49 questions. Try each one, then open the answer to check yourself and read the explanation.
In the diagram above, full employment is indicated by
Answer: B (M)
Full employment of resources is shown by a point on the production possibility curve. M lies on the curve; N and L are inside it and P is outside it (unattainable).
Units of consumption of commodity X | Marginal utility (Utils)
1 | 100
2 | 80
3 | 50
4 | 20
From the table above, the total utility for the individual who consumes 3 units of commodity X is
Answer: C (230 utils)
Total utility is the sum of the marginal utilities: 100 + 80 + 50 = 230 utils.
One of the economic problems of Nigeria today arises from
Answer: D (the under-utilization of human and natural resources.)
Nigeria has plenty of people and natural resources, but many workers are unemployed and many resources lie idle, so they are under-utilized.
In certain circumstances, a centrally planned economy adopts the rationing system because of
Answer: C (the need for equitable distribution of goods and services)
Rationing gives each person a fixed share, so a planned economy uses it to share goods fairly among everyone.
Given that
B = Births
D = Deaths
X = Emigrants
M = Immigrants
The population of a country over a period of time will rise if
Answer: B (B − D = O and M > X)
If births equal deaths, natural increase is zero, so the population rises only if more people come in (M) than leave (X).
Population Statistics of a Country
AGE RANGE IN YEARS | % OF POPULATION 1960 | % OF POPULATION 1990
60 and above | 35 | 38
18 - 59 | 40 | 42
1 - 17 | 25 | 20
The dependency ratio between 1960 and 1990 is
Answer: C (decreased by 2%)
Dependants (under 18 and 60+) were 25 + 35 = 60% in 1960 and 20 + 38 = 58% in 1990, so the dependent share fell by 2%.
Population Statistics of a Country
AGE RANGE IN YEARS | % OF POPULATION 1960 | % OF POPULATION 1990
60 and above | 35 | 38
18 - 59 | 40 | 42
1 - 17 | 25 | 20
In 1990, the difference between the dependent population and the active population ratio is
Answer: C (16%)
In 1990 the dependent population is 38 + 20 = 58% and the active population is 42%. The difference is 58 − 42 = 16%.
The short-run period in production is defined as a period when
Answer: A (there is at least one fixed factor)
The short run is a period too short to change every input, so at least one factor (such as land or machinery) stays fixed.
Specialization often improves economic performance because it
Answer: A (permits exploitation of economies of scale)
When firms and workers specialise, output can be produced on a large scale with special machines and skills, which lowers cost per unit. These economies of scale are why specialization improves economic performance.
Which of the following statements best describes the relationship between average product and marginal product?
Answer: C (Average product curve will rise as long as marginal product is greater than average product.)
When the extra output of a new worker (MP) is above the average, it pulls the average up, so AP rises while MP > AP. MP cuts AP at AP's highest point.
When a firm is reaping economies of large-scale production, it experiences a fall in its
Answer: B (long-run average cost)
Economies of scale mean that as the firm grows, its cost per unit (long-run average cost) falls.
In the diagram above, the price P2 in price control situation, is referred to as
Answer: A (minimum price)
Demand and supply meet at P1. P2 is fixed above this equilibrium, and a legal price set above equilibrium, below which sales may not take place, is a minimum price.
The shaded triangle in the diagram above is known as
Answer: B (consumer surplus)
The triangle below the demand curve and above the price P1 shows what buyers were willing to pay above what they actually paid: consumer surplus.
In the diagram above, D0D0 is the original demand curve, S0S0 is the original supply curve, D1D1 is the new demand curve and S1S1 is the new supply curve. What is the new equilibrium quantity?
Answer: B (Q2)
The new equilibrium is where the new demand curve D1D1 crosses the new supply curve S1S1, which is above Q2.
If an increase in the price of a commodity leads to increase in total revenue, then it means that the demand for this commodity is
Answer: C (inelastic)
If raising the price raises total revenue, quantity fell by a smaller percentage than price rose, so demand is inelastic.
Given that the elasticity of demand for a commodity is 2.5, the percentage change in the quantity demanded as a result of a 10 per cent change in its price is
Answer: D (25.00.)
% change in quantity = elasticity × % change in price = 2.5 × 10 = 25%.
The producer in a perfectly competitive market is faced with a demand curve whose elasticity is
Answer: C (infinite)
A perfect competitor can sell any amount at the market price but nothing above it, so its demand curve is horizontal: perfectly (infinitely) elastic.
In the diagram above, profit is maximized at the output level
Answer: C (OL)
Profit is maximized where MC = MR and MC is rising. MC cuts MR twice; at N it is falling, but at L it is rising, so the best output is OL.
Unlike the retailer, the wholesaler provides
Answer: D (useful information about market trends and finance to the manufacturer.)
The wholesaler stands between manufacturer and retailer: he advises the manufacturer on market trends and helps finance production by buying in bulk and paying early.
Liquidation of limited liability company implies that the
Answer: B (debts of the company can only be paid from its own assets)
With limited liability, shareholders' private property is safe; the company's debts are paid only from the company's own assets.
One form of business organization which is not motivated solely by the profit objective is the
Answer: C (co-operative society)
A co-operative society is formed mainly to serve and help its members, not just to make profit.
Which of the following can have their shares quoted on the stock exchange?
Answer: D (A public limited liability company.)
Only public limited companies can offer their shares to the public and have them listed on the stock exchange.
The sector that employs the largest proportion of the active labour force in Nigeria is the
Answer: D (agricultural sector.)
Most working Nigerians are farmers, so agriculture employs the largest share of the labour force.
An entirely domestic effort directed at improving agricultural production in Nigeria is the
Answer: D (National Land Development Authority.)
The National (Agricultural) Land Development Authority was created and funded by the Nigerian government alone; the ADPs were World Bank assisted and FAO is a UN body.
A factor that influences the location of a firm near its market is the
Answer: C (high cost of transporting finished goods)
When finished goods are bulky, fragile or perishable and costly to carry, firms locate near the market to save transport costs.
In many developing countries, infrastructural problem is acute due to the shortage of
Answer: D (supporting services that encourage economic activities.)
Infrastructure means the supporting services, such as roads, power, water and telephones, that make other economic activities possible; these are in short supply.
Export-promotion policy is primarily concerned with the
Answer: D (encouragement of the production of export commodities.)
Export promotion means encouraging the production and sale of goods for export.
The petroleum industry in Nigeria is
Answer: C (the mainstay of the economy)
Oil earns most of Nigeria's foreign exchange and government revenue, so it is the mainstay of the economy (but not the sole source of revenue).
Crude petroleum is a good example of a
Answer: B (wasting asset)
Crude oil is used up as it is extracted and cannot be replaced, so it is a wasting asset.
One of the techniques of monetary control used by the Central Bank of Nigeria is
Answer: A (selective credit control)
Selective credit control, where the Central Bank tells banks which sectors to lend more or less to, is one of its tools for controlling money and credit.
Which of the following is true about the value of money?
Answer: A (It varies inversely with the price level)
When prices rise, each naira buys less, so the value of money moves in the opposite direction to the price level.
If the reserve requirement for commercial banking in Nigeria were 30%, a commercial bank which receives an initial cash deposit of ₦ 3000 is in a position to lend out
Answer: D (₦2,100.)
The bank must keep 30% of ₦3000 = ₦900 as reserve, so it can lend ₦3000 − ₦900 = ₦2,100.
An issue of bank-notes not backed by gold but by government securities is known as
Answer: A (fiduciary issue)
A fiduciary issue is currency backed by trust and government securities, not by gold.
A rise in the market price of fixed interest securities is an indication that the
Answer: D (market rate of interest has fallen.)
A bond pays a fixed amount each year. When market interest rates fall, that fixed payment becomes more attractive, so the bond's price rises.
An increase in government expenditure will lead to
Answer: B (an increase in the level of aggregate demand)
Government spending is part of aggregate demand (C + I + G + X − M), so more spending raises it.
When an indirect tax is levied on the producer of a good, the burden on the consumer will depend largely on the
Answer: C (elasticities of demand and supply of the commodity)
How much of a tax the producer can pass on depends on how buyers and sellers react to price: the more inelastic demand is relative to supply, the more the consumer pays. So both elasticities matter.
If a government wants to reduce the level of inflation, it will
Answer: A (run a budget surplus)
A budget surplus takes more money from the economy in taxes than the government spends, reducing total demand and so inflation.
If a country's national income increased from ₦1000 billion to ₦1100 billion over a period of 2 years, what was the average annual rate of growth of national income over the period?
Answer: A (5%)
Total growth = (1100 − 1000)/1000 × 100 = 10% over 2 years, so the average is 10 ÷ 2 = 5% a year.
A fall in the marginal propensity to save will lead to
Answer: B (an increase in national income)
If people save less of each extra naira, they spend more, so the multiplier (1 ÷ MPS) gets bigger and national income rises.
Which of the following is a transfer payment?
Answer: B (Gift to a Motherless Babies' Home)
A transfer payment is money received without giving any good or service in return, like a gift to a charity home.
The major objective of economic growth is to
Answer: D (increase the real per capita income.)
Economic growth aims to raise the real output, and so real income, per person.
The Family Support Programme in Nigeria essentially focuses on
Answer: D (economic emancipation of women.)
The Family Support Programme (1994) aimed mainly at improving the economic position of women and families.
Economically, underdeveloped countries are characterized by
Answer: A (high rate of population growth and low rate of economic growth)
Underdeveloped countries usually have populations growing fast while output grows slowly, so income per head stays low.
One of the major consequences of urban-biased development programmes in Nigeria is that they
Answer: A (led to rapid rural-urban migration)
When jobs and amenities are concentrated in towns, young people leave rural areas for the cities.
Development plans have not been successful in some developing countries largely because of
Answer: D (shortage of skilled labour and experts.)
Plans need trained people to prepare and carry them out; developing countries often lack these skilled workers and experts.
The balance of visible trade is the difference between the values of
Answer: A (imported and exported goods)
Visible trade is trade in physical goods, so its balance is exports of goods minus imports of goods.
If a country has a balance of payments surplus on current account this means that
Answer: D (the aggregate of the balance of trade and the invisible balance must be positive.)
The current account is the balance of trade (goods) plus the invisible balance (services, income, transfers); a surplus means their total is positive, even if one of them is negative.
If a country operates a freely floating exchange rate system, and suffers a balance of payments deficit, the deficit can be eliminated through
Answer: B (a fall in the external value of its currency)
A fall in the currency's value makes exports cheaper abroad and imports dearer at home, so exports rise, imports fall and the deficit closes.
The Economic Commission for Africa was set up by the
Answer: A (UNO)
The Economic Commission for Africa (1958) is one of the regional commissions of the United Nations.