50 questions. Try each one, then open the answer to check yourself and read the explanation.
Economics is a science which deals basically with
Answer: B (allocation of scarce resources)
Economics studies how scarce resources are allocated among competing wants. Factors of production, GDP and national income are only parts of what it studies.
Economists speak about 'opportunity cost' when a person
Answer: B (has to forego one thing in order to have another)
Opportunity cost is the alternative given up when a choice is made, so it arises whenever a person must forgo one thing to have another.
To calculate the annual natural growth rate of a country's population, one has to know the country's annual birth rate and
Answer: D (the annual death rate)
Natural growth rate = birth rate − death rate. Migration is not part of natural growth.
We can classify the people of Nigeria into three broad age groups: Group One, 0 - 15 years; Group Two, 16-64 years; Group Three, 65 years and above. Group Two is the most important economically because
Answer: E (it is the productive group of the economy.)
People aged 16–64 are the working-age population: they produce goods and services and support the young and the old.
In the study of Economics, land, labour, capital and entrepreneur are referred to as factors of production. These factors produce commodities only if they are
Answer: C (combined in the production process)
No single factor produces on its own; output results only when land, labour, capital and enterprise are combined.
The supply of and demand for goods and services are influenced by the
Answer: E (price mechanism.)
In a market economy, price changes signal buyers and sellers and so govern how much is demanded and supplied; this is the price mechanism.
The control price for a carton of beer in Nigeria is N7.20. But a carton of beer is sold in parts of the country for as much as N15.00 The cause of this exorbitant price is that
Answer: E (the demand for beer exceeds the supply.)
A control price set below equilibrium creates a shortage: demand exceeds supply, so buyers bid the price up on the black market.
Most firms are financed by share capital. The shares which do not carry any fixed rate of dividend are known as
Answer: C (ordinary shares)
Ordinary shareholders receive whatever dividend the directors declare from profit; there is no fixed rate, unlike preference shares and debentures.
A firm whose costs of production decrease as it continues to increase its output is said to be enjoying
Answer: E (economies of scale.)
Economies of scale are the cost savings a firm gets as it grows, so its average cost falls as output rises.
Who controls a limited liability company?
Answer: D (The board of directors)
Shareholders elect a board of directors, which controls and directs the company on their behalf.
The National Electric Power Authority (NEPA) is a
Answer: D (public corporation)
NEPA was set up by an Act of Parliament and owned and run by government to provide a public service, which makes it a public corporation.
Which one of the following functions of banks in Nigeria is reserved to the Central Bank?
Answer: C (Issuing bank-notes)
Only the Central Bank of Nigeria has the legal right to issue the country's currency notes and coins.
The difference between visible exports and invisible imports of a country, in money terms, is known as the
Answer: B (balance of payments)
The balance of trade covers only visible goods; once invisible (service) items are included, the comparison belongs to the balance of payments.
The main economic goal of ECOWAS is the attainment of
Answer: A (regional free trade)
ECOWAS aims at economic integration of West Africa, starting with the removal of trade barriers so that goods move freely within the region.
Taxes which are levied on a person's expenditures are known as
Answer: A (purchase tax)
A purchase tax is charged on what people buy, so it falls on their spending rather than on their income.
Some of major problems hindering economic development in West Africa are in the areas of electricity supply, communications, education and health. These items are known in Economics as
Answer: B (infrastructural facilities)
Power, communications, education and health are basic facilities that support all other production; economists call them infrastructure.
The equilibrium market price is determined at a point where
Answer: D (quantity consumers desire equal quantity sellers offer)
Equilibrium price is the price at which quantity demanded equals quantity supplied, so the market clears.
The sloping downward of the demand curve implies that
Answer: D (a decrease in price leads to an increase in quantity demanded)
A downward-sloping demand curve shows the law of demand: when price falls, more is bought.
If AC = Average Cost of production, TC = Total Cost of production, VC = Variable Cost of production, FC = Fixed Cost of production, Q = Quantity of goods produced, then
Answer: A (AC = TC/Q; TC = VC + FC)
Average cost is total cost divided by output, and total cost is the sum of fixed and variable costs.
Population growth can be calculated as
Answer: D (Birth rate − death rate − emigration rate + immigration rate)
Population rises with births and people coming in (immigration) and falls with deaths and people leaving (emigration).
Retailers are greater in number than wholesalers because
Answer: B (retail business requires less expertise)
Retailing needs little capital and skill, so many people can enter it, while wholesaling needs more capital, storage and know-how.
The purpose of import duties does NOT include the
Answer: C (promotion of international trade)
Import duties make imports dearer and so reduce trade; they raise revenue, protect local industry, save foreign exchange and discourage some consumption.
The chief sources of Federal Government revenue in Nigeria are
Answer: A (import duties, petroleum import tax, profit tax, royalties and government dividends)
The Federal Government earns most from customs duties and from oil (petroleum profit tax and royalties); income tax, vehicle licences and poll tax go mainly to states and local councils.
Functions of commercial banks do NOT include
Answer: E (printing of currency.)
Printing and issuing currency is done for the Central Bank, not by commercial banks.
Monetary policy does NOT involve
Answer: A (increasing the import duties)
Import duties are a tax, so changing them is fiscal (or trade) policy; the other options change money supply or interest rates, which is monetary policy.
For questions 26 and 27, consider the information below about the Nigerian economy.
Sector | Share of gross national product (GNP) | Share of total employment | Growth rate of output
All agriculture | 40% | 70% | 3%
Industry and mining | 30% | 10% | 10%
Trade and services | 30% | 20% | 5%
What is the growth rate of GNP?
Answer: D (5.7%)
Weight each sector's growth by its share of GNP: 0.4 × 3 + 0.3 × 10 + 0.3 × 5 = 1.2 + 3 + 1.5 = 5.7%.
For questions 26 and 27, consider the information below about the Nigerian economy.
Sector | Share of gross national product (GNP) | Share of total employment | Growth rate of output
All agriculture | 40% | 70% | 3%
Industry and mining | 30% | 10% | 10%
Trade and services | 30% | 20% | 5%
What is the growth rate of employment?
Answer: E (4.1%)
Taking each sector's employment to grow with its output, weight the growth rates by employment shares: 0.7 × 3 + 0.1 × 10 + 0.2 × 5 = 2.1 + 1 + 1 = 4.1%.
In an economy, if the proportion of people who are below 18 years is 40% and those above 60 years is 30% what would this imply? The
Answer: A (dependency ratio is high)
70% of the people are too young or too old to work, so only 30% of working age support them: a high dependency ratio.
Which is considered the most effective tool by which the Central Bank of Nigeria can control the activities of commercial banks?
Answer: B (Reserve requirements)
Nigeria's money market was too small for open market operations to work well, so changing the cash and liquidity reserve requirements was the CBN's most effective control.
One of the ways by which Government derives revenue from industrial enterprises in West Africa is
Answer: B (excise duties)
Excise duties are taxes on goods produced inside the country, so they are collected from local industries.
What is the most important factor influencing the location of the iron and steel industry at Ajaokuta?
Answer: C (Nearness to raw materials)
Iron ore (at Itakpe) and other bulky raw materials are found near Ajaokuta, and heavy industries locate close to their raw materials to save transport costs.
A good measure of the standard of living usually used for international comparison is
Answer: E (per capita income (PCI).)
Per capita income divides national income by population, so it allows fair comparison between countries of different sizes.
A commodity can be sold for two or more different prices if it is
Answer: D (produced or sold by monopoly)
A monopolist controls supply, so it can practise price discrimination by charging different prices in separate markets.
The PAYE (Pay As You Earn) in Nigeria is an example of
Answer: B (progressive tax)
PAYE income tax charges higher rates on higher incomes, which makes it a progressive tax.
Market for maize. In the above diagram (1 denotes initial position; 2 denotes position after change), which of the following is NOT likely to be a factor causing the change from S1 to S2?
Answer: D (An increase in the price of maize)
A change in the good's own price moves along the supply curve; it does not shift it. The other options raise costs or cut output and shift supply to the left.
If income rises from N200.00 to N250.00 and the amount spent on good X falls from N30.00 to N28.00, then good X is
Answer: C (an inferior good)
Spending on X falls as income rises, so its income elasticity is negative, which marks an inferior good.
Which is NOT responsible for the decline in food production in West Africa?
Answer: D (Many of the countries do not face balance of payments problems)
Not having balance of payments problems would not reduce food output; the other options all take labour or incentives away from farming.
The most dominant economic activity which employs the largest number of people in West Africa is
Answer: D (agriculture)
Most West Africans live in rural areas and work on farms, so agriculture is the largest employer.
Public enterprises are supported on the grounds that they are undertaken for
Answer: C (improving the welfare of the people)
Public enterprises are set up mainly to provide essential services for the people's welfare, not chiefly to make profit.
Unit of output | Total cost
1 | 20
2 | 32
3 | 42
4 | 48
5 | 50
In the above table, the marginal cost of the 3rd unit of output is
Answer: C (10)
Marginal cost of the 3rd unit = TC of 3 units − TC of 2 units = 42 − 32 = 10.
Full equilibrium under perfect competition requires that
Answer: C (MR = MC = AR = AC)
In long-run (full) equilibrium a perfectly competitive firm produces where MC = MR, and since it earns only normal profit, price (AR = MR) also equals AC.
Oligopoly means
Answer: C (few sellers in the market)
Oligopoly is a market with only a few sellers, each large enough to affect the others.
Price discrimination can be practised profitably by a monopolist when the elasticity of demand for his product is
Answer: D (elastic in one market and inelastic in the other)
Discrimination pays only if elasticities differ: the monopolist charges a higher price where demand is inelastic and a lower price where it is elastic.
Demand for money for speculative purposes means
Answer: C (buying financial assets because of possible gains)
People hold money speculatively so they can buy bonds and other financial assets when prices change in their favour and make a gain.
If the Central Bank intends to increase the money supply through open market operations then it will
Answer: B (buy securities in the open market)
When the Central Bank buys securities it pays out money, which raises banks' reserves and the money supply.
When the import of a commodity is limited to a definite quantity by using a trade control method, this is known as
Answer: B (quotas)
A quota is a fixed limit on the quantity of a good that may be imported.
Balance of payments of a country explains the overall position of
Answer: C (both the current and capital accounts)
The balance of payments records all transactions with the rest of the world: both the current account and the capital account.
All of the following EXCEPT ONE are normal functions of the Marketing Boards in Nigeria
Answer: C (Provision of funds for building access roads)
Marketing boards bought and sold export crops, stabilised prices and supported agricultural development; building access roads is a government public-works job.
Which of the following countries is NOT a member of the Economic Community of West African States?
Answer: B (Sudan)
Sudan is in North-East Africa, not West Africa, so it is not an ECOWAS member.
In Nigeria, a balance of payments deficit can be solved by all of the following EXCEPT
Answer: D (purchasing foreign exchange from foreign countries)
Buying foreign exchange from abroad needs payment in other foreign currency, so it does not remove a deficit; the others cut imports, raise exports or finance the gap from reserves.