49 questions. Try each one, then open the answer to check yourself and read the explanation.
When two variables are positively related, the graph of the relationship
Answer: D (is an upward-sloping curve)
A positive relationship means both variables rise together, so the graph slopes upwards.
For an inferior good, a decrease in real income will lead to
Answer: C (an outward shift of the demand curve)
People buy more of an inferior good when their income falls, so its demand curve shifts outwards (to the right).
Use the production possibility curve of a country represented in the diagram to answer this question. If the country is currently producing at point Y, it can increase production of producer goods by moving to the point
Answer: A (W)
Use the diagram. W is on the curve and to the right of Y, so the country can produce more producer goods (giving up some consumer goods). Z lies outside the curve and cannot be reached with present resources.
Use the production possibility curve of a country represented in the diagram to answer this question. An improvement in technology will enable the country to produce at
Answer: C (Z)
Use the diagram. Better technology shifts the production possibility curve outwards, so a point beyond the present curve such as Z becomes attainable.
In economic analysis, a statement is said to be normative if it
Answer: A (relates to value judgement)
Normative statements say what ought to be; they are based on opinions or value judgements and cannot be tested.
Utility is the satisfaction derived from
Answer: D (consumption)
Utility is the satisfaction a consumer gets from consuming a good or service.
The price of a good rises from ₦5 to ₦8 and the quantity demanded falls from 200 to 190 units. Over this price range, the demand curve is
Answer: B (fairly inelastic)
Quantity falls by 10/200 = 5% while price rises by 3/5 = 60%, so elasticity = 5 ÷ 60 ≈ 0.08: less than 1 but not zero, i.e. fairly inelastic.
In a planned economy, the emphasis is on
Answer: A (public ownership and control)
In a planned (command) economy the state owns and controls the means of production.
The table below gives the marginal utilities of commodities y and x.
Q | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8
MUy | 16 | 14 | 12 | 10 | 8 | 6 | 4 | 2
MUx | 11 | 10 | 9 | 8 | 7 | 6 | 5 | 4
In the table above, the price of commodity y is ₦2 and that of x is ₦1 while the individual has an income of ₦12. Determine the combination of the two commodities the individual should consume to maximize his utility.
Answer: B (3y and 6x)
Utility is maximised when MUy/Py = MUx/Px and all income is spent. At 3y and 6x: 12/2 = 6 = 6/1, and cost = 3 × ₦2 + 6 × ₦1 = ₦12.
If there is an increase in demand without a corresponding increase in supply, there will be a
Answer: A (rise in price)
More buyers chasing the same supply creates a shortage, so the price rises.
The best method of production in an underpopulated country is
Answer: D (capital-intensive)
An underpopulated country is short of labour, so it should use more machines in place of workers: capital-intensive methods.
Use the table below to answer the question.
Output produced per day (Units) | Fixed cost per day (₦) | Total cost per day (₦)
20 | 60 | 100
30 | 60 | 120
40 | 60 | 130
50 | 60 | 135
60 | 60 | 150
70 | 60 | 170
80 | 60 | 190
At 60 units of output, the AVC is
Answer: B (₦1.50)
Variable cost = total cost − fixed cost = ₦150 − ₦60 = ₦90. AVC = ₦90 ÷ 60 = ₦1.50.
Use the table below to answer the question.
Output produced per day (Units) | Fixed cost per day (₦) | Total cost per day (₦)
20 | 60 | 100
30 | 60 | 120
40 | 60 | 130
50 | 60 | 135
60 | 60 | 150
70 | 60 | 170
80 | 60 | 190
The ATC at 30 units of output is
Answer: B (₦4.00)
Average total cost = total cost ÷ output = ₦120 ÷ 30 = ₦4.00.
If the demand curve facing a firm is sharply downward-sloping, the firm is likely to be
Answer: B (a monopolist as it can have a great influence on price)
A steep (inelastic) downward-sloping demand curve means there are no close substitutes, which is the case of a monopolist with great power over price.
A normal supply curve is usually positively sloped because the relationship between
Answer: A (price and supply is positive)
Sellers offer more at higher prices, so price and quantity supplied move in the same direction: a positive relationship.
Short-run period in production is a period too short for a firm to be able to change its
Answer: A (scale of operation)
In the short run some factors (such as plant and machinery) are fixed, so the firm cannot change its scale of operation.
Price elasticity of supply is a ratio of the change in
Answer: B (quantity supplied to the change in price)
Elasticity of supply = proportionate change in quantity supplied ÷ proportionate change in price.
The long-run average cost curve is called a planning curve because it shows what happens to costs when
Answer: B (different sizes of plants are built)
The long-run average cost curve shows the lowest cost of each output when the firm can choose any plant size, so it helps the firm plan which size of plant to build.
Imperfect market is characterised by
Answer: B (many buyers and few sellers)
When there are only a few sellers, each can influence price, so the market is imperfect. The other options describe a perfect market.
The term 'Near money' is best described as
Answer: A (a financial instrument that is readily convertible to cash)
Near money is an asset (such as a savings deposit or treasury bill) that is not money itself but can quickly be turned into cash.
The commercial banks differ from non-bank financial institutions because they
Answer: B (accept deposits withdrawable by cheque)
Only commercial banks keep current accounts whose deposits can be withdrawn by cheque; the other features are shared with non-bank institutions.
The distinguishing characteristic between the money market and the capital market lies in whether the
Answer: B (debt instruments provided are long-term or short-term)
The money market deals in short-term funds and the capital market in long-term funds.
For a firm, value added can be defined as the difference between the
Answer: B (value of its output and inputs purchased from other firms)
Value added = value of the firm's output − value of the inputs it bought from other firms.
Insurance companies, pension and provident funds and unit trusts are all examples of
Answer: D (non-bank financial institutions)
These bodies collect and invest savings but do not accept cheque deposits, so they are non-bank financial institutions.
Inflation that is usually associated with periods of trade boom is
Answer: D (demand-pull inflation)
In a boom, spending rises faster than output, so too much money chases too few goods: demand-pull inflation.
The monetary control instrument most effectively used by the Central Bank of Nigeria is the
Answer: A (open market operations)
The CBN mainly controls the money supply by buying and selling government securities: open market operations.
Securities are described as listed when they are
Answer: B (traded on a recognised stock market)
A listed security is one admitted for trading on a recognised stock exchange.
The theory of comparative advantage states that a commodity should be produced in that nation where the
Answer: B (opportunity cost is least)
Comparative advantage means producing what you can make at a lower opportunity cost than others.
An advantage of the sole proprietorship over the partnership form of business organisation is that
Answer: C (the possibility of conflict in management is virtually non-existent)
A sole proprietor makes all decisions alone, so there are no quarrels between partners over management.
The distinction between capital and recurrent expenditure lies in the
Answer: B (time frame of the expenditure)
Recurrent spending (salaries, running costs) recurs every year, while capital spending creates long-lasting assets; the difference is the time span the spending covers.
Under a floating exchange rate regime, the determinant of the exchange rate is
Answer: C (demand for and supply of foreign goods)
Under a floating system the exchange rate is set by market forces of demand and supply, which come from trade in foreign goods and services.
The major objective of a revenue allocation formula in a country is to
Answer: A (share revenue between the different tiers of government)
A revenue allocation formula decides how federally collected revenue is shared among federal, state and local governments.
A greater burden of the taxes on essential goods is borne by the
Answer: A (lower income group)
Poor people spend a larger share of their income on essential goods, so taxes on them fall more heavily on the lower income group.
Privatization and commercialization of public enterprises in Nigeria is necessitated by
Answer: C (their operational inefficiency)
Public enterprises were often wasteful and loss-making, so government privatised or commercialised them to improve efficiency.
The effectiveness of devaluation as a solution to a balance of payments problem depends on the
Answer: C (relative elasticities of demand and supply of imports and exports)
Devaluation works only if demand for exports and imports is elastic enough for the price changes to raise export earnings and cut import spending.
Statutory organisations usually established by Acts of Parliament are called
Answer: A (public corporations)
Public corporations (e.g. NNPC, NPA) are set up by Acts of Parliament (statutes), so they are statutory corporations.
The effect of an increase in the personal income tax is to
Answer: C (reduce the disposable income)
Disposable income is income after tax, so a higher income tax leaves people with less to spend.
IBRD as an international monetary institution is concerned with the
Answer: B (development of infrastructure in member nations)
The IBRD (World Bank) lends for long-term development projects such as roads, power and dams.
To compare the standard of living among nations, the most widely used economic indicator is the
Answer: C (real per capita income)
Real income per head allows for both price changes and population size, so it best compares living standards.
The major role of multi-national companies in the petroleum industry in Nigeria is
Answer: B (oil marketing and prospecting)
Multinational oil companies search for (prospect), produce and market Nigeria's crude oil.
Two basic features common to an industry are
Answer: D (similarity of products and production processes)
An industry is a group of firms making similar products, usually with similar production processes.
The demand for labour is an example of
Answer: C (derived demand)
Labour is demanded for the goods it helps to make, so its demand is derived demand.
When a union is composed of workers with the same skill, it is termed
Answer: B (a craft union)
A craft union brings together workers with the same skill or trade, e.g. carpenters or electricians.
An adverse environmental impact of the petroleum industry on the economy is
Answer: C (oil spillage)
Oil spills pollute land, rivers and farmland, which is environmental damage.
Occupational mobility as applied to factors of production means the ease by which
Answer: A (factors can be transferred from one form of use to another)
Occupational mobility is the ease of moving a factor from one job or use to another; moving between places is geographical mobility.
A country is said to be overpopulated when
Answer: C (the resources are inadequate to cater for the population)
Overpopulation exists when there are too many people for the available resources.
An important factor hindering the rapid development of the industrial sector in Nigeria is
Answer: C (inadequate infrastructural facilities)
Poor power supply, roads and water raise production costs and slow industrial growth.
Fixing the prices of agricultural products can be a problem because of the
Answer: D (unpredictable output of farmers)
Farm output depends on weather and seasons and varies from year to year, which makes fixed prices hard to maintain.
The labour force of a country can be determined by examining the
Answer: A (age structure of the population)
The labour force consists of people of working age, so the age structure of the population shows its size.