1.

Under the perfectly competitive market the industry is price taker, since all firms in this
type of market have no power to determine price of their product.
2. In economic sense the word market refers to solely to the physical place where goods and
services are sold and bought.
3. Price is always equal to average revenue in all market type.
4. The nominal GDP of one nation can increase only when the total output of the nation
increases.
5. Ethiopian citizens living in USA can contribute something to the GDP their country.
6. Future expectation of rise in price, leads to increment in future supply but it leads to
decline current demand and supply.

Part II
1) One can increase his/her total revenue by raising the price of the product, under
_______________ consumer.

A) Elastic B) Inelastic C) Unitary elastic D Perfectly inelastic

E) B&D

2) All, but one is not false concerning supply and quantity supplied?
A) Like supply, quantity supplied is fixed amount.
B) Like supply, quantity supplied is not fixed amount.
C) Unlike quantity supplied, supply is fixed amount.
D) Unlike supply, quantity supplied is fixed amount.
E) NONE
3) Which one of the following couldn’t shift the supply curve to the left?
A) Increment in tax and subsidy.
B) Increment in cost of production.
C) Reduction in price of complements.
D) Reduction in price of substitutes.
4) An increase in price of complement leads to__________
A) Increases both equilibrium quantity and equilibrium price.
B) Equilibrium price rises but equilibrium quantity falls.
C) Equilibrium quantity rises but equilibrium price is ambiguous.
D) Equilibrium price falls but equilibrium quantity is ambiguous.
5) Which one of the following is wrong about the effect of government policy on
Equilibrium?
A) Price floor brings excess supply and higher price to commodities.
B) Price ceiling leads to decrease quantity supply and increase quantity
demanded.
 C) Increase in tax leads to increase price above the equilibrium and to
decrease quantity supply below the market equilibrium.
D) When the government falls to subsidize the producer’s price and
quantity supply will rise above the market equilibrium.
6) Which one of the following is wrong concerning the determinants of price
elasticity of demand?
A) The more and the better substitutes that exist for a commodity, the more
elastic its demand will be.

B) The demand for luxuries is more price elastic than that of necessities.
demand is price elastic for goods on which the proportion of income spent is
high

C) Demand is relatively inelastic in the short-run but more elastic in the

long run.
D) A little drop in price of salt leads to higher quantity demand of it.
7) If the cross elasticity of the commodities is zero, the how these products are
related?
A) They are substitute. C) they are unrelated
B) They are complements. D) they could be mobile and shoe
E) C&D
8) Which one of the following is true?
A) In stage I of production AVC>MC.
B) In stage II of production MC>AVC.
C) Stage II of production begins from the point where MC reaches its
minimum.
D) Stage II of production begins from the point where AVC reaches its
minimum.
9) Which one of the following is not feature of perfectly competitive market?