46 questions. Try each one, then open the answer to check yourself and read the explanation.
A typical feature of a market economy is that
Answer: C (consumer sovereignty exists)
In a market economy consumers' spending decides what gets produced; this is consumer sovereignty.
The privatization exercise in Nigeria is a move towards a
Answer: C (market economy)
Privatisation transfers public enterprises to private owners, moving the economy towards a market system.
Use the pie chart below to answer questions 4 and 5. The percentage contribution of the transport sector is
Answer: D (16.7)
Transport has 60° of the 360° circle: 60/360 × 100 = 16.7%.
Use the pie chart below to answer questions 4 and 5. If the contribution of the oil sector is ₦3.6 million, what is the contribution of the other sectors?
Answer: B (₦7.2 million)
Oil's 120° stands for ₦3.6 million; the other sectors take 360° − 120° = 240°, twice as much, so ₦7.2 million.
A cumulative frequency graph is
Answer: B (an ogive)
A graph of cumulative frequency against the class boundaries is called an ogive.
A movement along the same demand curve is caused by the
Answer: A (price of the product)
Only a change in the good's own price moves the consumer along the demand curve; other factors shift the curve.
The demand curve for a luxury good is
Answer: D (positively sloped)
Luxury (prestige) goods are bought partly to show off, so more is demanded at a higher price, giving an upward-sloping (abnormal) demand curve.
Price elasticity of demand is expressed as
Answer: D ((Percentage change in quantity demanded)/(percentage change in price))
Price elasticity of demand = % change in quantity demanded ÷ % change in price.
A major assumption in cardinal utility theory is that
Answer: A (utility is measurable)
Cardinal utility theory assumes satisfaction can be measured in numbers (utils), unlike ordinal theory which only ranks it.
A supply curve is positively sloped because
Answer: D (price is an incentive to producers)
A higher price promises more profit, so producers are encouraged to supply more.
The short-run supply curve for medical doctors is more likely to be
Answer: B (perfectly inelastic)
Training a doctor takes many years, so in the short run the number of doctors cannot change whatever the pay.
If the price of an item changes by 8% and quantity supplied changes from 600 units to 660 units, the price elasticity of supply is
Answer: B (1.25)
% change in quantity = 60/600 × 100 = 10%; elasticity = 10 ÷ 8 = 1.25.
In a regulated market, price is determined by
Answer: D (government)
In a regulated (controlled) market the government fixes prices rather than leaving them to demand and supply.
A decrease in supply without a corresponding change in demand will lead to
Answer: A (an increase in equilibrium price and a decrease in equilibrium quantity)
The supply curve shifts left along an unchanged demand curve, so price rises and the quantity traded falls.
Production takes place when
Answer: C (input is transformed into output)
Production is the process of turning inputs (land, labour, capital) into goods and services.
Use the table below to answer questions 17 and 18.
Unit of capital | Total output (kg)
1 | 16
2 | 64
3 | 126
4 | 212
5 | 425
6 | 684
The marginal product of the 5th unit of capital is
Answer: D (213)
MP = 425 − 212 = 213 kg.
Use the table below to answer questions 17 and 18.
Unit of capital | Total output (kg)
1 | 16
2 | 64
3 | 126
4 | 212
5 | 425
6 | 684
Determine the average product of the 4th unit of capital
Answer: A (53)
AP = total output ÷ units of capital = 212 ÷ 4 = 53 kg.
As the level of output increases, the average fixed cost of a firm will
Answer: C (continue to decrease)
The same fixed cost is shared over more and more units, so AFC keeps falling.
The shape of the long-run average cost curve is best explained by the
Answer: B (law of returns to scale)
In the long run all inputs vary, so LRAC first falls (increasing returns to scale) and later rises (decreasing returns to scale).
The supply curve of a perfectly competitive firm is identical to its
Answer: B (marginal cost)
A competitive firm produces where P = MC, so its supply curve is its MC curve above minimum AVC.
In the long run, one of the characteristics of monopolistic competitive firms is that they
Answer: C (make normal profits)
Free entry lets new firms come in until supernormal profits disappear, leaving only normal profit in the long run.
In developing countries, it is easier to obtain accurate national income estimates through the
Answer: B (GDP)
GDP counts only output produced inside the country, avoiding hard-to-measure net income from abroad and depreciation.
Double counting is a problem in computing national income when using the
Answer: C (output method)
Under the output method, adding the full value of goods at every stage counts intermediate goods more than once.
In the circular flow of income, an increase in savings causes
Answer: B (a decrease in the income stream)
Savings are a leakage: money saved is not spent, so less flows around the economy.
The ability of commercial banks to create money depends on the
Answer: A (reserve ratio)
Banks lend out deposits beyond the required reserve; the lower the reserve ratio, the more money they can create (multiplier = 1/reserve ratio).
A manufacturer who wants to build a new plant will source funds from the
Answer: C (capital market)
Building a plant needs long-term finance, which is raised on the capital market through shares, bonds and long-term loans.
Cost-push inflation occurs when
Answer: A (production cost is high)
When production costs rise, firms raise their prices to protect profits, pushing up the general price level.
If government expenditure exceeds revenue, this results in
Answer: C (budget deficit)
Spending more than you collect in a budget gives a budget deficit.
The Basic Needs Approach to development is directed at
Answer: A (poverty alleviation)
The basic needs approach aims to give the poor food, shelter, health, education and water, i.e. to reduce poverty.
The major reason why countries strive to achieve optimum growth is to
Answer: B (raise general living standards)
Growth is pursued so that people can enjoy more goods and services, i.e. a higher standard of living.
According to the theory of comparative advantage, specialization will result in
Answer: C (efficient allocation of resources)
Each country produces what it makes at the lowest opportunity cost, so world resources are used more efficiently.
Dumping in international trade means selling a good at a
Answer: A (higher price at home than abroad)
Dumping is selling exports abroad more cheaply than at home, often below cost.
Guided deregulation as currently practised in Nigeria implies that
Answer: C (market forces and government determine interest and exchange rates)
Under guided deregulation, rates are mainly market-determined but the government (through the CBN) still steps in to guide them.
An important function of the World Bank is to
Answer: D (provide long-term loans to members)
The World Bank gives long-term loans for development projects; short-term balance of payments help comes from the IMF.
The major problem confronting a sole proprietor is
Answer: C (limited source of capital)
A sole trader depends on personal savings and small loans, so shortage of capital limits the business.
A public liability company is run on a daily basis by
Answer: A (the chief executive)
The board of directors meets from time to time to set policy, but the day-to-day running of a public limited company is the job of the chief executive (managing director) and the managers under him.
The marketing of agricultural products in Nigeria can be improved by
Answer: B (re-establishing the marketing boards)
Marketing boards buy farm produce at guaranteed prices, grade and store it, and find markets for it.
To enhance the competitiveness of domestic agricultural products, there is need to
Answer: C (improve the quality of domestic agricultural products)
Better quality makes local produce able to compete with imported produce at home and abroad.
In Nigeria, the location of a steel industry at Ajaokuta is due to
Answer: C (the proximity to large deposits of iron ore)
Ajaokuta is close to the iron ore deposits at Itakpe, the main raw material for steel.
Industries for consumer goods are concentrated in urban centres as a result of
Answer: A (large market)
Towns have many people with money to spend, so consumer goods firms locate near this large market.
The current industrial development strategy in Nigeria is aimed at encouraging
Answer: C (small-and medium-scale industries)
Nigeria's industrial policy (e.g. SMEDAN, SMIEIS) focuses on small and medium-scale enterprises.
Activities in the oil and gas industry are classified into
Answer: C (upstream and downstream)
The oil and gas industry is split into upstream (exploration and production) and downstream (refining, distribution and marketing).
High dependency ratio is influenced by
Answer: C (high birth rate)
A high birth rate gives many children, who depend on the working population, raising the dependency ratio.
Occupational distribution of population determines the
Answer: D (size and categories of the labour force)
Occupational distribution shows how many workers are in each occupation, i.e. the size and types of the labour force.
The mobility of labour is mainly determined by
Answer: D (wage rate differentials)
Workers move from one job or place to another mainly because of differences in pay.
When workers have a union, the supply of labour is said to be
Answer: A (monopolistic)
A trade union acts as a single seller of its members' labour, like a monopolist.