46 questions. Try each one, then open the answer to check yourself and read the explanation.
A major disadvantage of a socialist economy is that
Answer: B (consumers' sovereignty is lost)
In a socialist economy the state decides what to produce, so consumers lose the power to direct production by their spending.
The privatisation of public enterprises will lead to efficient management of resources in the economy. This statement can best be described as
Answer: D (positive reasoning.)
A positive statement says what is, was or will be and can be checked against evidence. 'Privatisation will lead to efficient management' is a prediction that can be tested, so it is positive reasoning; a normative statement would say what ought to be done.
The sign of the slope of a graph in economic analysis is important because it
Answer: B (shows the relationship between variables)
A positive slope shows the variables move in the same direction; a negative slope shows they move in opposite directions.
Use the pie chart below to answer the question.
The percentage contribution of agriculture is
Answer: D (25.0.)
Agriculture has 90° of the 360° circle: 90/360 × 100 = 25%.
Use the pie chart below to answer the question.
If the GDP is ₦60 billion, what is the difference between the contributions of oil and manufacturing sectors?
Answer: B (₦13.3 billion)
Manufacturing's angle = 360° − (160° + 90° + 30°) = 80°. Difference = (160 − 80)/360 × ₦60bn = ₦13.3 billion.
If the quantity of rice bought decreases from 250 tonnes to 200 tonnes owing to a 2% rise in price, it shows that there is a change in
Answer: D (quantity demanded.)
A change in the good's own price causes a movement along the demand curve, called a change in quantity demanded.
A rise in income will, ceteris paribus, bring about
Answer: C (a rightward shift of the demand curve)
With more income, people buy more of a normal good at every price, so the demand curve shifts to the right.
Use the table below to answer the question.
Price (₦) | Quantity (kg)
50 | 500
70 | 400
From the table above, calculate the price elasticity of demand.
Answer: D (0.5)
% change in quantity = (500 − 400)/500 × 100 = 20%. % change in price = (70 − 50)/50 × 100 = 40%. Elasticity = 20/40 = 0.5.
If the price of an item increases by 8% while the quantity demanded falls from 1500 units to 1492 units, the demand is said to be
Answer: B (inelastic)
% change in quantity = 8/1500 × 100 ≈ 0.53%. Elasticity ≈ 0.53/8 ≈ 0.07, which is less than 1 but not zero, so demand is inelastic.
Comparison of interpersonal utility is impossible because
Answer: C (utility is subjectively)
Satisfaction is a personal feeling: the same good gives different people different satisfaction, so one person's utility cannot be compared with another's.
When the slope of the total utility curve is declining, the marginal utility of a consumer will be increasing if he
Answer: B (reduces the quantity consumed)
The slope of total utility is marginal utility. It declines as consumption rises, so to raise marginal utility the consumer must reduce the quantity consumed.
Use the diagram below to answer the question.
The consumer is at equilibrium at point
Answer: D (K)
Equilibrium is where the budget line just touches the highest indifference curve the consumer can reach, which is at K.
Use the diagram below to answer the question.
To move from point m to k, the consumer has to increase the
Answer: D (consumption of Y and reduce the consumption of X.)
K lies higher up and to the left of M, so it has more Y and less X.
The supply of cocoa is influenced by
Answer: A (seasonal conditions)
Cocoa is a farm crop, so weather and the seasons largely decide how much is harvested and supplied.
If quantity supplied is constant irrespective of price changes, the supply elasticity is
Answer: D (perfectly inelastic.)
If quantity does not change at all when price changes, elasticity is zero: perfectly inelastic supply.
The invisible hand promotes the interests of
Answer: B (society)
Adam Smith argued that when each person pursues his own gain in a free market, the price system guides them, as if by an invisible hand, to benefit society.
Fixing price above equilibrium will cause
Answer: B (an increase in quantity supplied)
At a price above equilibrium, producers are willing to sell more, so quantity supplied rises (a movement along the supply curve).
An important function of the price system is to
Answer: C (allocate resources to most productive uses)
Prices signal where resources earn the most, so they move resources into their most productive uses.
The equilibrium point of a firm is attained at the point where the isoquant is
Answer: C (tangent to the isocost)
The least-cost combination of inputs is where an isoquant just touches (is tangent to) the isocost line.
The long-run average cost curve touches the short-run average cost curves at the
Answer: C (minimum point of only one of the short-run cost curves)
The LRAC curve wraps round all the SRAC curves. Only at the lowest point of LRAC does it touch an SRAC curve at that curve's minimum; elsewhere it touches the falling or rising parts of the SRAC curves.
If a firm doubles all inputs in the long run and the total output is less than doubled, this results in
Answer: D (decreasing returns to scale.)
When all inputs are doubled but output less than doubles, output rises less than in proportion: decreasing returns to scale.
Patents and copyrights enable monopolists to
Answer: D (restrict entry of new firms.)
Patents and copyrights give the holder the sole legal right to produce, so other firms cannot enter the market.
A discriminatory monopoly is characterized by
Answer: B (different elasticities in different markets)
A monopolist can charge different prices only if demand elasticity differs between markets: a higher price where demand is inelastic.
Net National Product is derived by deducting
Answer: D (depreciation from GNP.)
NNP = GNP − depreciation (capital consumption allowance).
The investment expenditure of an economy changes by ₦2 million and MPC is 0.75. What is the change in income?
Answer: D (₦8.0m.)
Multiplier = 1/(1 − 0.75) = 4. Change in income = 4 × ₦2m = ₦8m.
The investment expenditure of an economy changes by ₦2 million and MPC is 0.75. The multiplier is
Answer: B (4)
Multiplier = 1/(1 − MPC) = 1/0.25 = 4.
The money that commands a higher market value than its face value is called
Answer: C (commodity money)
Commodity money is a good that has value in itself, so it can be worth more on the market than its value as money. Paper money is worth almost nothing as paper.
If a basket of commodities cost ₦120 in the base year and ₦240 in the current year, calculate the price index.
Answer: B (200)
Price index = current cost/base cost × 100 = 240/120 × 100 = 200.
The minimum amount which banks are required to deposit with the central bank is determined by the
Answer: B (cash reserve ratio)
The cash reserve ratio is the fraction of deposits banks must keep with the central bank.
The major function of the money market is to
Answer: B (provide funds for short-term financing)
The money market deals in short-term loans and securities; long-term funds come from the capital market.
An ad valorem tax is imposed on
Answer: D (the value of a commodity.)
Ad valorem means 'according to value': the tax is a percentage of the commodity's value.
A huge national debt is an indication that the gold reserves of a nation has
Answer: B (decreased)
A country that has piled up a huge debt has usually had to draw on its reserves to pay for imports and debts, so its gold and foreign reserves have decreased.
Rapid economic development in Nigeria is realizable by
Answer: D (diversifying the economy.)
Spreading production across many sectors reduces dependence on oil and gives steadier, faster development.
The primary reason for desiring economic growth is to
Answer: D (raise standard of living.)
Growth increases the goods and services available, so people can enjoy a higher standard of living.
An emerging agricultural export crop in Nigeria is
Answer: A (cassava)
Cocoa and cotton are old export crops; cassava (as chips, starch and flour) is a newer export crop being promoted.
A strategy for improving agriculture in Nigeria will involve
Answer: B (ensuring self-sufficiency in food production)
Aiming at food self-sufficiency drives more support and investment into farming.
A sugar industry is best located near the source of
Answer: B (raw materials)
Sugar cane is bulky and loses weight in processing, so factories are sited near the cane fields.
An important contribution of small-scale industries to the Nigerian economy is in the area of
Answer: D (labour employment.)
Small-scale industries use labour-intensive methods, so they create many jobs.
A change in the pump price of petrol in Nigeria has a direct effect on the
Answer: D (cost of transportation.)
Vehicles run on petrol, so a change in its price immediately changes transport fares and costs; other prices change later as a result.
Long-term funds for investment projects are sourced from the
Answer: D (capital market.)
The capital market (stock exchange, bonds) provides long-term funds.
The Malthusian theory was concerned about the relationship between
Answer: C (population growth rate and natural resources)
Malthus compared how fast population grows with how fast food and other resources can grow.
In a village of 50 persons, 10 immigrated, 25 died and 5 emigrated in a year. Determine the total population.
Answer: C (30)
Population = 50 + 10 (immigrants) − 25 (deaths) − 5 (emigrants) = 30.
A deficit balance of payments is measured by subtracting the debits from the credits in the
Answer: B (current and capital accounts)
The overall balance is found from both the current and capital accounts; if debits exceed credits there is a deficit.
One of the functions of ECOWAS is to
Answer: A (provide funds for infrastructural development)
Through its fund and bank, ECOWAS finances roads, power and other infrastructure in member states.
The reward on machinery and equipment in the process of production is known as
Answer: B (interest)
Machinery and equipment are capital, and the reward for capital is interest.
Use the diagram below to answer the question.
From the diagram above, the minimum wage OW will lead to
Answer: B (unemployment)
At wage OW more people want to work than firms want to hire, because the wage is above equilibrium. The excess supply of labour is unemployment.