not considered efficient, and therefore, they cannot be used to value
project inputs and outputs in financial analysis.

88. ___________ is shows the negative relationship between inflation and unemployment
A. Hyperinflation
B. Okun's Law
C. Phillips Curve
D. Stagflation

The correct answer is C. Phillips Curve. The Phillips Curve illustrates the negative relationship
between inflation and unemployment. It suggests that when unemployment is low, inflation tends
to be high, and vice versa. This relationship was initially observed by economist A.W. Phillips in
the 1950s and has since been a subject of study in macroeconomics. Stagflation, on the other
hand, refers to a combination of high inflation and high unemployment, which is not in line with
the negative relationship described by the Phillips Curve.

89. One of the following is correct about the effects tariff imposed by this small country
A. There is no welfare change on both producers and consumers
B. Consumers welfare loss to producers is equivalent to area "B"
C. Producers welfare increases by area "F".
D. Producers welfare decreases by area "B"

90. Undiscounted measures of project worth doesn't consider time value of money
A. True
B. False
C. A and B
D. None of the above

The correct answer is A. True. Undiscounted measures of project worth, such as payback period
and accounting rate of return, do not take into account the time value of money. These measures
do not consider that a dollar received in the future is worth less than a dollar received today due
to factors such as inflation and the opportunity cost of capital. Therefore, option A is the correct
answer, stating that undiscounted measures of project worth do not consider the time value of
money.

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91. If all aij values in the pivot (incoming variable) column of the simplex tableau are zero
and/or negative, then:
A. There exist no solution
B. The solution is unbounded
C. The solution is infeasible
D. None of the above

The correct answer is c. The solution is infeasible. When all the aij values in the pivot (incoming
variable) column of the simplex tableau are zero and/or negative, it means that there are no
positive coefficients available to increase the value of the objective function. This indicates that
the problem is infeasible, meaning there is no feasible solution that satisfies all the constraints
simultaneously.

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