44 questions. Try each one, then open the answer to check yourself and read the explanation.
An effective way of controlling inflation in a mixed economy is to
Answer: A (increase productivity)
Inflation means too much money chasing too few goods. Producing more goods raises supply and brings prices down.
One of the limitations of PPC assumption is that there is
Answer: B (no recognition of preferred goods for countries)
A production possibility curve shows all the combinations an economy can produce, but it does not show which combination the country actually prefers.
A major disadvantage of the arithmetic mean is that it is
Answer: D (affected by extreme values.)
Because the mean uses every value, one very large or very small value can pull it far from the typical value.
A consumer surplus measures the
Answer: D (excess of marginal utility over price.)
Consumer surplus is the extra satisfaction a buyer gets above what he pays, i.e. what the good is worth to him minus its price.
If the demand for one commodity excludes another, it is said to be
Answer: B (competitive demand)
Goods in competitive demand are substitutes: buying one means you do not buy the other.
Use the table below to answer the question.
Price(₦) | Quantity (kg)
1 | 100
2 | 120
3 | 150
4 | 180
5 | 200
The graph of the schedule above will depict
Answer: C (an abnormal demand curve)
As the price rises from ₦1 to ₦5, the quantity rises from 100 kg to 200 kg. A demand curve that slopes upwards like this is abnormal.
The median of an odd-numbered set of scores is the
Answer: A (middle value in the set)
When scores are arranged in order, the median is the one in the middle; with an odd number there is exactly one middle value.
If demand increases without a change in supply, equilibrium price and quantity will
Answer: D (rise.)
The demand curve shifts right along an unchanged supply curve, so both price and quantity rise.
In the process of production, total output is at maximum when
Answer: A (MP = 0)
Total product keeps rising while marginal product is positive and starts to fall once MP is negative, so it peaks where MP = 0.
Use the table below to answer the question.
Price(₦) | Qty. / (bags)
1 | 60
2 | 120
From the table above, the price elasticity of supply is
Answer: C (1)
% change in quantity = 60/60 × 100 = 100%; % change in price = 1/1 × 100 = 100%. Elasticity = 100/100 = 1.
When a consumer is at equilibrium, the MRSxy is equal to the
Answer: C (ratio of the two prices)
At equilibrium the indifference curve touches the budget line, so their slopes are equal: MRSxy = Px/Py.
Minimum price legislation by government will
Answer: C (reduce demand and create surplus)
A minimum price is fixed above equilibrium, so quantity demanded falls while quantity supplied rises, leaving a surplus.
Ranking is the method used in measuring
Answer: B (ordinal utility)
Ordinal utility theory says satisfaction cannot be measured in numbers but can be ranked in order of preference.
If a firm is faced with an elastic supply curve, its revenue will
Answer: C (increase by more than the percentage increase in price)
With elastic supply, quantity sold rises by a bigger percentage than price, so revenue rises by more than the percentage rise in price.
The optimal range of output for a perfectly competitive firm is where
Answer: A (AC is lowest)
The optimum (most efficient) output is where average cost is lowest, because each unit is then produced as cheaply as possible. The lowest point of AVC is only the point below which the firm shuts down.
A firm will experience diseconomies of scale when
Answer: A (there are difficulties in coordinating production)
When a firm grows too large, management and coordination become difficult, so average cost rises: diseconomies of scale.
The law of variable proportions is applicable only
Answer: D (in the short-run period.)
The law describes what happens when more of a variable factor is added to a fixed factor. Some factors are fixed only in the short run.
Use the diagram below to answer the question.
From the diagram above, the optimal point of production is
Answer: D (S.)
The best point is where the budget line just touches the highest indifference curve it can reach. That is S on curve II; R is unaffordable and U and T are on a lower curve.
If real income increases while nominal income remains the same, it can be inferred that
Answer: B (general prices have fallen)
Real income is money income adjusted for prices. If money income is unchanged but it buys more, prices must have fallen.
One of the characteristics of oligopoly is the availability of
Answer: A (few sellers)
An oligopoly is a market dominated by a few sellers.
Use the diagram below to answer the question.
The average total cost when 20 units are produced is
Answer: D (₦15.00.)
At 20 units the ATC curve is at its lowest point, which reads ₦15 on the price axis.
Use the diagram below to answer the question.
When 20 units of output is produced, TC will be
Answer: B (₦300)
TC = ATC × quantity = ₦15 × 20 = ₦300.
The profit of a monopolist can be eliminated where price equals
Answer: C (AC)
Profit per unit = price − average cost. If price is set equal to AC, the monopolist earns no abnormal profit.
Bank consolidation policy in Nigeria is a measure to increase
Answer: A (the capital base of banks)
The 2004/2005 consolidation raised banks' minimum capital (to ₦25 billion) to make them stronger.
An increase in the circulation of money without a corresponding increase in output will lead to
Answer: D (inflation.)
More money chasing the same quantity of goods pushes the general price level up: inflation.
In national income accounts, an item counted as part of government spending is
Answer: A (salaries and wages)
Government spending in national income counts only payments for goods and services, like salaries and wages. Pensions, scholarships and welfare are transfer payments and are left out.
If aggregate demand is lower than total output in an economy, national income will
Answer: D (fall.)
When spending is less than output, unsold goods pile up, firms cut production and national income falls.
During the era of barter, money was generally in the form of
Answer: D (commodities.)
Before coins and notes, goods such as cowries, salt and cattle were used as money (commodity money).
A country achieves economic development when there is
Answer: C (a sustained increase in per capita income)
Development needs a lasting rise in income per head, which raises the standard of living of the people.
An indicator of growth in an economy over a period of time is the
Answer: C (GDP at market price)
Economic growth is measured by the rise in the value of total output, GDP at market price, over time.
A country embarks on deficit financing in order to
Answer: D (stimulate investment.)
Spending more than revenue injects money into the economy, raising demand and encouraging investment and output.
The import-substitution strategy of industrialization is to encourage
Answer: A (domestic production)
Import substitution means setting up local factories to make goods the country used to import, so it encourages domestic production.
Agricultural production in Nigeria is constrained by
Answer: C (poor implementation of policies)
Many agricultural policies in Nigeria were well designed but poorly carried out, so poor implementation of policies has held back farm production.
The main function of NNPC is to
Answer: A (oversee the development of the oil sector)
NNPC is the government corporation that manages and oversees Nigeria's oil and gas industry.
Investing heavily in the agricultural sector will lead to
Answer: A (sufficient food production)
More investment in farming raises farm output, so the country produces enough food.
The record of a country's transactions in international trade is her
Answer: B (balance of payments)
The balance of payments records all of a country's transactions with the rest of the world in a period.
The transfer of public shareholding in corporations to private enterprises is
Answer: D (privatization.)
Selling government shares in public corporations to private owners is privatisation.
A condition in which official and autonomous exchange rates coexist is
Answer: A (dual exchange rate system)
When an official rate and a separate market (autonomous) rate operate at the same time, there are two rates: a dual exchange rate system.
In modern economies, the Malthusian theory of population is ineffective because of
Answer: B (technical progress)
Malthus said food would grow slower than population, but improved technology has made food output grow fast enough.
Optimum population enables an economy to attain the highest level of
Answer: B (income per head)
Optimum population is the size at which, with the available resources, income per head is highest.
A change from one industry to another by a worker is an example of
Answer: B (horizontal mobility)
Horizontal mobility is moving to another job or industry at about the same level. Vertical mobility is a promotion or demotion.
The money paid per hour for work done is
Answer: B (wage rate)
Payment per hour or per day of work is a wage rate; a salary is a fixed monthly or yearly payment.
Trade takes place because of
Answer: D (comparative advantage.)
Countries trade because each can produce some goods at a lower opportunity cost than others: comparative advantage.
The World Trade Organization is responsible for
Answer: D (minimizing obstacles to international trade and investment.)
The WTO works to reduce tariffs and other barriers to trade among its members.