50 questions. Try each one, then open the answer to check yourself and read the explanation.
One main quality of a good is that it
Answer: B (satisfies wants)
Something is an economic good because it gives satisfaction (utility) by meeting a want.
The interdependence between households and business enterprises illustrated in the figure above is known as
Answer: C (circular flow of income)
Households sell labour to firms for wages and spend the wages on firms' goods, so money and goods flow round in a circle: the circular flow of income.
Bisi needs a book costing N10.00 and a hat costing N10.00. If Bisi buys the book instead of the hat, the opportunity cost of his choice is the
Answer: D (hat)
Opportunity cost is the next best alternative actually given up. Bisi chose the book, so what he gave up is the hat itself.
An economic problem exists whenever
Answer: A (there is scarcity and choice)
The basic economic problem arises because resources are scarce, so people must choose which wants to satisfy.
The meaning of scale of preference is
Answer: A (preparing a list of goods and services to be purchased in order of priority)
A scale of preference is a list of wants arranged in order of importance, so the most pressing are satisfied first.
Optimum population is desirable because it enables an economy to attain maximum
Answer: A (per capita income)
At the optimum population, the people combined with the available resources give the highest income per head.
The age distribution of a population is NOT influenced by
Answer: E (school leaving age.)
Births, deaths and migration change how many people are in each age group; the age at which pupils leave school does not.
One theory of population contends that population tends to increase much faster than the supply of food, and that if the growth in population is not checked, it will be checked by natural forces like misery disasters and food shortages. This theory was propounded by
Answer: D (Rev. Thomas Malthus)
Thomas Malthus (1798) argued that population grows geometrically while food grows arithmetically, so famine, disease and war act as positive checks.
Units of Quantity Consumed | Total Utility | Marginal Utility
0 | --- | ---
1 | 10 | 10
2 | 15 | 5
3 | 17 | 2
4 | 18 | 1
5 | 18 | 0
The table above illustrates the law of
Answer: A (diminishing marginal utility)
Each extra unit consumed adds less satisfaction than the one before (10, 5, 2, 1, 0): diminishing marginal utility.
If in the short-run commodity X and commodity Y are supplied jointly, which of the following is correct?
Answer: A (An increase in demand for X will increase the supply of Y)
Jointly supplied goods come out of the same process (e.g. beef and hides), so producing more X to meet demand automatically produces more Y.
In market economies, resources are allocated through the
Answer: B (price system)
In a market economy prices, set by demand and supply, guide what is produced and how resources are used.
Study the figure below. At point H, the price elasticity of supply is
Answer: B (inelastic)
For a supply curve, a tangent through the origin means unit elasticity, a tangent cutting the price axis means elastic supply and a tangent cutting the quantity axis means inelastic supply. The curve is steep at H and its tangent there meets the quantity axis, so supply at H is inelastic.
At every point on an indifference curve, the
Answer: D (level of utility is constant)
An indifference curve joins combinations of two goods that give the consumer the same satisfaction, so utility is constant along it.
Under perfect competition, the long-run equilibrium requires
Answer: D (MR = MC = AR = AC)
In the long run the firm maximises profit (MR = MC) and earns only normal profit (AR = AC); since AR = MR, all four are equal.
In the figure above, the broken line labelled M is the Marginal Revenue Curve of a
Answer: A (monopoly)
The MR line slopes down and lies below the downward-sloping demand line, which happens only when a firm faces a falling demand curve, as a monopoly does.
If monopoly is attempting to maximize profit which of the following should it attempt to do?
Answer: E (Equate marginal cost to marginal revenue.)
Any firm, monopoly included, maximises total profit by producing where marginal cost equals marginal revenue.
The amount of labour a producer hires relative to other factor inputs depends on the
Answer: B (price of labour, machinery and other inputs)
A producer compares the price of labour with the prices of machines and other inputs before choosing the mix of factors.
Which of the following is NOT a feature of underdevelopment?
Answer: E (High per capita income.)
Underdeveloped countries have low, not high, income per head.
The inefficient distribution of scarce commodities in Nigeria is mostly due to the
Answer: C (long chain of the distribution system)
Goods pass through many middlemen before reaching consumers; each adds cost and delay, and hoarding is easier.
Warehousing facilities in the distribution and marketing of products are provided by
Answer: B (wholesalers)
Wholesalers buy in bulk and store goods in warehouses until retailers need them.
A corporation can obtain funds by issuing bonds. A bond is a form of debt which falls due to repayment after
Answer: E (10 or more years.)
Bonds are long-term loans, usually repaid after ten years or more.
A firm is said to be a public Joint Stock Company when it
Answer: D (sells shares to members of the public and publishes its accounts)
A public company offers its shares to the general public (on the stock exchange) and must publish its accounts.
Limited liability means
Answer: A (the debts of a company can only be paid from its own assets)
With limited liability, creditors can claim only the company's assets, not the owners' private property.
The purchasing power of the naira will fall when
Answer: C (there is inflation)
Inflation is a general rise in prices, so each naira buys fewer goods.
When a business has unlimited liability
Answer: D (the owners are responsible for all its financial debts)
Unlimited liability means the owners must pay all the business's debts, even from their private property.
Which of the following factors is most responsible for the concentration of population around the oil fields in Eastern Nigeria?
Answer: B (Presence of mineral deposits)
The oil (a mineral deposit) attracts companies and jobs, and people move to the area to work.
The petro-chemical industries are located in the Rivers State of Nigeria due to
Answer: C (oil deposits)
Petrochemicals are made from crude oil and gas, which are found in Rivers State.
One of the functions of a commercial bank is that it is
Answer: E (a banker of demand and time deposits of customers)
Commercial banks accept current (demand) and savings/time deposits from customers; the other functions belong to the Central Bank.
Because money serves as a standard for deferred payments
Answer: B (goods can be bought on credit with pre-determined value)
As a standard of deferred payment, money lets people agree today on a sum to be paid later, which makes credit buying possible.
Which of the following is a necessary prerequisite for trade by barter?
Answer: A (Need for double coincidence of wants)
In barter each party must want what the other has; without this double coincidence of wants no exchange happens.
A state budget is an outline of planned
Answer: A (expenditures and revenues expected within a financial year)
A budget sets out both the planned spending and the expected revenue of government for one financial year.
Which of the following is NOT among the canons of taxation as set out by Adam Smith?
Answer: B (Security)
Adam Smith's four canons are equality, certainty, convenience and economy; security is not one of them.
An example of a regressive tax is
Answer: C (a general sales tax)
Everyone pays the same sales tax on what they buy, so it takes a bigger share of a poor person's income: it is regressive.
Tax which is levied on goods manufactured, sold or used within a country is
Answer: B (excise tax)
Excise duty is the tax charged on goods produced inside the country.
By terms of trade, we mean the
Answer: D (index of export prices to import prices expressed as a percentage)
Terms of trade = (index of export prices ÷ index of import prices) × 100; it compares prices, not quantities.
The argument of tariff protection in less developed economies is that such a measure would
Answer: C (protect young industries from ruinous competition from abroad)
The infant-industry argument says tariffs shield new local industries from strong foreign rivals until they can compete.
Devaluation of the naira as a condition for the International Monetary Fund 'loan' is considered inadvisable because
Answer: D (it would worsen Nigeria's foreign exchange situation)
Nigeria's main export, oil, is priced in dollars and its demand does not rise when the naira falls, while imports needed by industry become dearer, so devaluation would worsen the foreign exchange position.
Foreign exchange control in Nigeria is administered by the
Answer: D (Central Bank of Nigeria)
The Central Bank manages the country's foreign reserves and administers exchange control.
Under the ECOWAS agreement, a Nigerian can enter and stay in Ghana without a visa for a period of
Answer: D (90 days)
The ECOWAS protocol on free movement allows citizens of member states to stay in another member state for up to 90 days without a visa.
How many National Development Plans did Nigeria have between 1960 and 1984?
Answer: C (Four)
Nigeria had four plans in that period: 1962–68, 1970–74, 1975–80 and 1981–85.
If an economy grows at an annual rate of 6%, of which 4% is deemed to be due to improvement in the productivity of labour and capital combined, the remaining 2% is generally attributed to
Answer: A (technical progress)
Growth not explained by labour and capital (the 'residual') is credited to technical progress.
The process by which a country attempts to reduce the import of manufactured goods by encouraging firms to produce these goods at home is described as
Answer: B (import-substitution)
Import substitution means producing at home the manufactured goods that used to be imported.
Under normal circumstances a producer will bear the entire burden of taxation on his output if the
Answer: A (demand for his product is completely elastic)
With perfectly elastic demand any price rise loses all buyers, so the producer cannot pass any of the tax on and bears all of it.
Which of the following is NOT a part of the fixed costs of a limited liability company?
Answer: E (Wages.)
Wages of production workers change with output, so they are a variable cost; the others are paid whatever the output.
The act of combining factor inputs in order to obtain specific output is known as
Answer: E (production.)
Production is the combining of factors of production to create goods and services.
Disguised unemployment
Answer: A (exists when manpower is not being utilized efficiently)
In disguised unemployment more people work at a job than are needed, so some add nothing to output: labour is not used efficiently.
Output | Total Cost (N)
1 | 20
2 | 56
3 | 96
4 | 144
5 | 160
In the table above, the marginal cost when output is two units is,
Answer: C (N36.00)
MC of the 2nd unit = TC(2) − TC(1) = 56 − 20 = N36.
The table below illustrates the law of diminishing returns on a farm.
Fixed Unit of land (hectares) | Variable Unit of Labour | Total Output (TO) | Marginal Product (MP)
5 | 1 | 10 | 10
5 | 2 | 25 | 15
5 | 3 | X | 21
5 | 4 | 60 | 14
5 | 5 | 73 | 13
5 | 6 | 82 | Y
Which pair of the following answers is appropriate for the missing information in the spaces marked X and Y?
Answer: C (X = 46, Y = 9)
X = 25 + 21 = 46 (also 60 − 14 = 46). Y = 82 − 73 = 9.
The unemployment associated with a recession is called
Answer: C (cyclical)
Unemployment caused by a fall in total demand during the downswing (recession) of the trade cycle is cyclical unemployment.
When total revenue is at a maximum, marginal revenue is
Answer: C (zero)
TR rises while MR is positive and falls once MR is negative, so at its peak MR is zero.