MANA BARUMSAA MAKKOO BILLII

MAKKO BILLI SCHOOL

መኮቢሊት/ቤት
0221120620 Casher office, 0221120621 secretary office, 02221106031main campus KG school, 0221125803
main campus elementary school, 0222119848 main campus high school 0222121984 branch campus
Part I: Choose the correct answer among the alternatives for the following Questions.(UNIT 5-8 )
1. A firm producing 6 units of output has average total cost of birr 150 and has to pay birr 240 to its fixed
factors of production. In the given case, average variable cost at 6 units of output will be:
A. BIRR150 B.BIRR 660 C. BIRR 110 D.BIRR 1,440
2. Which cost increases continuously with increase in production?
A. Average cost B. Marginal cost C. Variable cost D. Fixed cost
3. A firm has a variable cost of BIRR 1,000 at five units of output. If fixed costs are BIRR 400, what will be
the average total cost at five units of output?
A. B.RR 280 B. BIRR 80 C. BIRR 200 D. BIRR 1400
4. A firm’s average fixed cost (AFC) is BIRR 20 at six units of output. What will be AFC at four units of
output? A.BIRR 20 B. BIRR 30. C. BIRR40 D.BIRR 50
5. Which of the following statements is TRUE?
A. ATC = AFC-AVC B. AVC = AFC + ATC C. AFC = ATC + AVC D. AFC = ATC-AVC
6. ________ cost refers to actual payment made by the entrepreneur to the providers of factor
services.
A. Explicit B. Implicit C. Variable D. Fixed
7. Which of the following is an example of “Implicit cost”?
A. Interest that could have been earned on retained earnings used by the firm to finance
expansion
B. Payment of Rent by the Firm
C. Interest Payment made by the Firm for funds borrowed from a Bank
D. Payment of Wages by the Firm
8. If a Firm produces zero output in the short period, then
A. Total Cost will be zero C. Variable Cost will be positive
B. Fixed Cost will be positive D. Marginal Cost will be positive
9. The total cost at 5 units of output is BIRR30. The fixed cost is BIRR 5. The average variable cost at 5
units of output is A. BIRR.25 B.BIRR.6 C.BIRR.5 D.BIRR.
10. The average fixed cost at 4 units of output is BIRR 20. Average variable cost at 5 units of output is BIRR
40. Average cost of producing 5 units is: (Choose the correct alternative)
A. BIRR. 20 B.BIRR40 C.BIRR. 56 D.BIRR.60

1 | E C O N O M I C S STE BY HABTAMU GENENE 22/05/2025 TELGRAM t.me/eduactionalresources2016

 11. If a firm’s production department data says that the TVC for producing 8 units and 10 units of output is
BIRR 2,500 and BIRR. 3,000 respectively, marginal cost of 10th unit will be
A. BIRR.100 B.BIRR. 150 C. BIRR.500 D.BIRR.250
12. A production function measures how
A. A firm transforms output into input C. A firm transforms inputs into output
B. An individual maximizes utility D. A firm minimizes cost
13. The marginal physical productivity of labour is defined as
A. A firm’s total output divided by total labour input
B. The extra output produced by employing one more unit of labour while allowing other inputs to vary
C. The extra output produced by employing one more unit of labour while holding other inputs constant
D. the extra output produced by employing one more unit of capital while holding labour input constant
14. The marginal physical productivity of labour is equal to
A. The slope of the total output curve at the relevant point
B. The negative of the slope of the total output curve at the relevant point
C. The slope of the line connecting the origin with the relevant point on the total output curve
D. The negative of the slope of the line connecting the origin with the relevant point on the total output
curve
15. Suppose a firm is producing 100 units of output, incurring a total cost of $10 000 and total variable cost
of $6000. It can be concluded that average fixed cost is
A. $40. B. $60. C. $100. D. $4000.
16. The process of transforming inputs into outputs is
A. Consumption B. Production C. Utility D. Profit
17. In production process, short run refers to the period of
A. One year B. Less than five years C. At least one input is fixed D. All inputs are variable
18. In short run production function which stage is increasing returns stage
A. Stage I B. Stage II C. Stage III D. Stage I and II
19. Increasing the amount of the variable factor(inputs) with fixed factors(inputs) eventually result in,
A. Increasing marginal productivity C. Diminishing marginal productivity
B. Increase in average productivity D. Increase in total productivity
20. In the short run production, stage II is considered to be a rational stage and therefore, producers should
produce in this stage. This is because in stage II
A. There is excess capacity of fixed inputs
B. More variable inputs are used beyond the capacity of fixed inputs
C. Fixed and variable inputs are at the right proportion
D. Marginal product is decreasing

2 | E C O N O M I C S STE BY HABTAMU GENENE 22/05/2025 TELGRAM t.me/eduactionalresources2016

 21. The cost schedule of a firm is given as
Output (units) 1 2 3 4
Marginal Cost (br.) 70 60 62 72
In the given case, average variable cost at 3rd level of output will be
A. 70 B. 66 C. 65 D. 64
22. Marginal cost refers to addition to the total cost when one more unit of output is__________.
A. Wasted B. Produced C. Employed D. Sold
23. Average fixed costs
A. Remain same at all levels of output C. Increase as output increases
B. Decreases as output increases D. Initially increases and then decreases
24. Which formula is incorrect to determine the value of TC
A. TC = TVC + TFC C. TC = ∑MC
B. TC = AC × Output D. TC = ∑MC +TFC
25. The cost schedule of a firm, whose total fixed cost is Br. 12, is given as
Output (units) 1 2 3 4 5 6
Marginal Cost (Br.) 9 7 2 4 8 12
In the given case, total cost at 2nd level of output will be
A. 16 B. 28 C. 9 D. 7
26. Normal Profits earned by a firm are included in
A. Implicit cost B. Explicit cost C. Fixed cost D. Variable cost
27. NIGATU , TOLOSA and MIGBARU are confused with the formula for deriving TC
NIGATU Says: TC = TVC + TFC
TOLOSA says: TC = AC × Output
MIGBARU Says: TC = ∑MC + TFC Identify who amongst them is correct.
A. NIGATU B. TOLOSA C. MIGBARU D. All of them
28. TFC is Br. 20 at 2nd unit of output and MC at 3rdunit is Br. 5. TFC at 3rd unit of output will be
A. Br. 15 B.Br. 20 C. Br. 25 D. Br. 5
29. Which one of the following is also known as fixed cost?
A. Supplementary Cost C. Prime Cost
B. Direct Cost D. Avoidable Cost
30. The cost which is never zero even when production is stopped is known as
A. Supplementary Cost C. Prime Cost
B. Explicit cost D. Implicit cost
31. A firm producing 6 units of output has average total cost of Br. 150 and has to pay Br. 240 to its fixed
factors of production. In the given case, Total variable cost at 6 units of output will be
3 | E C O N O M I C S STE BY HABTAMU GENENE 22/05/2025 TELGRAM t.me/eduactionalresources2016
 A. Br. 660 B. Br. 600 C. Br. 110 D. Br. 1,440
32. Which cost decreases continuously with increase in production?
A. Average cost C. Marginal cost
B. Variable cost D. Total Fixed cost
33. The distinction drawn between fixed and variable costs is based on
A. Whether the costs can or cannot be changed during the life of the plan
B. Whether the costs do or do not vary with the output produced in the long run
C. Whether the costs do not enter the calculation of total costs
D. Whether the costs do or do not vary with the output produced in the short run
34. Which of the following is an example of “Implicit cost”?
A. Interest that could have been earned on retained earnings used by the firm to finance expansion
B. Payment of Rent by the Firm
C. Interest Payment made by the Firm for funds borrowed from a Bank
D. Payment of Wages by the Firm
35. If a Firm produces zero output in the short period, then
A. Total Cost will be zero C. Variable Cost will be positive
B. Fixed Cost will be positive D. Marginal Cost will be positive
36. A production function measures how
A. A firm transforms output into input C. A firm transforms inputs into output
B. An individual maximizes utility D. A firm minimizes cost.
37. The marginal physical productivity of labour is defined as
A. A firm’s total output divided by total labour input
B. The extra output produced by employing one more unit of labour while allowing other inputs to vary
C. The extra output produced by employing one more unit of labour while holding other inputs constan
D. The extra output produced by employing one more unit of capital while holding labour input constant
38. If more and more labour is employed while keeping all other inputs constant, the marginal physical
productivity of labour
A. Will eventually increase C. Will eventually decrease
B. Will eventually remain constant D. Cannot tell from the information provided
39. The marginal physical productivity of labour is equal to
A. The slope of the total output curve at the relevant point
B. The negative of the slope of the total output curve at the relevant point
C. The slope of the line connecting the origin with the relevant point on the total output curve
D. The negative of the slope of the line connecting the origin with the relevant point on the total output
curve
4 | E C O N O M I C S STE BY HABTAMU GENENE 22/05/2025 TELGRAM t.me/eduactionalresources2016
 40. The average productivity of capital is defined as
A. The extra output produced by employing one more unit of capital while holding other inputs constant
B. The extra output produced by employing one more unit of capital while allowing other inputs to vary
C. The ratio of total output produced to the quantity of capital employed
D. The ratio of total capital employed to the total output produced
41. Suppose a firm is producing 100 units of output, incurring a total cost of BR. 10 000 and total variable
cost of BR. 6000. It can be concluded that average fixed cost is
A. BR. 40. B. BR.400. C. BR. 4200. D. BR. 4000.
42. When marginal cost is rising, we know that
A. Average fixed cost must be rising C. Marginal product must be falling
B. Average variable cost must be rising D. Average total cost must be rising.
43. In short run production function which stage is increasing returns stage,
A. Stage I B. Stage II C. Stage III D. Stage I and II
44. Increasing the amount of the variable factor(inputs) with fixed factors(inputs) eventually result in
A. Increasing marginal productivity C. Diminishing marginal productivity
B. Increase in average productivity D. Increase in total productivity
45. In the short run production, stage II is considered to be a rational stage and therefore, producers should
produce in this stage. This is because in stage II
A. There is excess capacity of fixed inputs
B. More variable inputs are used beyond the capacity of fixed inputs
C. Fixed and variable inputs are at the right proportion
D. Marginal product is decreasing
 Suppose short run cost structure of a firm is given as follows, where TFC is total fixed cost, TVC
is total variable cost and TC is total cost (all costs are in Birr)
Output produced (Q) 0 1 2 3 4 5 6 7
TFC(in Birr) 200 200 200 200 200 200 200 200
TVC (in Birr) 0 30 56 75 85 90 100 130
Based on the above costs of the firm, answer question number 46 and 47
46. Marginal cost of producing the 3rdoutput of the firm is
A. Birr 19 B. Birr 10 C. Birr 25 D. Birr 91.67
47. Which of the following is TRUE about the above firm’s cost?
A. When the firm produces 5 units of outputs the average total cost is Birr 18
B. When the firm produces 4 units of outputs average variable cost is Birr 30
C. Average fixed cost is Birr 40 when the firm produces 5 units of output
D. Fixed cost declines as the firm produces more outputs
5 | E C O N O M I C S STE BY HABTAMU GENENE 22/05/2025 TELGRAM t.me/eduactionalresources2016
 48. Type of short run cost which decreases as quantity of output increases is
A. Average variable cost C. Average total cost
B. Average fixed cost D. Marginal cost
49. Which of the following is TRUE?
A. Total cost is the product of total fixed cost and total variable cost
B. The minimum total cost is the variable cost
C. The difference between total cost and total variable cost is the fixed cost
D. The magnitude of fixed cost depends on the level of output
50. A firm has an average total cost of Birr 5 and an average variable cost of Birr 4.5 at certain level of
output. If the firm has fixed cost of Birr 350, then its level of output is_____
A. 700units B. 175units C. 400units D. 125units
51. When the short-run marginal product of labour is negative
A. Total product is also negative C. Total products are rising, but at a diminishing rate
B. Total products are rising at an increasing rate D. Total products are declining.
52. Suppose the average product of 6 workers is 150 units of a good and that of 7 workers is 170 units. The
MP of the seventh worker equals
A. 200 B. 270 C. 290 D. 220
53. The supply of economic resources in the short run production that cannot change is
A. Fixed inputs B. Variable inputs C. Labor and raw materials D. Average variable costs
54. Which of the following is/are not a good indicator or measure of output per unit input?
A. Total product B. Average product C. Marginal Product D. Both A and C
55. A specific type of costs that are always incurred even if the firm does not produce anything.
A. Accounting costs B. Variable costs C. Total cost D. Fixed costs
56. In the short-run,
A. All costs are fixed C. All costs are marginal
B. Some costs are fixed D. All costs are variable
57. Suppose output increases from 50 to 51 units and total cost increases from birr 260 to birr 293. The MC
of the extra output is birr,
A. 553 B. 226.5 C. 33 D. 29
58. Barter cannot function well
A. Because goods are not always divisible C. Because transaction costs are minimal

B. Because goods are always standardized D. A& B COREECT

59. For a commodity to be accepted as money, it must meet certain criteria.
A. Standardization B. Divisibility C. Portability D. All

6 | E C O N O M I C S STE BY HABTAMU GENENE 22/05/2025 TELGRAM t.me/eduactionalresources2016

 60. Which of the following refers to anything that is generally accepted as payment for goods and services?
A. Checks B. Money C. Checking account deposits D. All
61. Major drawbacks of paper currency and coins are
A. They are easily stolen
B. They can be expensive to transport
C. They have a problem with a common measure of value
D. Both A and B
62. Examples of e-money include,
A. Visa card B. Credit card C. Mobile banking D. All
63. It relates to the desire to hold one’s resources in liquid form in order to take advantage of market
movements in the future.
A. The speculative motive C. The precautionary motive
B. The transaction motive D. Both A & C
64. When the barter system was replaced by monetary system, the primitive money was first used.
A. Paper currency B. Checks C. Commodity money D. E-money
65. Which one of the following is main motives demand for money to hold?
A. Transactional motivation C. Precautionary motive
B. A speculative motivation D. All of the above motive of demand hold
66. Which one of the following is function of money?
A. Money as a unit of accounts C. Money as a store of value
B. The medium of exchange functions D. All of the following function of money
67. Which one of the following is/are limitations of the barter system?
A. Lack of double coincidence of wants C. Durability
B. Indivisibility of commodities D. A and B limitations of the barter system
68. For a commodity to be accepted as money, it must meet the following criteria.
A. Unit of account C. Standardization
B. Measure of value D. Differed payment
69. Payments through electronic money can be performed in a number of ways such as
A. Debit card B. Prepaid cards C. Credit cards D. All
70. The bulk of the currency with the public is in the form of currency notes issued by,
A. National Bank of Ethiopia C. Commercial Bank of Ethiopia
B. Private Commercial Banks D. All
71. The money supply consists of,
A. Metallic money B. Coins C. Currency notes D. All

7 | E C O N O M I C S STE BY HABTAMU GENENE 22/05/2025 TELGRAM t.me/eduactionalresources2016

 72. What is the main focus of macroeconomics?
A. The study of the structure and performance of national economies and of the policies that governments
use to try to affect economic performance
B. The study of the behavior and interaction of individual agents within the economy, such as consumers,
producers, and markets
C. The study of the allocation of scarce resources among competing ends and the efficiency and equity of
economic outcomes
D. Macroeconomics studies the effects of government regulation and taxes on the price of individual goods
and services whereas microeconomics does not
73. If a government prints more money to pay for war time expenses, what kind of inflation is this likely to
cause?
A. Demand-pull inflation C. Currency-induced inflation
B. Cost-push inflation D. Structural inflation
74. Which one of the following is constitutes Gross Domestic product (GDP) in income approach?
A. Consumption, investment, government spending and net export
B. Wage and salary, depreciation, rental income, profit and indirect business tax.
C. Export, investment, rental income, and compensation of employee.
D. Compensation of employee, Investment, interest, and net factor income
75. One of the following is NOT a macroeconomic variable, which one?
A. Export B. Unemployment C. Inflation D. utility
76. When calculating Gross Domestic product (GDP) using the product approach, why are only final goods
and services considered?
A. To avoid inflationary affects C. To prevent double counting
B. To measure government spending accurately D. To focus on consumer behavior
77. The analysis of the behavior of individual decision-making units is the definition of
A. Microeconomics. B. Macroeconomics C. Positive economics. D. Normative economics
78. What does the word "MACRO" means in macroeconomics?
A. Small B. Large C. Mixed D. A& C are correct answers
79. Which of the following deals with structure and performance of national economies, and the policies that
governments use to affect economic performance?
A. Microeconomics C. Growth Economics
B. Macroeconomics D. Trade Economics
80. Mrs. Chaltu Beksisa has been working in Commercial Bank of Ethiopia (CBE) since she graduated
from Addis Ababa University. Recently she gave a birth to a sweet little girl and she will be out of
work for at least four months. This kind of unemployment is known as?

8 | E C O N O M I C S STE BY HABTAMU GENENE 22/05/2025 TELGRAM t.me/eduactionalresources2016

 A. cyclical unemployment C. structural unemployment
B. underemployment D. frictional unemployment
81. Sisay voluntarily quit his job as an insurance agent to return to school full -time to earn a BA degree.
With Diploma in hand he is now searching for a position in management. Sisay presently is
A. Cyclically unemployed. C. structurally unemployed
B. Frictionally unemployed D. seasonally unemployed
82. Which of the following is always TRUE?
A. Nominal GDP is equal to the real GDP.
B. Nominal GDP is less than the real GDP.
C. Nominal GDP is less than the real GDP during the time of inflation.
D. Nominal GDP is greater than the real GDP during the time of inflation.
83. The labour force consists of all those
A. Who is fit for work? C. Who are willing to work
B. Who are available for work D. All of the above
84. The general goals of macroeconomic policy are
A. High rate of economic growth C. The rule of the law
B. Price instability D. All
85. If the national economy is closed, i.e. a country has no interaction with the rest of the world then
A. GNP > GDP B. GNP < GDP C. GNP = GDP D. All
86. Which of the following is the measure of the total market value of all final goods and services produced
in a country during a year regardless of ownership of factors of production?
A. Gross Domestic Product (GDP) C. Gross Personal Income (GPI)
B. Gross National Product (GNP) D. Gross National Income (GNI)
87. What is the definition of inflation?
A. A regular and continuous rise in the general price level C.A regular and continuous fall in the general
price level
B. A regular and continuous change in the general price level D. All of the above
88. What are the primary macroeconomic goals?
A. High inflation and low unemployment
B. Economic growth and high inflation
C. Economic growth, full employment, and price stability
D. Full employment and low economic growth
89. Which of the following is TRUE about the relationship between nominal GDP, real GDP and the
Consumer Price Index?

9 | E C O N O M I C S STE BY HABTAMU GENENE 22/05/2025 TELGRAM t.me/eduactionalresources2016

 A. Nominal GDP is equal to the real GDP multiplied by the Consumer Price Index.
B. Nominal GDP is equal to the real GDP divided by the Consumer Price Index.
C. Real GDP is equal to the nominal GDP multiplied by the Consumer Price Index.
D. Consumer Price Index is equal to the real GDP multiplied by the nominal GDP.
90. Which one of the following is TRUE about Net Domestic Product?
A. It is the net market value of the final goods and services produced in the domestic territory of a
country during a year.
B. It is the gross market value of the final goods and services produced in the domestic territory of a
country during a year.
C. It is the net market value of the final good and services produced outside a country during a year.
D. It is the net market value of the final goods and services produced in the domestic territory of a
country during the previous year.
91. Unemployment caused by permanent shift in pattern of demand is a cause of
A. Cyclical unemployment C. Structural unemployment
B. Frictional unemployment D. Disguise unemployment
92. Which is/&are the following example/s of structural unemployment?
A. A civil engineering graduate is looking for a job at a clinic
B. A student immediately after graduation
C. An agricultural graduate looking for a job at “Piassa”
D. A and C.
93. Which one of the following is wrong about Gross Domestic Product (GDP)?
A. It measures the current production of goods and services only
B. It is less than GNP if the net factor income received from abroad is negative
C. It measures the values of final goods and services produced within the territory of a country
irrespective of who owns that output
D. When the net factor income received from abroad is zero, GDP is equal to GNP
94. The general objectives of a macroeconomic policy are to achieve
A. Economic growth C. Full employment
B. Stable balance of payment D. All
95. A situation where “too much money” chases “too few goods.”
A. Cost push inflation C. Demand pull inflation
B. Supply side inflation D. both A & C
96. A situation of voluntary switching of jobs in search of better jobs.
A. Frictional unemployment C. Structural Unemployment
B. Cyclical Unemployment D. All

10 | E C O N O M I C S STE BY HABTAMU GENENE 22/05/2025 TELGRAM t.me/eduactionalresources2016

 97. It represents the difference between receipts for exports of goods and expenditure on imports of goods.
A. Balance of Payments C. Visible balance
B. Trade Balance D. Both B & C
98. Which statement is CORRECT about trade balance?
A. It is the difference between buying to foreigner and sell to foreigners
B. It may be deficit when export greater than import
C. It may be surplus when export less than import
D. It may be balance when import less than export
99. What is the balance of trade?
A. The difference between the export and the import of goods and services of a country for a given
period
B. The systematic record of a nation’s financial transactions with the outside world
C. The volume of private foreign investment and public grants and loans that flow into and out of a
country over a given period
D. The sum of interest payments and repayments of principal on external debt
100. What is a balanced trade?
A. When imports exceed exports C. When exports exceed imports
B. When exports and imports are equal D. When exports and imports are both zero
101. What happens when trade is out of balance and large trade surpluses or deficits exist?
A. Many nations seek trade surpluses
B. Some degree of trade deficit is economically tolerable for countries
C. A series of financial crises can lead economies into deep recessions
D. All of the above
102. When is a trade deficit economically tolerable for countries?
A. When it reflects the importing of capital equipment
B. When it reflects the exporting of consumer goods
C. When it reflects the borrowing of foreign currency
D. When it reflects the lending of domestic currency
103. In a situation where a country's exports exceed its imports, what is the likely effect on the balance of trade?
A. A trade deficit B. A trade surplus C. No impact D. A balanced trade
104. Which of the following affects the balance of payments of a country directly?
A. Changes in import and export.
B. Changes in internal trade and production.
C. Changes in consumption and investment.
D. Changes in tax revenues and capital expenditure

11 | E C O N O M I C S STE BY HABTAMU GENENE 22/05/2025 TELGRAM t.me/eduactionalresources2016

 105. A deficit in Balance of payment can be corrected by
A. An increase in interest rate C. A decrease in interest rate
B. Discouraging capital inflows D. Restricting remittances
106. A country's Balance of Trade in unfavourable when
A. Exports exceed imports C. Imports exceed exports
B. Terms of trade become unfavourable D. Imports grow in proportion to exports
107. A favourable Balance of Trade position of a country implies
A. Imports are greater than exports C. Exports are greater than imports
B. Both imports and exports are equal D. Rising imports and falling export
108. The type of innovation which is described as the creation of a new product, service or process.
A. Invention B. Extension C. Duplication D. Synthesis
109. Which is one of the key elements of business success?
A. Cooperation B. Work independently C. Team working D. Both A and C.
110. The first place entrepreneurs should take for start-up money is
A. Friends and relatives B. Personal saving C. Partners D. Angels
111. An ability to use spoken and written language to express ideas and inform others.
A. Motivation Skills B. Delegation Skills C. Communication Skills D. Delegation Skills
112. It indicates the commanding role to drive social change to and a potential payoff with its benefit to society.
A. Social entrepreneurship B . Entrepreneur C. Trader D . All
113. __________ has been recognized as important contributors to a nation’s economic growth.
A. Creativity B. Innovation C. Entrepreneurship D. All
114. Entrepreneurs should be passionate about their: ideas, goals and companies.
A. Bravery B. Flexibility C. Passion D. Integrity
115. Some of the most important general management skills are
A. Planning Skills B. Financial Skills C. Strategy Skills D. All
116. It is the ability to allocate tasks to different people.
A. Delegation Skills B. Motivation Skills C. Negotiation Skills D. Communication Skills
117. Entrepreneurs must demonstrate to others that they are trustworthy and honest.
A. Integrity B. Flexibility C. Strong Work Ethics D. Passion
Write very short answers to the following questions
118. What does the difference between total cost and total variable cost indicate in the short run?
119. Why are the TC and TVC curves parallel to each other?
120. Why do TC and TFC become equal at the zero level of output?
121. If TFC and TVC are given, how will you estimate the TC?
122. What does the difference between total cost and total fixed cost indicate in the short run?
123. Explain the general goals of a macroeconomic policy
124. Discuss the difference between GDP and GNP.
SET BY HABTAMU GENENE IN MAY 22/05/2025

12 | E C O N O M I C S STE BY HABTAMU GENENE 22/05/2025 TELGRAM t.me/eduactionalresources2016