50 questions. Try each one, then open the answer to check yourself and read the explanation.
It is impossible to satisfy all human wants because
Answer: D (available resources are limited)
Wants are unlimited but the resources to satisfy them are limited (scarce).
The diagram (quantity of good Y against quantity of good X) showing the maximum possible combination of commodities X and Y produced in Nigeria is called the
Answer: C (production possibility curve)
A curve showing the greatest combinations of two goods that can be produced with given resources is the production possibility curve.
Use the production possibility diagram. How many units of good X is produced for 8 units of commodity Y?
Answer: D (0)
The curve meets the Y-axis at 8 units, so producing 8 units of Y leaves no resources for X: X = 0.
The main function of the price system is to
Answer: B (ensure efficient allocation of resources in the economic system)
Prices signal where resources are most wanted and move them there, so resources are allocated efficiently (not equally).
A system in which the means of production is held in trust for the people by government is known as a
Answer: A (socialist economy)
Under socialism the state owns the means of production on behalf of the people.
The working population refers to
Answer: C (the economically active segment of the population)
The working population is the part of the population that is of working age and able and willing to work.
Which of the following factors is NOT responsible for the rural/urban drift in Nigeria?
Answer: C (Rural electrification programme)
Rural electrification improves life in the villages, so it reduces rather than causes the drift to towns.
An accurate census is important to a country because it helps
Answer: D (in providing a sound basis for formulating development policy)
Planners need correct figures on the size and structure of the population to plan schools, hospitals, jobs and so on.
If 502.75 million tonnes of grains are consumed annually by a population of 88.5 million people, the per capita grains consumption will be
Answer: B (5.68 tonnes)
Per capita consumption = 502.75 ÷ 88.5 ≈ 5.68 tonnes.
In the theory of production and cost, the average total cost of a firm is minimized when the marginal cost curve cuts the average total cost curve at its
Answer: A (lowest point)
MC always cuts ATC at ATC's lowest point: below it MC pulls ATC down, above it MC pushes ATC up.
A firm faces diminishing returns when its
Answer: C (marginal output diminishes)
Diminishing returns begin when each extra unit of the variable factor adds less output than the one before, i.e. marginal product falls.
If labour productivity in the cement industry is increasing as output of cement is expanded, then the amount of labour per unit of output produced must be
Answer: B (decreasing)
Higher output per worker means fewer workers (less labour) are needed for each unit of output.
If profit maximization is assumed to be the objective of a business enterprise, labour must be paid a wage rate equal to the
Answer: B (marginal revenue product of labour in the enterprise)
A profit-maximising firm hires workers until the wage equals the extra revenue the last worker brings in, the marginal revenue product of labour.
From the diagram, a shift in the demand curve from D0D0 to D1D1 implies
Answer: A (a rise in the demand for the commodity)
The demand curve moves to the right, so more is demanded at every price: demand has increased.
If the equilibrium price of a certain commodity is N120.00 and the government fixes its price at N110.00, the supply will be
Answer: B (smaller than the equilibrium supply)
At a price below equilibrium producers offer less, so quantity supplied falls below the equilibrium quantity.
If the price elasticity of demand for a certain commodity is less than unity, then
Answer: A (an increase in the price of the commodity will raise the total revenue of the producer)
With inelastic demand, quantity falls proportionally less than price rises, so total revenue increases.
In the diagram above, what is the lowest possible price the monopolist could charge and still break even without there being excess demand?
Answer: A (P1)
To break even, price must equal average total cost. The demand curve cuts ATC at output Z, price P1; there quantity demanded equals output, so there is no excess demand.
At equilibrium, one of the distinctive features of monopoly compared with perfect competition is that in the former
Answer: C (price is always higher than marginal cost)
A monopolist's marginal revenue is below price, so at MC = MR the price is above marginal cost; in perfect competition P = MC.
In the diagram above, the marginal propensity to consume (MPC) is equal to
Answer: B (TP/RP)
MPC = change in consumption ÷ change in income. On the triangle, the rise TP is the change in consumption and RP the change in income, so MPC = TP/RP.
Output in units; total revenue (N); average revenue (N); marginal revenue (N):
1; 20; 20; ---
2; 38; 19; 18
3; 54; ---; 16
4; 68; ---; ---
5; 80; 16; ---
Given an output of 3 units, the average revenue is
Answer: B (N18.00)
Average revenue = total revenue ÷ output = 54 ÷ 3 = N18.
Output in units; total revenue (N); average revenue (N); marginal revenue (N):
1; 20; 20; ---
2; 38; 19; 18
3; 54; ---; 16
4; 68; ---; ---
5; 80; 16; ---
Determine the marginal revenue if the total revenue is N80.00
Answer: A (N12.00)
TR rises from N68 (4 units) to N80 (5 units), so MR = 80 − 68 = N12.
Which of the following functions does the wholesaler perform to save the retailer the burden of carrying large stocks?
I. Breaking the bulk
II. Packing the goods in smaller containers
III. Providing vital information.
IV. Granting credit facilities.
Answer: A (I and II)
By breaking bulk and repacking goods into small lots, the wholesaler lets the retailer buy only the small quantities he can sell, so he need not hold large stocks.
Production is said to be completed when
Answer: A (goods and services reach the consumers)
Production includes every activity up to the point where the good reaches the final consumer, including distribution.
A debenture share entitles its holder to
Answer: C (receive a fixed interest on sums invested)
A debenture holder lends money to the company and receives a fixed rate of interest; he is not an owner.
A public liability company is different from a private limited company because it
Answer: D (can sell shares in the stock exchange)
Only a public company may offer its shares to the general public through the stock exchange; both kinds are registered and are legal entities.
A modern corporation is owned by
Answer: B (ordinary shareholders)
Ordinary shareholders are the real owners: they carry the main risk and have voting rights. Debenture holders are creditors.
Wheat grows best in
Answer: B (temperate climate)
Wheat needs a cool, fairly dry growing season, which is found in temperate lands.
On the basis of the contribution to employment, the most important economic sector in West Africa is
Answer: B (agriculture)
Most working people in West Africa are farmers, so agriculture employs the most people.
The most popularly adopted industrialization strategy in West Africa is
Answer: A (import substitution)
West African countries mainly tried to industrialise by producing at home the goods they used to import.
One of the most important factors that should be considered in the location of an industry is
Answer: C (availability of inputs and market)
Firms locate where they can get raw materials and other inputs and sell their products cheaply.
Since the mid-1980s, the most disturbing development in the industrial sector in Nigeria is
Answer: D (capacity under-utilization)
After the fall in oil earnings, factories could not get imported raw materials and spare parts, so they worked far below capacity.
The money market is a financial market that specializes in the provision of
Answer: A (short-term loans and advances)
The money market deals in short-term funds; long-term funds are raised in the capital market.
Which of the following programmes in the monetary sector is aimed at enhancing the banking habit of the rural areas?
Answer: C (The community banking scheme)
Community banks were set up in rural communities to bring banking services to people there.
The sum of N80,000 is deposited in a bank and the cash ratio of the banking system is 10%. Calculate the total sum of money the bank can create from the deposit.
Answer: B (N800 000)
Total deposits = 80,000 ÷ 0.10 = N800,000.
Economic development is distinguishable from economic growth because the former
Answer: C (also includes an efficient distribution of economic growth)
Growth is just a rise in output; development also means the gains are shared so that living conditions improve for the people.
Which of the following can be considered as being outside the objectives of public finance?
Answer: D (The deregulation of the economy)
Allocation, distribution and stabilisation are the aims of public finance; deregulation is a policy of withdrawing government control.
The joint ventures operating in the Nigerian oil industry are between
Answer: C (the NNPC and producer marketers)
The oil joint ventures are partnerships between the NNPC and the (mainly foreign) oil-producing companies.
Which of the following are the major disadvantages of direct system of taxation?
I. Disincentive to hardwork
II. Difficulties in assessment and collection
III. Imperfections in tax assessment.
Answer: D (I, II and III)
Direct taxes such as income tax can discourage people from working harder, are difficult and costly to assess and collect, and are often assessed imperfectly (allowing evasion). All three are disadvantages.
Items (N m):
1. Wages and Salaries: 38.0
2. Profits and Rents: 11.0
3. Payments to foreigners on assets held in Nigeria: 1.0
4. Income from foreign assets held by Nigerians resident abroad: 2.0
5. Depreciation: 4.0
Using the table above, calculate the net income.
Answer: D (N46m)
Factor incomes 38 + 11 = 49; add net income from abroad (2 − 1 = 1) to get 50; subtract depreciation 4 to get net income of N46m.
According to the income approach to national income measurement, the national income of a country is equal to
Answer: B (the value of output at factor cost)
The income approach adds the incomes paid to the factors of production, which equals the value of output at factor cost.
The best index for international comparison of standards of living is the
Answer: C (per capita income)
Income per head takes account of population size, so it compares living standards better than total national income.
The GDP of Nigeria will be greater than her GNP if
Answer: D (the value of goods and services produced by Nigerian businesses abroad is less than that of foreign businesses in Nigeria)
GNP = GDP + net factor income from abroad. If foreigners earn more in Nigeria than Nigerians earn abroad, net factor income is negative and GDP exceeds GNP.
Below equilibrium, the gap between aggregate demand and the full employment level of income is called the
Answer: D (deflationary gap)
When aggregate demand is too low to reach full-employment income, the shortfall is a deflationary gap.
Which of the following are the advantages of Nigeria's membership of ECOWAS?
I. A greater opportunity for trade according to comparative cost advantage
II. A larger market for industries producing under conditions of decreasing cost
III. Competition for home based monopoly firms
Answer: D (I, II and III)
Economic integration lets members trade according to comparative cost advantage, gives industries a bigger market so they can cut unit costs, and exposes local monopolies to competition. All three are advantages.
Comparative advantage implies that a country will specialize in producing the commodity
Answer: C (with the lowest opportunity cost)
A country has a comparative advantage in the good it can produce at a lower opportunity cost than other countries.
Devaluation is effective when
Answer: D (demand for exports is price elastic)
Devaluation makes exports cheaper abroad; if foreign demand for them is elastic, export earnings rise a lot.
What type of unemployment is revealed by the dotted lines on the graph above?
Answer: B (Cyclical unemployment)
The dotted line rises and falls opposite to output over the trade cycle: unemployment caused by booms and slumps is cyclical.
From which of the following does Nigeria derive trade concessions?
Answer: D (EEC)
Under the Lomé Convention the EEC gave African countries such as Nigeria preferential access for their exports.
Tariffs on imports are meant to
Answer: A (prevent a country from becoming a dumping ground for foreign goods)
Import duties make cheap foreign goods dearer, protecting home industries from dumping.
The International Bank for Reconstruction and Development is important to developing countries because it
Answer: C (offers loans to member countries for socio-economic activities)
The IBRD (World Bank) lends to member countries for development projects such as roads, power, health and education.