1.

Which term refers to is a situation which can result in a number of outcomes but one
is not sure as to which outcome is to be materialized?
A. Uncertainty
B. Risk
C. Probability
D. Utility
ANSWER: A
2. One is not risk minimizing strategy?
A. Purchase of Insurance
B. Diversification of asset
C. Obtaining less information
D. All
ANSWER: C
3. “ I am doing the best I can given what you are doing.” “You are doing the best you
can given what am doing.” If that is the case?
A. Both Players are at Nash equilibrium
B. Both Players are using dominant strategy
C. Both Players are in a situation of Prisoners Dilemma
D. All
ANSWER: A

4. For whom the utility from expected value is greater than the expected utilities?
A. Risk lover
B. Risk Averse
C. Risk neutral
D. Risk Premium
ANSWER: B

5. Which one of the following is correct about theory of production?

 A. When marginal product greater than average product, average product is

decreasing,

B. The fixed factor input does change with the changes in production level.

C. When marginal product increases, total product increases at decreasing

rate.

D. Production is the process of transforming outputs in to factor inputs

ANSWER: C

6. If Robe gets 20 utils from the first bottle of water and 18 utils from the second bottle of the
same water she offered, which of the following is not true according to the cardinalist
approach?

A. Robe's total utility from consumption of two bottle of watter is 38 utils

B. Robe is willing to pay more Birr for the second bottle of Watter than the first
C. Robe's marginal utility is 18
D. None

ANSWER: B

7. In which types of goods indiference curves takes the shape of right ange?

A. Complementary goods
B. Substitute goods
C. Outdated goods
D. None

ANSWER: A

8. To which types of market do we categorize the market for botteled water in

Ethiopia?
A. Perfectly competitive
B. Ologopoly
C. Monopolistically competitive
D. Pure Monopoly

ANSWER: C
9. Which is correct order from the lowest level of competition to the highest?
A. Pure Monopoly, Duopoly, Ologopoly, Monopolistically Competitive
B. Ologopoly, Duopoly, Monopolistically Competitive,Pure Monopoly,
C. Monopolistically Competitive,Ologopoly,Duopoly,Pure Monopoly
D. Ologopoly,Duopoly, Pure Monopoly, Monopolistically Competitive

ANSWER: A

10. The convexity of indifference curve implies

A. A decreasing marginal rate of substitution

B. Constant marginal rate of substitution

C. An increasing marginal rate of substitution

D. Perfect substitutability of the two commodities

ANSWER: A
11. From the followings which one is not true about the relationship between AC

and MC curve?

A. For average costs to fall, the MC must be higher.

B. The marginal cost curve intersects the AVC and ATC at their minimum point

C. For average costs to rise, the MC must be higher.

D. For average costs to be at their minimum point the MC must be equal to them.

ANSWER: A
12. Which of the following is the set of conditions necessary for long-run

equilibrium for a perfectly competitive firm?

A. P = SRMC < SRAC = LRAC

 B. P = SRMC = SRAC = LRAC

C. P = SRMC = SRAC > LRAC

ANSWER: B

13. When marginal costs are below average total costs,

A. average fixed costs are rising.

B. average total costs are falling.
C. average total costs are rising.
D. average total costs are minimized

ANSWER: B

14. Suppose a consumer has an income of Birr 8, the price of good X is Birr 1and the
price of good Y is 0.50 birr. Then, which one of the following is a correct statement?

A. The quantity combination of 3 units of X & 10 units of Y is on the

consumer’s budget line.
B. The slope of the budget line is 2/8 when good X is measured on the horizontal
axis.
C. The slope of the indifference curve at the consumer’s equilibrium point is 1/2.
D. The consumer can buy 18 units of Y if the entire income is spent on Y.
ANSWER: A

15. Select incorrect statement

A. For ordinalists, utility is not additive and quantifiable

B. For cardinalists, utility is measurable, and magnitude does matter
C. For ordinalists, utility can be ordered, but magnitude does not matter
D. For cardinalist, utility cannot be found by summing utility from individual
commodities
ANSWER: D
16. In the short run, a competitive firm’s supply curve is

A. Its marginal cost curve above the minimum long-run average total cost curve.
 B. Its marginal cost curve above the minimum average variable cost curve.
C. Its marginal cost curves above its average cost curve.
D. The horizontal summation of the short-run marginal cost curves.
ANSWER: B
Part 2: Microeconomics II
17. Which one of the following gives monopolistically competitive firm certain
monopoly power and then down ward sloping demand curve.
A.
Product differentiation
B.
A large number of independent firms compete
C.
Easy enter and exit of firms to the market
D.
None
ANSWER: A
18. Monopolistically competitive firm to earn positive abnormal profit at equilibrium in
the short run, when:
A. MR = MC
B. MR = MC and demand curve is less than short run average cost curve
C. MR = MC and demand curve is greater than short run average cost curve
D. MR = MC and demand curve is equal to short run average cost curve
ANSWER: C

19. Chamberlin developed all the following distinct models of long run equilibrium,
except:
A.
Equilibrium with price competition
B.
Equilibrium with new firm entering the industry
C.
Equilibrium with price competition and free entry of new firms
D.
None
ANSWER: D
20. In which Oligopoly model that each firm takes the other firms output level as given
and chooses its own output level to maximize profit.
A. Kinked demand model
B. Cournot duopoly model
C. Bertrand duopoly model
D. All
ANSWER: B
21. In which market that the firm works suboptimal scales without exhaustively using
the advantage of economies of scale?
A. Perfectly competitive
B. Collusive Oligopoly
C. Non-collusive Oligopoly
D. Monopolistically competitive
 ANSWER: D
22. Critiques of Chamberlin large group monopolistic competition market model include
all, except:
A. The assumption of product differentiation is incompatible with the assumption
of independent action and free entry of firms
B. The myopic behavior of business firm
C. The model assumes a few numbers of firms with higher price elasticity of
product sold in monopolistic competitive market
D. The concept of industry is destroyed by recognition of product differentiation
ANSWER: C
23. What are the contribution of large group monopolistic competition market model
A. Introduce the concept of product differentiation and selling strategy as two
additional policy variables in optimal decision-making process of the firm
B. It introduces the concept of share of the market demand curve as a tool of
analysis
C. Business firms do not learn from their experience
D. A & B
E. All
ANSWER: D
24. Why monopolistically competitive firm experiences downward demand curve in
short run?
A. Because of the similarity of its cost and demand structure with others
B. A decrease in the price of individual product results in increase in sales
volume of the firm by attracting customers of other rivalry firms!
C. Because some customers shift their preference to other product because of
increase in price.
D. All except A
E. None
ANSWER: D
25. Which one is true?
A. Since the demand curve of monopolistically competitive firm is negatively
sloped, the corresponding marginal revenue sloped downward
B. In the short run monopolistically competitive firm make change to the scale of
their plant to minimize cost of production
C. In the long run monopolistically competitive firm can earns positive economic
profit at the equality of marginal cost and marginal revenue, because, at this
point total revenue exceeds the total cost
D. All
E. None
ANSWER: A
26. One the following is not found in the Oligopoly market?
A. Many sellers
B. homogenous product
C. Differentiated product
D. the action of each firm affects the other firm’s decision in the industry
ANSWER: A
27. Which one of the can be taken as example of Oligopoly in Ethiopia?
A. hydro- electric power
B. Beer industry
C. hotels
D. food grain markets
ANSWER: B
28. Except one all are causes of Oligopoly. Which one?
A. Economies of scale in sales promotion and advertising may also promote
oligopoly
B. merger of small firms
C. Free entry and exit
D. None
ANSWER: C
29. Which one is non-collusive oligopoly model?
A. Kinked demand model
B. Cournot duopoly model
C. Stackelberg duopoly model
D. All
ANSWER: D
30. Product differentiation is said to be real, if:-
A. The products are the same but the producers that its product differs from other
close substitutes convince consumers.
B. The products found in the same product group differ in terms of their
inheritance characteristics
C. The products found in the same product group and also the same in terms of
their inheritance characteristics.
D. B & C
ANSWER: B

31. In which Oligopoly industry that there is one large firm having large share of the
total market with a group of smaller firms supply the rest?
A.
Price leadership by low cost firm
B.
Price leadership by large (dominant) firm
C.
Barometric price leadership
D.
All
ANSWER: B
32. Which one of the following statement is true?
A. Cartel is a collusive form of oligopoly in which firm producing the same
product enter in to explicit contractual agreements to set price and the level of
output produced.
B. In Stackelberg’s duopoly model it is assumed that one duopolist with better
information becomes sophisticated to recognize his competitor act on the
cournot assumption
 C. A point is a Pareto optimal if and only if there is no change that can make
some one better off, without making any one worse- off
D. All

ANSWER: D
33. Except one, all are conditions of economic efficiency. Which one?
A. The marginal rates of substitution between any two goods must be the same
for all individuals
B. The marginal rates of technical substitution between any two inputs must be
the same in the production of all goods
C. The marginal rate of transformation between any two goods must equal the
common marginal rate of substitution for all individuals
D. None
ANSWER: D
34. One of the following is false. Which one?
A. Arrow’s Impossibility Theorem shows that there is ideal way to aggregate
individual preference into social preference
B. As long as the welfare function is increasing in each individual’s utility, a
welfare maximum will be Pareto efficient
C. The idea of fair allocation provides an alternative way to make distributional
judgments, this idea emphasizes the idea of symmetric treatment
D. All
ANSWER: A
35. What is the cause of market failure?
A. perfect information
B. Public goods
C. Imperfect information
D. All except A
ANSWER: D
36. Which of the following can be remedial measures for the problem of externalities?
A. Redefinition of property rights
B. Voluntary agreements
C. Government action
D. All
ANSWER: D
37. The analyses that assume that changes in prices can occur without causing significant
changes in prices in other markets are called:
A. General Equilibrium Analysis
B. Partial Equilibrium analysis
C. Pareto efficiency
D. All
ANSWER: B
38. Which one of the following is not basic assumption of Chamberlin’s large group
model of monopolistic competition market?
A. There are few numbers of sellers in the product group
 B. Sellers found in the same product group produce differentiated product and
yet they are close substitutes of one another.
C. It is relatively easy for new firms to enter the market with their own brands
and for existing firms to leave the product group if they are unprofitable
D. The objective of the firms is profit maximization in both the short run and
long run.
ANSWER: A

39. According to the sticky-wage model, aggregate supply curve is upward sloping because of

A. Nominal wages are set by long-term contracts, so wage cannot adjust quickly

B. Nominal wages are set by short-term contract, so wages cannot adjust quickly

C. All wages and prices are free to adjust to balance supply and demand.

D. None of the above

ANSWER: A

40. A curve that shows the relationships between unemployment and inflation is called;

A. Aggregate demand curve C. Okun’s law

B. Consumption curve D. Phillips curve

ANSWER: D

41. Assuming Ethiopia is under fixed exchange rate systems, if Birr buys more foreign currency,
we can say that;

A. There is depreciation of Birr C. Value of Ethiopian currency is decreasing

B. There is appreciation of Birr D. There is revaluation of birr

ANSWER: D
42. Which of the following is not true about Goods market and IS curve?

A. Consumption depends positively on disposable income

B. Investment depends negatively on the interest rate,

 C. Investment depends positively on the interest rate

D. Net exports depend negatively on the exchange rate

ANSWER: C

43. A decrease in government purchases or an increase in taxes shifts the IS curve?

A. Out ward B. Inward C. Unchanged D. All

ANSWER: B

44. In studying factors that determine money demand, we can establish correct relationship as
one of the following:

A. As inflation risk increases, money demand increases

B. As interest rate increases, money demand increases

C. As payment technology advances, money demand increases

D. As income increases, money demand increases

ANSWER: D

45. Public saving is equal to

A. Taxes + Government expenditure
B. private saving + public saving
C. Taxes – Government expenditure
D. GDP – government purchase
ANSWER: C
46. The government purchases multiplier is the ratio of
A. change in government purchases and change in consumption.
B. change in government purchases and change in income.
C. money supply divided by high-powered money
D. change in consumption expenditure and income

ANSWER: B

47. The natural rate of unemployment is generally thought of as the ______

A. Sum of structural unemployment and cyclical unemployment.

B. Ratio of the frictional unemployment rate to the cyclical unemployment rate.
C. Sum of frictional unemployment and cyclical unemployment.
D. Sum of frictional unemployment and structural unemployment.
ANSWER: D

48. The quantity theory of money concludes that an increase in the money supply
causes

A. A proportional increase in prices.

B. A proportional increase in real output.
C. A proportional decrease in velocity.
D. A proportional increase in velocity

ANSWER: A

49. Suppose National Bank of Ethiopia purchases a ETB1,000 government bond

from you & you deposit the entire in your bank, what is the total potential
increase in money supply as a result of the action if the bank’s reserve ratio is
20%?

A. ETB 4,000
B. ETB 5,000
C. ETB 1,000
D. ETB 2,000

ANSWER: B

Part 5: Monetary Economics

50. Which is not among economic role of banks a financial institution?

A. Reducing problems associated with asymmetric information
B. Increasing transaction cost in carrying out financial transactions
C. Helping people to diversify portfolios
D. Serve as the primary route for moving funds from lenders to borrowers.
ANSWER: B
51. If on receiving a checking deposit of $300, a bank’s excess reserve increased by
$255, the required reserve must be:
A. 5%
B. 15%
C. 25%
D. 35%
E. 45%
ANSWER: B
52. Which one is false regarding post Keynesian developments on money demand?
A. Transaction demand for money is interest inelastic
B. Economic agent incur interest forgone cost by holding cash
C. Money demand increases when transaction cost increases
D. Interest rate and money demand are negatively related
ANSWER: A
53. Which is false in a situation called liquidity trap in the Keynesian theory?
A. Interest rate is very low and cannot go down further
B. Everyone expect the interest rate to rise
C. The demand for money becomes perfectly inelastic
D. Everyone is unwilling to hold bonds
ANSWER: C
54. One is not among Criticism against Keynes theory of money demand?
A. Fail to mention why the choice is either money or bonds
B. The emphasis on motives for holding money
C. Assumption of money and bond as the only form of holding wealth
D. Emphasis on current & expected interest rate as the basis for capital gain on bond
ANSWER: B
55. Which is false if the frequency of check encashment or cash withdrawal per period
increase according to Baumol-Tobin?
A. Transaction cost increases
B. Interest foregone increases
C. Velocity of money increases
D. Average cash holding decreases
ANSWER: B
56. According to Friedman’s theory, when does money demand increase?
A. When permanent income decrease
B. When expected return on bonds and equity relative to money rise
 C. When return on demand deposits included in the money supply rise
D. When expected return on goods relative to money rise
ANSWER: C

57. Which of the following conditions indicate that a good is produced under perfect
competition:
A. producers` profits are high
B. producers` profits are small
C. total supply is inelastic
D. Individual demand is perfectly elastic.
ANSWER: D
58. Which of the following is true about the marginal product of labor?
A. It is the additional output produced by hiring one more unit of labor.
B. It is the average output produced by all units of labor.
C. It is the total output produced by all units of labor.
D. It is the output produced by the most productive unit of labor.

ANSWER: A

59. Which of the following is true about economies of scale?

A. They occur when the average cost of production decreases as output
increases.
B. They occur when the marginal cost of production decreases as output
increases.
C. They occur when the average cost of production increases as output increases.
D. They occur when the marginal cost of production increases as output
increases.
ANSWER: A

60. Which of the following is true about the shutdown point?

A. It is the level of output where average total cost is highest.
B. It is the level of output where marginal cost equals marginal revenue.
C. It is the level of output where total revenue equals total cost.
D. It is the level of output where price equals average variable cost.

ANSWER: D
61. Which one of the following is correct about theory of production?
A. When marginal product greater than average product, average product is
Decreasing
B. The fixed factor input does change with the changes in production level.
C. When marginal product increases, total product increases at decreasing rate.
D. Production is the process of transforming outputs in to factor inputs
ANSWER: C
62. The convexity of indifference curve implies
A. A decreasing marginal rate of substitution

B. Constant marginal rate of substitution

C. An increasing marginal rate of substitution

D. Perfect substitutability of the two commodities

ANSWER: A
63. From the followings which one is not true about the relationship between AC

and MC curve?

A. For average costs to fall, the MC must be higher.

B. The marginal cost curve intersects the AVC and ATC at their minimum point
C. For average costs to rise, the MC must be higher.
D. For average costs to be at their minimum point the MC must be equal to them.
ANSWER: A

64. Select incorrect statement

A. For ordinalists, utility is not additive and quantifiable

B. For cardinalists, utility is measurable, and magnitude does matter
C. For ordinalists, utility can be ordered, but magnitude does not matter
D. For cardinalist, utility cannot be found by summing utility from individual
commodities
ANSWER: D
65. In the short run, a competitive firm’s supply curve is
A. Its marginal cost curve above the minimum long-run average total cost curve.
B. Its marginal cost curve above the minimum average variable cost curve.
C. Its marginal cost curves above its average cost curve.
D. The horizontal summation of the short-run marginal cost curves.

ANSWER: B

66. Chamberlin developed all the following distinct models of long run equilibrium,
except:
A. Equilibrium with price competition
B. Equilibrium with new firm entering the industry
C. Equilibrium with price competition and free entry of new firms
D. None
ANSWER: D

67. The natural rate of unemployment is generally thought of as the ______

A. Sum of structural unemployment and cyclical unemployment.

B. Ratio of the frictional unemployment rate to the cyclical unemployment rate.
C. Sum of frictional unemployment and cyclical unemployment.
D. Sum of frictional unemployment and structural unemployment.
ANSWER: D

68. The quantity theory of money concludes that an increase in the money supply
causes

A. A proportional increase in prices.

B. A proportional increase in real output.
C. A proportional decrease in velocity.
D. A proportional increase in velocity

ANSWER: A

69. Suppose National Bank of Ethiopia purchases a ETB1,000 government bond

from you & you deposit the entire in your bank, what is the total potential
increase in money supply as a result of the action if the bank’s reserve ratio is
20%?
 A. ETB 4,000
B. ETB 5,000
C. ETB 1,000
D. ETB 2,000

ANSWER: B
70. Which is not among economic role of banks a financial institution?
A. Reducing problems associated with asymmetric information
B. Increasing transaction cost in carrying out financial transactions
C. Helping people to diversify portfolios
D. Serve as the primary route for moving funds from lenders to borrowers.
Answer: B
71. If on receiving a checking deposit of $300, a bank’s excess reserve increased by
$255, the required reserve must be:
A. 5%
B. B. 15%
C. 25%
D. 35%
E. 45%
ANSWER:B
72. Which one is false regarding post Keynesian developments on money demand?
A. Transaction demand for money is interest inelastic
B. Economic agent incur interest forgone cost by holding cash
C. Money demand increases when transaction cost increases
D. Interest rate and money demand are negatively related
ANSWER:A
73. Which is false in a situation called liquidity trap in the Keynesian theory?
A. Interest rate is very low and cannot go down further
B. Everyone expect the interest rate to rise
C. The demand for money becomes perfectly inelastic
D. Everyone is unwilling to hold bonds
ANSWER:C
74. One is not among Criticism against Keynes theory of money demand?
 A. Fail to mention why the choice is either money or bonds
B. The emphasis on motives for holding money
C. Assumption of money and bond as the only form of holding wealth
D. Emphasis on current & expected interest rate as the basis for capital gain on bond
ANSWER: B
75. Which is false if the frequency of check encashment or cash withdrawal per period
increase according to Baumol-Tobin?
A. Transaction cost increases
B. Interest foregone increases
C. Velocity of money increases
D. Average cash holding decreases
ANSWER: B

76. According to Friedman’s theory, when does money demand increase?

A. When permanent income decrease
B. When expected return on bonds and equity relative to money rise
C. When return on demand deposits included in the money supply rise
D. When expected return on goods relative to money rise

ANSWER: C

77. Assume that Country A is relatively abundant in labor and Country B is relatively
abundant in land. Note that wages are the returns to labor and rents are the returns to
land. According to the factor price equalization theorem, once Country A begins
specializing according to comparative advantage and trading with Country B

A. wages and rents should fall in Country A

B. wages and rents should rise in Country A
C. wages should rise and rents should fall in Country A
D. wages should fall and rents should rise in Country A
ANSWER :C

78. The Heckscher-Ohlin theory explains comparative advantage as the result of differences in
countries’:
A. Economies of large-scale production.
B. Relative costs of labor.
C. Relative abundance of various resources
D. capital intensive
ANSWER: C
79. Which is used in Leontief's paradox to prove H-O-T invalidity?
A. Factor intensity reversal.
B. Factor proportions.
C. Factor Endowment.
D. None of the above.
ANSWER: A

80. What is hedging in the foreign exchange market?

A. The act of reducing exchange rate risk
B. The act of buying and selling assets at different prices in different markets
C. The act of investing in securities in the hope of making a profit
D. The act of facilitating foreign exchange market to get commission
ANSWER: A

81. Which is false about price effect of devaluation?

A. It makes export measured in foreign currency cheaper
B. It makes import more expensive
C. It derives capital account to equilibrium
D. It contributes to a worsening of the current account

ANSWER: C
82. How price adjustment works to restore balance of payment deficit to equilibrium?
 A. Deficit decreases money supply, rise interest rate and increase capital inflow
B. Deficit rises demand for foreign currency, leads to devaluation & increases export
C. Deficit leads to devaluation, increase in income and rise in balance of payment
D. Deficit reduces money supply and leads to decrease in import price

ANSWER: B

83. What are the two main goals of policy makers in open economy?
A. Internal balance and external balance
B. Surplus budget &balance of payment
C. Full employment and stable inflation
D. Economic growth and low inflation

ANSWER: A
84. What was the Bretton Woods System?

A. It was a system of floating exchange rate system in which the value of currencies
are determined by market force.
B. It was a system of fixed exchange rate system in which all currencies had fixed
exchange rates against the U.S. dollar
C. A floating exchange rate system under which currencies are pegged to gold
D. A floating exchange rate system under which nations currencies are pegged to $ and
a dollar it self is pegged to gold.

ANSWER: B
85. Why external balance curve slopes upward in the Swan Diagram?
A. Because a rise in domestic absorption is needed to prevent current account moving
into surplus as increase in real exchange rate increase net export.
B. Because increasing domestic expenditure is necessary to compensate for decrease
in net export caused by revaluation.
C. Because decreasing domestic expenditure is necessary to compensate for rise in net
export caused by increase in real exchange rate.
 D. Because a rise in domestic absorption is needed to prevent capital account moving
into surplus as decrease in real exchange rate increase net export.

ANSWER: A
86. Which is false about price effect of devaluation?
A. It makes export measured in foreign currency cheaper
B. It makes import more expensive
C. It derives capital account to equilibrium
D. It contributes to a worsening of the current account
ANSWER: C
87. Which is true about devaluation?
A. It switches the nation’s expenditures from foreign to domestic goods
B. It switches the nation’s expenditures from domestic to foreign goods
C. It encourage exports by abolishing or reducing of export duties
D. It discourage import by imposing import duties and import quotas
ANSWER: A

88. Which of the following is false based on open economy national income identity?
A. Trade deficit equals the sum of government deficit and private sector deficit
B. An increase in government expenditure worsens the trade balance
C. An increase in government expenditure raises trade deficit
D. Trade deficit is the gap between foreign saving and domestic investment
ANSWER: D
89. Which statement best defines the real exchange rate?
A. Nominal exchange rate multiplied by the ratio of foreign price to domestic price
B. Domestic currency per unit of foreign currency
C. Foreign currency per unit of domestic currency
D. Nominal exchange rate multiplied by the ratio of domestic price to foreign price
ANSWER: A

90. Why external balance curve slopes upward in the Swan Diagram?
 A. Because a rise in domestic absorption is needed to prevent current account
moving into surplus as increase in real exchange rate increase net export.
B. Because increasing domestic expenditure is necessary to compensate for decrease
in net export caused by revaluation.
C. Because decreasing domestic expenditure is necessary to compensate for rise in
net export caused by increase in real exchange rate.
D. Because a rise in domestic absorption is needed to prevent capital account moving
into surplus as decrease in real exchange rate increase net export.
ANSWER: A

91. Which of the following policy action has a crowding-out effect on private
investment?
A. Contractionary fiscal policy
B. Tight monetary policy
C. Expansionary fiscal policy
D. Expansionary monetary policy
ANSWER: C

92. Why IS-Curve slopes downward?

A. Decrease in interest rate increases planned expenditure and income
B. Increase in interest rate increases investment and income
C. Increase in investment reduces investment and income
D. Decrease in planed expenditure increases investment and income
ANSWER: A
93. What is the capital-output ratio according to the Harrod-Domar model?
A. A ratio that shows the units of capital required to produce a unit of
output over a given period of time
B. A ratio that shows the units of labour required to produce a unit of output
over a given period of time
C. A ratio that shows the units of output required to produce a unit of capital over
a given period of time
 D. A ratio that shows the units of savings required to produce a unit of output
over a given period of time
ANSWER: A
94. The concept of dualism embraces the following key elements Except:
A. The co-existence of a little difference (almost balanced) in the productivity
gap between workers in developed countries and their counterparts in most
less developed countries seems to narrowed with each passing year.
B. The coexistence of powerful and wealthy industrialized nations with weak,
impoverished peasant societies in the international economy.
C. This co-existence is chronic and not merely transitional as well dualism is not
due to a temporary phenomenon.
D. Different sets of conditions of which some superior and others inferior can
co-exist in a given space.
ANSWER: A
95. Which of the following is/are not true about Lewis development theory?
A. It assumes the method of production in the industrial sector is capital intensive
and labour saving.
B. Lewis assumes that due to competitive labour market, the wage rate remains
constant in the urban sector for a long time.
C. It assumes that there is high unemployment in rural areas and full employment
in urban areas.
D. It is a one sided theory because the theory does not consider the possibilities
of progress in the agricultural sector.
ANSWER: A
96. For a given level of technology, we should expect an increase in productivity within
a nation when there is an increase in each of the following except
A. Labour.
B. Physical capital/worker.
C. Human capital/worker.
D. Natural resources/worker.
ANSWER: A
97. Which of the following statements is true?
A. Countries all have the same growth rate and level of output because any
country can obtain the same factors of production.
B. Countries have great variance in both the level and growth rate of GDP/person;
thus, poor countries can become relatively rich over time.
C. Countries may have a different level of GDP/person but they all grow at the
same rate.
D. Countries may have a different growth rate but they all have the same level of
GDP/person.
ANSWER: B
98. Which of the following is a key assumption of linear regression analysis?
A. Homoscedasticity
B. Autocorrelation
C. Multicollinearity
D. Heteroscedasticity

ANSWER: A

99. Which one of the following is NOT a plausible remedy for near multicollinearity?

A. Use principal components analysis

B. Drop one of the collinear variables
C. Use a longer run of data
D. Take logarithems of each of the variables

ANSWER: D

100.What is the main benefit of using a Work Breakdown Structure (WBS) in project
planning?
A. It helps allocate resources efficiently
B. It avoids stakeholder engagement
C. It eliminates all project risks
D. It speeds up project completion
ANSWER: A