Raya University
College of Business and Economics
Department of Economics
Mid Exam for Management students (Extension)
Course Name: Microeconomics, Course Code: Econ 2021, Exam date 28-9-2013, to be held
from 10:00 – 11:00 L.T. Time allowed: 60 minutes. Value: 30%.
Instructions:
 Switch off your mobile phones.
 Use only the answer sheet for providing the answers to all questions.
 Read all the questions carefully, think a lot before writing your answer.
 Write briefly, clearly, and legibly.
 For multiple-choice questions, ambiguous selections will be marked wrong!
 Cheating is strictly forbidden!
 Do not open this exam until instructed to do so!
Name___________________________________ID No__________________Section ____
Exam Committee
Name
1.
2.
3.
Signature
Date
Part I: write true if the statement is correct otherwise false (1.5 marks each).
1. Utility is the level of satisfaction that is obtained by consuming a commodity or
undertaking an activity.
2. Marginal Utility refers to the additional utility obtained from consuming an additional
unit of a commodity.
3. In the ordinal utility approach, utility cannot be measured absolutely but different
consumption bundles are ranked according to preferences
4. An indifference curve shows the various combinations of two goods that provide the
consumer the same level of output.
5. A higher Indifference curve is always preferred to a lower one.
Part II: Choose the best answer from the given alternatives (1.5 marks each).
1. Consider Beti whose weekly income for purchasing fruit and milk is $20. Each unit of
fruit costs $1, while each unit of milk costs $2. Which of the following consumption
bundles lies beyond Beti’s budget line?
A. 3 units of fruit and 9 units of milk
B. 4 units of fruit and 8 units of milk
C. 6 units of fruit and 6 units of milk
D. units of fruit and 6 units of milk
2. Which one of the following is true about the properties of Indifference Curves?
A. Indifference curves have negative slope
B. Indifference curves are convex to the origin
C. Indifference curves do not intersect each other
D. All
3. Rational consumers maximize:
A. Profit
B. Tastes
C. Utility
D. Demand
4. Total utility reaches its maximum point when:
A. Marginal utility is negative
C. Marginal utility is zero
B. Total utility reaches its peak point
D. All
5. An equation of budget line is given by Y = -1/2X+10, Where X and Y are commodities.
Then,
A. The slope of the budget line is -1/2
C. Maximum amount of Y purchased is 10 units
B. Maximum amount of X purchased is 20 units
D. All
6. Which one of the following is true about utility?
A. Utility’ and ‘Usefulness” are not synonymous
B. Utility is subjective
C. The utility of a product can be different at different places and time
D. All
7. Which one of the following is true about ‘assumptions of Cardinal Utility Theory’?
A. Rationality of Consumers
B. Utility is Cardinally Measurable
C. Constant Marginal Utility of Money
D. Diminishing Marginal Utility (DMU)
Part III: Work out (show all necessary steps)
1. Given MUx = X, MUY = 4Y, Price of X is 3 Birr per unit and price of Y is also 3 Birr
per unit. If the income of the consumer is 1200 Birr,
A. Find the amounts of X and Y that the consumer chooses to consume so as to
maximize his utility (1point).(2)
B. Find the MRSxy, at equilibrium.(2)
2. Suppose a consumer has an income of Birr 200, the price of good X is Birr 10 and the
price of good Y is Birr 5. Then,
A) Write the budget constraint equation (2)
B) If she/he spends the whole income to buy good X, how much of good X can he/she
buy?(2)
C) If she/he spends the whole income to buy good Y, how much of good Y can he/she
buy? (2)
D) Draw the budget line (2)
Answer Sheet
Name__________________________________IDNo_____________Sec.___
I.
II.
True/False
1_______2_______3_______4________5______
Multiple Choice
1____2____3____4____5____6____7____
III. Work out