44 questions. Try each one, then open the answer to check yourself and read the explanation.
In a firm, three employees earn ₦ 5,500 each, four earn ₦ 3, 300 each, two earn ₦ 5 000 each and one earns ₦ 7,000. The mean income of the employees is
Answer: C (₦ 4,670)
Total = 3 × 5,500 + 4 × 3,300 + 2 × 5,000 + 7,000 = 16,500 + 13,200 + 10,000 + 7,000 = ₦46,700. Mean = 46,700 ÷ 10 = ₦4,670.
Abubakar has the choice of buying either a house or a Mercedes Benz car for ₦ 1m plus ₦ 0.5m running cost. If he decides to buy the Mercedes Benz car, his opportunity cost is
Answer: C (the house)
Opportunity cost is the best alternative given up, not the money spent. Buying the car means giving up the house.
The shape of a production possibility frontier is determined by the
Answer: A (increasing relative costs)
The frontier bows outward because each extra unit of one good costs more and more of the other good: increasing relative (opportunity) costs.
Normative economics deals with
Answer: D (value judgements.)
Normative economics deals with opinions about what ought to be, which are value judgements; positive economics deals with facts (what is).
| Period 1 | Period 2
Family income | ₦1 000 | ₦1 500
Expenditure on clothing | ₦100 | ₦200
In the table above, the income elasticity of clothing is
Answer: B (2.0)
Spending on clothing rises from 100 to 200, a 100% rise; income rises from 1,000 to 1,500, a 50% rise. Income elasticity = 100 ÷ 50 = 2.0.
A capitalist economy is one characterized by the
Answer: A (private ownership of factors of production)
Under capitalism, land, capital and businesses are owned by private individuals and firms.
In a planned economy, what shall be produced is determined primarily by
Answer: B (government decisions)
In a planned (command) economy, a central planning authority of the government decides what to produce.
D0 and S0 are initial demand and supply curves with equilibrium at E1. Other supply and demand curves with equilibra points are indicated.
Points E6 and E5 are respectively equilibra points for
Answer: C (D2 and S1; D2 and S2)
E6 is where the highest demand curve D2 crosses the leftmost supply curve S1. Following D2 to the right, it crosses S2 at E5.
The graphs above illustrate
Answer: D (competitive demand)
Supply of X rises and its price falls, and at the same time demand for Y falls. People switch from Y to the cheaper X, so X and Y are substitutes: competitive demand.
In the diagram above, the consumer attains equilibrium at point
Answer: D (K.)
A consumer is in equilibrium where the budget line just touches (is tangent to) the highest indifference curve he can reach; this is point K. J is beyond the budget line and H is where a lower curve crosses it.
A utility maximizing household will allocate its expenditure so that
Answer: C (the utility of the last naira spent on each commodity is equal)
Satisfaction is greatest when the marginal utility of the last naira spent is the same for every good (equi-marginal principle).
The downward sloping part of the long-run average cost curve of a firm may be attributable to
Answer: D (increasing returns to scale.)
In the long run all inputs can change. LRAC falls when doubling inputs more than doubles output (increasing returns to scale).
The main function of price in the economic system is to
Answer: A (allocate scarce resources among competing uses)
Prices signal where resources are most wanted, so they share out scarce resources among their competing uses.
S/No. | Sector | No. of people
I. | Agriculture, forestry and fishing | 10 050 000
II. | Mining and quarrying | 1 500 000
III. | Transport and communication | 2 000 000
IV. | Manufacturing | 1 750 000
V. | Basic construction | 750 000
VI. | Distributive trade | 3 000 000
VII. | Administration | 1 250 000
Calculate the total number of people engaged in tertiary production from the data above
Answer: B (6 250 000)
Tertiary production is services: transport and communication (2 000 000) + distributive trade (3 000 000) + administration (1 250 000) = 6 250 000.
A characteristic of the average fixed cost is that, it
Answer: D (falls continuously but is never equal to zero.)
AFC = fixed cost ÷ output. It keeps falling as output grows, but since fixed cost is never zero, it never reaches zero.
In perfect competition, every firm is a price
Answer: B (taker)
Each firm is too small to affect the market price, so it must accept (take) the price set by the industry.
Given that the total fixed cost is ₦1 000, total variable cost ₦2 500 and the output, 100 units. Find the average total cost of producing one unit
Answer: C (₦35)
Total cost = 1,000 + 2,500 = ₦3,500. Average total cost = 3,500 ÷ 100 = ₦35.
Which of the following falls continuously as output expands?
Answer: A (Average fixed cost)
Fixed cost is shared over more and more units, so AFC keeps falling. MC, AVC and AC are U-shaped and eventually rise.
A major obstacle to rapid agricultural development in Nigeria is the
Answer: B (inability of farmers to adopt modern technology)
Most Nigerian farmers still use hoes and cutlasses because they cannot afford or are not trained in modern methods, which keeps yields low.
The land tenure system in Nigeria impedes agricultural production because
Answer: C (it limits opportunity for mass production of agricultural goods)
Inheritance shares land into small scattered plots, so farmers cannot farm on a large scale or use machines.
The major problem of cooperative societies in Nigeria is that
Answer: D (their management style is poor.)
Co-operatives are often run by ordinary members without business training, so poor management is their main weakness.
The primary objective of establishing the Export Processing Zone is to
Answer: B (encourage the production and processing of export commodities)
An Export Processing Zone gives firms special facilities and tax breaks so they will produce and process goods for export.
The first petroleum exploring company to discover crude petroleum in Nigeria was
Answer: D (Shell-BP.)
Shell-BP found oil in commercial quantity at Oloibiri in 1956.
Concentrating industries in one place is advantageous because there are gains in terms of
Answer: A (external economies)
Firms in the same area share skilled labour, services and infrastructure, which are external economies.
Import substitution industrialization refers to
Answer: C (a situation in which local industries are set up to produce goods formerly imported)
Import substitution means building local factories to make goods the country used to import.
An entrepreneur will continue to employ labour up to a point where
Answer: C (wages are equal to marginal product of labour)
Hiring one more worker adds to profit while his extra output is worth more than his wage, so the firm stops where the wage equals the marginal product of labour.
Optimum population is defined as the level of population at which
Answer: A (per capita output is maximized)
Optimum population is the size that, with the available resources and technology, gives the highest output (income) per head.
When a worker earns more than the wage just sufficient to keep him in his job, the excess income is called
Answer: B (an economic rent)
The wage just needed to keep a worker in a job is his transfer earnings; anything above it is economic rent.
No. | Items | Amount (₦m)
1. | Wages | 9000
2. | Salaries | 7000
3. | Government pensions | 1500
4. | Unemployment pay and other social benefits | 1000
5. | Rent and interest | 1500
6. | Profits | 1500
From the table above, calculate the national income.
Answer: B (₦19,000m)
Pensions and unemployment benefits are transfer payments and are left out. National income = 9000 + 7000 + 1500 + 1500 = ₦19,000m.
Non-bank financial intermediaries do not
Answer: C (accept demand deposits)
Non-bank financial institutions lend and may take savings or time deposits, but they do not operate current (demand) accounts on which cheques are drawn.
Inflation which is caused mainly by increases in the prices of factors of production is described as
Answer: A (cost-push inflation)
When wages, raw materials and other input costs rise, producers raise their prices: cost-push inflation.
The relationship between the value of money and the price level is
Answer: D (inverse.)
When prices rise, money buys less, so the value of money and the price level move in opposite directions.
People hold money for
Answer: D (speculative purposes.)
Keynes gave three motives for holding money: transactions, precaution and speculation.
Bills of exchange originate from a
Answer: B (commercial bank)
Of the options, commercial banks are the ones that draw, accept and discount bills of exchange for traders.
If high unemployment goes hand in hand with rising prices, the situation created is
Answer: B (stagflation)
Stagflation is stagnant output with high unemployment happening at the same time as inflation.
One of the functions of money is that, it helps
Answer: B (postpone payments without loss of count)
Money is a standard of deferred payment: debts can be settled later in money of known value.
Fiscal policy involves changes in
Answer: B (revenue and expenditure of government)
Fiscal policy is the use of government taxes (revenue) and spending to influence the economy; open market operations and money supply are monetary policy.
Economic development may be defined as economic growth
Answer: D (and improved distribution of wealth)
Development is more than growth in output: it also needs the benefits to be shared more fairly and living standards to improve.
The price of a good will not be affected by the imposition of a sales tax on it if the
Answer: D (demand is perfectly elastic.)
If demand is perfectly elastic, buyers would buy nothing at a higher price, so the seller cannot raise the price and must bear the whole tax.
A free trade area emerges when
Answer: C (a group of countries decide to remove restrictions on imports from one another)
In a free trade area, member countries remove tariffs and quotas on trade among themselves.
Devaluation helps in checking adverse balance of payments if the
Answer: A (demand for imports is elastic)
Devaluation makes imports dearer. If demand for imports is elastic, people cut imports a lot, so the import bill falls and the deficit improves.
Gains from trade depends on
Answer: A (comparative advantage)
Countries gain from trade by specializing in what they produce at a lower opportunity cost (comparative advantage).
Favourable terms of trade is important to a country because it facilities
Answer: C (economic prosperity for the country)
With favourable terms of trade, each unit of exports buys more imports, so the whole country gains.
The most acceptable economic measure for trade protection is to
Answer: B (protect infant industries)
The infant industry argument, protecting new industries until they can compete, is the most widely accepted economic case for protection.