47 questions. Try each one, then open the answer to check yourself and read the explanation.
The elasticity of supply of perishable goods is
Answer: B (inelastic)
Perishable goods cannot be stored, so sellers cannot easily hold back or add to supply when the price changes: supply is inelastic.
The demand for factors of production is an example of
Answer: C (derived demand)
Factors are wanted not for themselves but for the goods they help produce, so their demand is derived from the demand for those goods.
In the diagram above, the marginal rate of substitution of X for Y for a movement from S to T is
Answer: D (5:1)
Use the diagram. From S to T, Y falls from 18 to 13 (5 units) while X rises from 3 to 4 (1 unit), so 5 units of Y are given up for 1 of X: MRS = 5:1.
A student has ₦30.00 with which to buy a ruler costing ₦18.00 and an exercise book costing ₦25.00. If he buys the exercise book, his opportunity cost is
Answer: A (the ruler)
He cannot afford both (₦43 > ₦30). Opportunity cost is the next best alternative given up, which is the ruler itself, not its money price.
A shift in supply curve indicates that a different quantity will be supplied at each possible price because
Answer: C (other factors than price have changed)
A change in the good's own price only moves along the curve; the whole curve shifts when other factors (costs, technology, weather, etc.) change.
In the pie chart above, the percentage for children is equivalent to
Answer: D (144°)
Use the pie chart. Children are 40% of the circle: 40/100 × 360° = 144°.
If goods P and Q are purchased by a consumer, a fall in the price of P with the price of Q unchanged will cause the budget line to
Answer: B (rotate outwards away from the origin)
The consumer can now buy more P with the same income, so the budget line pivots outwards on the P axis while its Q intercept stays fixed.
One of the reasons for an exceptional demand curve is the
Answer: A (expectation of a future change in price)
If people expect prices to rise further, they buy more now even though the price has risen, giving an upward-sloping (exceptional) demand curve.
A scientific approach in economic analysis entails
Answer: D (both inductive and deductive methods)
The scientific method uses induction (from facts to generalisation) and deduction (from theory to predictions). Normative statements are value judgements, not scientific methods.
In a centrally planned economy, the economic problem of deciding what to produce is dependent on
Answer: B (state command)
In a command economy the government (state) decides what, how and for whom to produce.
The solution to the problem of double coincidence of wants requires a buyer and a seller whose demands are precisely
Answer: D (complementary)
Under barter, trade happens only when each person wants exactly what the other offers, i.e. their wants complement each other.
The stock exchange is a market for the buying and selling of
Answer: C (existing shares)
The stock exchange is mainly a secondary market where already-issued (existing) shares and securities change hands.
National Income estimates can be used to
Answer: D (compare a country's growth rate with that of another over a period of time)
National income figures over several years show how fast an economy grows, and can be compared with other countries' figures.
In Nigeria, the bank that can correctly be described as a unit bank is
Answer: D (community bank)
A unit bank operates from a single office with no branches. Community banks in Nigeria were unit banks serving one locality.
If the country's GNP in the current year is ₦65 billion and the GNP in the base year ₦50 billion, the GNP deflator is
Answer: A (130.0)
GNP deflator = current-year GNP ÷ base-year GNP × 100 = 65 ÷ 50 × 100 = 130.
In a closed economy, the marginal propensity to consume is 0.6 and the average propensity to consume is 0.8. The value of the multiplier is
Answer: A (2.5)
The multiplier uses the marginal propensity: k = 1/(1 − MPC) = 1/(1 − 0.6) = 1/0.4 = 2.5. The APC is not needed.
Insurance companies invest mainly in instruments traded on the
Answer: A (capital market)
Insurance companies hold long-term funds, so they invest mainly in long-term securities on the capital market.
Liquidity preference refers to the
Answer: D (demand to hold money as assets rather than as stocks)
Liquidity preference is the desire to hold wealth in the form of money (cash) rather than in other assets such as stocks.
Creeping inflation implies that there is a
Answer: A (gentle and persistent increase in the general price level)
Creeping inflation is a slow, mild but continuing rise in the general price level.
The primary objective of the NDIC is to
Answer: D (give protection to bank depositors)
The Nigeria Deposit Insurance Corporation insures bank deposits so depositors are protected if a bank fails.
Excess demand inflation can be controlled through
Answer: A (contractionary fiscal policy)
Demand-pull inflation is cured by reducing total spending, e.g. raising taxes or cutting government spending: contractionary fiscal policy.
The middlemen in the chain of distribution are
Answer: B (wholesalers and retailers)
Middlemen stand between producers and consumers; they are the wholesalers and retailers.
If the growth rate of available resources continuously outpaces that of the population, a country will eventually experience
Answer: B (underpopulation)
If resources keep growing faster than population, there are too few people to make full use of the resources: underpopulation.
The equilibrium wage in an economy is determined by the
Answer: D (supply and demand for labour)
Like any price, the equilibrium wage is set where the demand for labour equals the supply of labour.
The Malthusian theory of population growth is often said to be
Answer: C (pessimistic)
Malthus predicted that population would outgrow food supply, leading to famine and misery, so his theory is called pessimistic.
Improved labour efficiency can be measured by
Answer: A (an increase in output-input ratio)
Efficiency means getting more output from the same input, so a rising output-input ratio shows improved efficiency.
As a firm increases its output, the average fixed cost
Answer: D (tends to decrease continuously)
Fixed cost stays the same, so dividing it over more units makes average fixed cost fall continuously.
In the diagram above, what is the excess demand at the price of ₦60?
Answer: A (200)
Use the diagram. At ₦60 the supply curve gives 100 units and the demand curve 300 units, so excess demand = 300 − 100 = 200.
The short-run equilibrium output for a monopolist is determined by the
Answer: D (intersection of the marginal cost and marginal revenue curves)
A monopolist maximises profit at the output where marginal cost equals marginal revenue.
The benefits that accrue to a firm as a result of an improvement in the industry it belongs to are called
Answer: D (external economies)
Benefits from the growth of the whole industry, outside the firm's own control, are external economies.
The economic policy of deregulation is aimed at encouraging
Answer: C (a competitive market structure)
Deregulation removes government controls and barriers to entry so more firms can compete.
Under conditions of perfect competition, a firm's supply curve is determined by its
Answer: B (marginal cost curve)
A competitive firm produces where price = marginal cost, so its supply curve is its marginal cost curve above average variable cost.
The effect of an increase in demand for a commodity accompanied by a decrease in supply will be to
Answer: A (raise the price of the commodity and affect the quantity in an indeterminate way)
Both changes push the price up. Higher demand raises quantity but lower supply reduces it, so the change in quantity depends on which is bigger.
External finance for a limited liability company is mainly sourced through
Answer: B (the issuing of shares)
A limited company raises most of its outside capital by selling shares to the public or to investors.
Some of the key indicators of underdevelopment in a country are
Answer: B (poverty, low level of literacy and low income)
Underdeveloped countries are marked by widespread poverty, low literacy and low incomes per head.
One of the roles of NNPC in the production and refining of crude oil is to
Answer: C (satisfy the domestic consumption of petroleum products)
NNPC runs the country's refineries mainly to meet local demand for petroleum products.
One way of correcting the balance of payments problem of a country is to
Answer: C (devalue the currency)
Devaluation makes exports cheaper and imports dearer, which helps to reduce a balance of payments deficit.
Import substitution aims at
Answer: D (improving the balance of payments)
Import substitution means producing at home goods that were imported. This saves foreign exchange and so improves the balance of payments.
One of the major criticisms of the 1962-1968 National Development Plan was that
Answer: D (its execution was based largely on foreign sourced financial resources)
The first national plan depended heavily on foreign aid and loans (about half its finance), which did not all come.
A deficit budget can be used to
Answer: A (stimulate recovery from a trade depression)
Spending more than revenue injects money into the economy, raising demand and helping recovery from a depression.
One of the major factors militating against industrialization in Nigeria is the
Answer: A (inadequacy of infrastructural facilities)
Poor roads, unreliable power and inadequate water supply raise costs and hold back industries in Nigeria.
The types, sources and uses of government income are mainly concerned with
Answer: D (public finance)
Public finance studies how government raises revenue and how it spends it.
The present privatization policy in Nigeria is aimed at
Answer: D (increasing efficiency in production)
Privatisation sells government enterprises to private owners, who are expected to run them more efficiently.
One of the problems arising from the localization of industries is
Answer: D (structural unemployment)
When the dominant industry of an area declines, many workers with the same skills lose their jobs at once: structural unemployment.
The major purpose of African Development Bank is to
Answer: B (provide loans for infrastructural development)
The African Development Bank lends to member countries mainly for development projects such as roads, power and water.
As a country gets more developed, the percentage of labour engaged in agriculture tends to
Answer: B (decrease steadily)
With development, farming becomes more mechanised and industry and services grow, so the share of labour in agriculture falls.
In the diagram above, the opportunity cost of a unit of cotton in terms of cocoa is
Answer: A (4 for Ghana; 2 for Nigeria)
Use the diagram. Ghana gives up 20 cocoa for 5 cotton (20 ÷ 5 = 4 cocoa per cotton); Nigeria gives up 60 cocoa for 30 cotton (60 ÷ 30 = 2).