48 questions. Try each one, then open the answer to check yourself and read the explanation.
If the marginal propensity to consume is 0.6 and consumption expenditure changes by ₦10 million, the equilibrium level of income will change by
Answer: B (₦25.0 million)
The multiplier is 1/(1 − MPC) = 1/0.4 = 2.5. So income changes by 2.5 × ₦10 million = ₦25 million.
The price index is calculated as
Answer: B ((current price)/(base year price) × 100/1)
A price index compares current prices with base-year prices: current price divided by base year price, times 100.
Personal income tax as a source of government revenue is increased when the
Answer: A (tax rate is raised)
Raising the tax rate means each taxpayer pays more on the same income, so revenue from personal income tax rises.
In computing national income, transfers are excluded because
Answer: D (they are not payments for productive activities)
Transfer payments such as pensions and gifts are not earned by producing goods or services, so counting them would overstate national output.
The major role of NDIC is to
Answer: A (insure bank deposits)
The Nigeria Deposit Insurance Corporation insures bank deposits so that depositors are paid if a bank fails.
When the federal government guarantees a loan for a state government, such a loan constitutes
Answer: A (a public debt)
A loan taken by a state government and guaranteed by the federal government is owed by the public sector, so it is a public debt.
One way of controlling deflation is by
Answer: C (deficit financing)
Deflation comes from too little spending. Deficit financing means government spends more than it collects, which raises demand and prices.
If the Central Bank of Nigeria reduces the bank rate, this will cause
Answer: A (money supply to increase)
A lower bank rate makes borrowing from the central bank cheaper, so commercial banks lend more and money supply increases.
The main source of government revenue in Nigeria is
Answer: B (rents and royalties)
Nigeria's government earns most of its revenue from crude oil, collected as rents and royalties from oil companies.
The Revenue Mobilization, Allocation and Fiscal Commission in Nigeria has the primary responsibility for
Answer: C (evolving an acceptable revenue-sharing formula)
The RMAFC's main job is to work out the formula for sharing federal revenue among the federal, state and local governments.
The burden of a government tax on a commodity whose demand is inelastic will
Answer: B (fall more heavily on consumers)
When demand is inelastic, buyers keep buying even at a higher price, so sellers can pass most of the tax on to consumers.
An important determinant of price elasticity of demand is
Answer: C (the ease of substitution)
If a good has close substitutes, buyers switch easily when its price rises, so demand is more elastic.
The range of the data 14, 13, 15, 18, 20, 35 and 13 is
Answer: B (22)
Range = highest − lowest = 35 − 13 = 22.
If the marginal utility of good X exceeds that of good Y, this implies that
Answer: B (consuming more of X will increase total utility)
As long as marginal utility of X is positive, consuming more of X adds to total utility; here X's extra unit gives more satisfaction than Y's.
A commodity will be demanded only if
Answer: D (it has utility)
People only want a good if it gives satisfaction (utility); without utility there is no demand at any price.
Derived demand is normally used with reference to
Answer: D (the factors of production)
Factors of production are demanded not for themselves but for the goods they help produce, so their demand is derived.
A straight line indifference curve indicates that the two products are
Answer: C (perfect substitutes)
A straight-line indifference curve has a constant marginal rate of substitution, which happens when the goods are perfect substitutes.
Given that demand and price remain unchanged, an outward shift of the supply curve will lead to
Answer: B (excess supply)
More is offered for sale at the same price while demand stays the same, so quantity supplied exceeds quantity demanded.
Use the diagram below to answer questions 19 and 20. A movement from K to M will
Answer: B (leave the consumer's utility unchanged)
K and M lie on the same indifference curve (I), and every point on one indifference curve gives the same satisfaction.
A distribution is said to be positively skewed if it
Answer: B (has a long tail to the right)
A positively skewed distribution has most values bunched on the left and a long tail stretching to the right.
A decision on input combination solves the economic problem of
Answer: A (how to produce)
Deciding which mix of labour, capital and other inputs to use is the question of how to produce (the production method).
Choice involves opportunity cost because
Answer: B (available resources are inadequate)
Resources are scarce, so choosing one thing means giving up the next best alternative, which is the opportunity cost.
The law of demand can be expressed as
Answer: A (Qd = f(P))
Quantity demanded depends on price, written as the demand function Qd = f(P).
Nigeria's exports usually comprise
Answer: A (primary goods)
Nigeria mainly exports raw materials such as crude oil, cocoa and groundnuts, which are primary products.
A characteristic common to partnership and sole proprietorship is
Answer: D (unlimited liability)
In both a sole proprietorship and an ordinary partnership the owners' personal property can be taken to pay business debts: unlimited liability.
Economic growth can be accelerated through
Answer: D (increased current investment)
Investing now adds to the stock of capital, which raises the economy's future output.
The exchange rate determined by market forces is known as
Answer: B (floating exchange rate)
A floating exchange rate is set by the demand for and supply of the currency, not by government.
An association formed by a group of individuals solely for the marketing of their product is a
Answer: C (producer cooperative society)
Producers who join together to market what they produce form a producer (marketing) cooperative society.
Import substitution policy is used to
Answer: C (correct the balance of payments problem)
Producing at home what was once imported cuts the import bill, which helps correct a balance of payments deficit.
The organization whose aim is to solve the trade problems of less developed nations is
Answer: A (UNCTAD)
The United Nations Conference on Trade and Development (UNCTAD) was set up to deal with the trade and development problems of poorer countries.
Mobility of labour is higher when there
Answer: C (are alternative jobs in the same location)
When several jobs are available in one place, workers can easily move from one job to another.
A major advantage of industrialization is that it
Answer: C (leads to growth and development)
Industrialisation raises output, creates jobs and widens the economy, leading to growth and development.
The oil-producing areas in Nigeria are agitating for special compensation owing mainly to
Answer: D (environmental pollution)
Oil spills and gas flaring pollute the land, water and air of the Niger Delta, so the communities demand compensation.
If children and the aged dominate the population of a country, this results in
Answer: B (a fall in the standard of living)
Children and old people mostly consume without producing, so a small working population must support many dependants and living standards fall.
A major factor militating against rapid industrialization in Nigeria is
Answer: D (epileptic power supply)
Factories need steady electricity; frequent power cuts raise costs and hold back industrial growth in Nigeria.
Minimum wage legislation will result in
Answer: B (greater supply of labour)
A minimum wage above the market rate attracts more people to offer their labour, so the supply of labour increases.
The major problem of conducting a census in Nigeria is
Answer: D (lack of political will)
Census figures in Nigeria are tied to political power and revenue sharing, so political interference is the main obstacle to an accurate count.
The marginal productivity theory applies in a
Answer: B (perfectly competitive market)
The theory says workers are paid the value of their marginal product, which holds under perfect competition.
A rising short-run average cost is a result of
Answer: C (diminishing returns)
In the short run, adding more variable inputs to fixed inputs brings diminishing returns, so cost per unit rises.
The only factor of production that plays an active role in the production process is
Answer: C (entrepreneur)
The entrepreneur actively organises the other factors and takes the risks of the business.
The market structure in which there is interdependence of price-output policies is
Answer: B (an oligopoly)
In an oligopoly a few firms dominate, so each must consider how rivals will react to its price and output decisions.
If the short-run cost curve of a firm is U-shaped, the marginal and average costs are equal where the
Answer: C (average cost is minimum)
The marginal cost curve cuts the average cost curve at its lowest point.
The diagram above shows the effect of
Answer: A (maximum price legislation at P2)
P2 is a price ceiling set below the equilibrium price P1, which is maximum price legislation; it causes a shortage of q2 − q3.
A perfectly competitive firm is advised to close down when the
Answer: D (price is below the average variable cost)
If price cannot even cover average variable cost, the firm loses less by shutting down and paying only its fixed costs.
Use the table below to answer questions 47 and 48.
Number of men: 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8
Total product (unit): 200 | 440 | 540 | 600 | 640 | 660 | 660 | 640
What is the average product when 3 men are employed?
Answer: A (180 units)
Average product = total product ÷ number of men = 540 ÷ 3 = 180 units.
Use the table below to answer questions 47 and 48.
Number of men: 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8
Total product (unit): 200 | 440 | 540 | 600 | 640 | 660 | 660 | 640
If the price per unit is ₦2, what is the average revenue when 6 men are employed?
Answer: C (₦220)
Total revenue = 660 × ₦2 = ₦1,320; spread over 6 men this is ₦1,320 ÷ 6 = ₦220 per man.
Product differentiation in monopolistic competition implies that
Answer: D (the same product is available in different forms)
Firms in monopolistic competition sell basically the same product but make it look different through brand, packaging or design.
A constraint on the expansion of a firm is the
Answer: B (size of the market)
A firm cannot grow beyond what its market can buy; a small market limits expansion.