46 questions. Try each one, then open the answer to check yourself and read the explanation.
Economics can be best defined as the study of
Answer: D (how scarce resources can be used efficiently)
Economics studies how people use limited (scarce) resources efficiently to satisfy their many wants.
Which of the following are resources for holding money instead of investing it?
I. Transaction motive
II. Precautionary motive
III. Speculative motive
IV. Liquidity motive
Answer: C (I, II and III only)
Keynes gave three motives for holding money (liquidity preference): transactions, precautionary and speculative. 'Liquidity motive' is not a separate motive.
It is generally believed that inflation in West Africa is caused by all the factors listed below except
Answer: E (decrease in money supply.)
A fall in money supply reduces spending and pulls prices down; the other factors push prices up.
All the following are specific examples of indirect tax except
Answer: E (poll tax.)
A poll tax is a fixed sum paid directly by each adult, so it is a direct tax; the others are taxes on goods.
Demand in Economics is synonymous with
Answer: D (wants supported with ability to pay)
Effective demand is the desire for a good backed by the ability and willingness to pay for it.
All the following factors will cause a change in demand except
Answer: E (the price of the commodity.)
A change in the good's own price moves us along the demand curve (change in quantity demanded), not a shift in demand.
A rational consumer tends to do all the following except
Answer: A (buying more at a high price than at a low price)
A rational consumer obeys the law of demand, buying more when price is low, not more when it is high.
A firm that charges different prices for goods or services that have the same technical qualities is called
Answer: D (a discriminating monopoly)
Selling the same product at different prices to different buyers is price discrimination by a monopolist.
A perfect market has all the following features except that
Answer: A (there are many buyers and few sellers)
Perfect competition needs many buyers and many sellers, not few sellers.
Time deposit has the same meaning as
Answer: C (deposit account)
A time deposit is a deposit (savings) account where money is kept for a period and earns interest.
Which of the following best explains an inflationary situation at current price level?
Answer: A (Demand > Supply)
Inflationary pressure exists when demand at current prices exceeds supply, so prices are pushed up.
The theory of consumer behaviour is based on all the following assumptions except that the
Answer: A (consumer is assumed irrational)
Consumer theory assumes the consumer is rational, i.e. he tries to get the most satisfaction from his income.
The Joint Stock Company can be a private company whose minimum membership is
Answer: A (2)
Under Nigerian company law a private limited company needs at least 2 members.
Limited liability in Economics means that
Answer: A (a shareholder's liability in the event of debt or bankruptcy is limited to the amount he has invested)
With limited liability a shareholder can lose only what he put into the company, not his private property.
Regressive tax is not a good tax system because it
Answer: D (does not ensure equity in payment)
A regressive tax takes a bigger share of a poor person's income than a rich person's, so it is not fair (equitable).
The price and quantity of crude oil and petrol sold to other countries by Nigeria is fixed by the
Answer: C (OPEC)
As a member of OPEC, Nigeria follows OPEC's agreed prices and production quotas.
Which of the following is not a member of the OPEC?
Answer: E (Egypt.)
Egypt has never been an OPEC member; Indonesia (then), Iran, Venezuela and the UAE were members.
Which of the following statements is not true of capital income?
Answer: C (It is calculated as Population/National Income)
Per capita income = national income ÷ population; dividing population by national income is upside down.
The notion of short-run and long-run periods is responsible for grouping costs into
Answer: A (fixed and variable)
In the short run some costs are fixed and others variable; in the long run all costs are variable.
Which of the following statements is not true of cheques? They
Answer: C (are legal tender)
A cheque is not legal tender: nobody is forced by law to accept it in payment.
The liquidity ratio of a commercial bank refers to the
Answer: A (proportion of the bank's total assets which should be held in cash and liquid form)
The liquidity ratio is the share of a bank's deposits/assets it must keep in cash and easily cashed assets.
Which of the following are not agents of distribution?
Answer: C (Consumers)
Consumers are where distribution ends; they do not distribute goods to others.
One of the greatest demerits of the middlemen in Nigeria is that they
Answer: A (increase the prices of goods and services at will)
Middlemen often hoard and add large profit margins, pushing up prices.
When a country has a large labour force, it is beneficial to use a method of production which is
Answer: C (labour intensive)
Where labour is plentiful and cheap, labour-intensive methods create jobs and keep costs low.
Which of the following are determinants of the rate of population growth?
Answer: C (Death rate, birth rate and net migration)
Population growth = birth rate − death rate ± net migration.
The concentration of industries in one area is referred to as
Answer: E (localization of industries.)
When many firms in an industry gather in one area this is localisation of industry.
Which of the following best describes the budget? A
Answer: B (detailed estimate of government financial operation for a year)
A budget is a detailed estimate of government revenue and expenditure for one financial year.
Which of the following is not done by the NNPC?
Answer: E (Pricing of crude oil.)
NNPC explores, produces and refines oil, but the price of crude is fixed through OPEC (see Q17).
One major function of the central bank is to
Answer: E (control and regulate money supply.)
The central bank controls the money supply and credit through monetary policy.
Distribution involves the
Answer: E (transfer of goods and services from production centre to consumers.)
Distribution covers all the stages that move goods from where they are produced to the final consumers.
The Nigerian economy can best be described as a
Answer: C (mixed economy)
In Nigeria both government and private individuals own and run businesses, so it is a mixed economy.
The amount of money to be created by commercial banks is actually influenced by the
Answer: A (legal reserve ratio)
Credit creation depends on the reserve (cash) ratio: the higher the required ratio, the less banks can lend.
Another name for the International Bank for Reconstruction and Development (IBRD) is
Answer: C (World Bank)
The IBRD is popularly called the World Bank.
The headquarters of the Organization of Petroleum Exporting Countries (OPEC) is in
Answer: B (Vienna, Austria)
OPEC's headquarters has been in Vienna, Austria, since 1965.
The wholesaler provides all the following services to the manufacturer except
Answer: E (after-sales services.)
After-sales service (repairs, maintenance) is given to the consumer, usually by the retailer or manufacturer, not by the wholesaler to the manufacturer.
The country that makes the largest contribution to the IMF is
Answer: A (The USA)
The USA has the largest quota (contribution) in the IMF.
Section A (answer one question only from this section)
The raw scores of 20 students of Utopia High School who took part in an examination in Economics are given below. The pass mark is 40%.
38, 28, 70, 43
39, 20, 64, 66
12, 46, 52, 53
20, 34, 48, 69
18, 20, 64, 34
(a) What is the mean score of the students' marks? (b) How many students passed the examination? (c) What percentage of the students failed the examination? (d) What is the range of the scores? (e) How many students scored below the mean score?
(a) Sum of scores = 838; mean = 838 ÷ 20 = 41.9
(b) Scores of 40 and above: 43, 46, 48, 52, 53, 64, 64, 66, 69, 70 = 10 students passed
(c) 10 failed out of 20: 10/20 × 100 = 50%
(d) Range = highest − lowest = 70 − 12 = 58
(e) Below 41.9: 12, 18, 20, 20, 20, 28, 34, 34, 38, 39 = 10 students
Arrange the scores in order first; it makes every part easier.
Section A (answer one question only from this section)
The demand and supply function of a commodity are given as follows:
Quantity demanded (Qd) = 20 − 2P
Quantity supplied (Qs) = 6P − 12, where P = price in naira.
(a) Determine the equilibrium price and quantity bought and sold at that price
(b) If the price of the commodity is fixed at N6.00, what is the magnitude of the excess supply?
(a) At equilibrium Qd = Qs: 20 − 2P = 6P − 12, so 32 = 8P and P = N4
Quantity: Qd = 20 − 2(4) = 12 units (check Qs = 6(4) − 12 = 12)
(b) At N6: Qd = 20 − 12 = 8 units; Qs = 36 − 12 = 24 units
Excess supply = 24 − 8 = 16 units
Excess supply = quantity supplied − quantity demanded at the fixed price.
Section B (answer three questions only from this section)
(a) Distinguish briefly but clearly between opportunity cost and money cost.
(b) Has the concept of opportunity cost any relevance to the economies of West African countries?
(a) Opportunity cost (real cost) is the alternative forgone when a choice is made – the next best thing given up. Money cost is the amount of money paid for a good or service. Example: with N10 a student buys a textbook instead of a shirt; the money cost of the book is N10, its opportunity cost is the shirt.
(b) Yes, it is relevant:
- Governments with scarce resources must choose between projects (schools vs roads); opportunity cost guides budget priorities.
- Helps planners rank needs (scale of preference) and allocate resources efficiently.
- Firms choose what to produce and which factors to use.
- Households choose how to spend limited incomes.
- Helps in choosing between consumption now and investment for growth, and between producing for export or for home use.
Use an example in (a).
Section B
Discuss the factors that should motivate a producer to supply more of a commodity.
Factors that make a producer supply more:
1. A rise in the price of the commodity.
2. A fall in the cost of factors of production (raw materials, wages).
3. Improved technology that lowers cost.
4. A fall in the price of other goods the factors could produce (making this good relatively more profitable), or a rise in price of jointly supplied goods.
5. Government subsidies or lower taxes.
6. Favourable weather (for farm produce).
7. Expectation of lower future prices (sell more now).
8. Aim of the firm (e.g. maximising sales/market share), entry of new firms, improved transport and peace/stability.
Explain each factor briefly.
Section B
'Despite having about 75% of their labour force in agriculture, West African countries cannot meet their domestic food requirement.' Discuss.
Reasons:
1. Use of crude tools (hoe, cutlass) and little mechanisation – low productivity.
2. Small, scattered farms and the land tenure system.
3. Farmers are mostly old and illiterate; young people drift to towns.
4. Poor seeds, little fertiliser, pests and diseases.
5. Lack of credit to farmers.
6. Poor storage, processing and transport – heavy post-harvest losses.
7. Dependence on rainfall; drought, erosion and floods.
8. Emphasis on export cash crops instead of food crops.
9. Low and unstable prices discourage farmers.
10. Rapid population growth.
11. Inadequate extension services and research.
The point: many workers but very low productivity.
Section B
What is inflation? What efforts have been made by the government to combat inflation in Nigeria?
Inflation: a persistent and general rise in the price level, which reduces the value (purchasing power) of money.
Government efforts:
1. Monetary policy by the Central Bank: higher interest/bank rate, open market sales of securities, higher reserve and liquidity ratios, credit ceilings, selective credit control.
2. Fiscal policy: cutting government spending, raising taxes, reducing budget deficits.
3. Price control and the Price Control Board.
4. Wage freezes / income policy.
5. Increasing production, e.g. Operation Feed the Nation, Green Revolution.
6. Importation of scarce goods and reduction of import duties on essential goods.
7. Improving distribution and checking hoarding.
Define, then explain measures.
Section B
Define National Income. What are the uses of National Income account in Nigeria?
National income is the total money value of all final goods and services produced in a country in a year, plus net income from abroad.
Uses:
1. Measures economic growth over time.
2. Gives per capita income and indicates standard of living.
3. Helps economic planning and policy making.
4. Shows the contribution of each sector.
5. Allows comparison with other countries.
6. Shows distribution of income; guides taxation.
7. Guides investors.
8. Used by international bodies for aid, loans and contributions.
Give a precise definition first.
Section B
Outline the difficulties encountered by tax collectors in Nigeria.
Difficulties:
1. Tax evasion and avoidance.
2. Poor records: many people keep no accounts and incomes are hard to assess.
3. Large informal sector and self-employed people.
4. Illiteracy and ignorance of tax laws.
5. Corruption of tax officials.
6. Inadequate and poorly trained staff, poor equipment.
7. Poor transport and communication to reach rural areas.
8. Resistance and hostility from taxpayers; mistrust of government spending.
9. Lack of accurate population and residence data.
10. Weak enforcement of penalties.
Outline means brief points.
Section B
Give reasons for development planning in Nigeria.
Reasons:
1. To use scarce resources efficiently and set priorities.
2. To achieve rapid economic growth and development.
3. To reduce unemployment.
4. To reduce income inequality and regional imbalance.
5. To provide infrastructure and social services.
6. To diversify the economy away from dependence on oil/one product.
7. To control inflation and attain price stability.
8. To improve the balance of payments.
9. To attract foreign aid and investment (donors want a plan).
10. To co-ordinate public and private sector activities.
Give at least five well-explained reasons.
Section B
How can the Nigerian National Petroleum Corporation achieve internal economies of scale?
Internal economies of scale are cost savings a firm gets from its own growth. NNPC can achieve them through:
1. Technical economies: large, modern refineries, pipelines and equipment; full use of capacity.
2. Managerial economies: specialised, skilled managers and division of labour.
3. Financial economies: borrowing large sums cheaply because of its size.
4. Marketing economies: bulk purchase of inputs and bulk sale of products, cheaper advertising per unit.
5. Research and development economies.
6. Risk-bearing economies: diversifying into petrochemicals, gas, fertiliser.
7. Welfare economies: training and staff welfare that raise productivity.
8. By-product economies: using by-products such as gas.
Define internal economies, then apply each to NNPC.