48 questions. Try each one, then open the answer to check yourself and read the explanation.
Economics is a social science which studies how
Answer: D (scarce resources are allocated to satisfy human wants)
Economics studies how scarce resources are allocated among competing human wants.
Scarcity in Economics means
Answer: C (limited supply of goods and services)
Scarcity means goods and services (and the resources that make them) are limited compared with human wants.
The decision on what to produce is a problem in
Answer: A (all economic systems)
Because resources are scarce everywhere, every economic system must decide what to produce.
The law of demand states that
Answer: D (as price falls, quantity demanded increases)
The law of demand: other things equal, the lower the price, the higher the quantity demanded.
Which of the following is an important limiting factor in the application of division of labour?
Answer: A (Market size)
Division of labour leads to mass production, which is only worthwhile if the market is large enough to buy the output.
Which of the following factors does not encourage the location of industries?
Answer: D (Political instability)
Political instability scares investors away; the other factors attract industries.
Which of the following economic systems is in operation in Nigeria?
Answer: E (Mixed economy)
In Nigeria both government and private individuals own and run businesses, so it is a mixed economy.
Giffen commodities are those commodities
Answer: B (for which demand increases as price increases)
Giffen goods are inferior staples whose quantity demanded rises when their price rises, an exception to the law of demand.
Effective demand in Economics means
Answer: C (the desire for a commodity or service backed by purchasing power)
Effective demand is desire backed by the ability (money) and willingness to pay.
Government can influence aggregate demand through all the following measures except
Answer: B (retirement of directors-general in the public service)
Taxes, jobs, deductions and fringe benefits change people's spending power; retiring a few directors-general does not.
The term production in Economics means
Answer: B (the creation of utilities)
Production is the creation of utility: making goods and services that satisfy wants, including getting them to consumers.
Under the socialist economy, the decision on what to produce is determined by the
Answer: D (government)
In a socialist (planned) economy, the state owns the resources and decides what to produce.
Credit creation by banks is limited by
Answer: C (the non-availability of collateral security)
Banks lend only against adequate security, so lack of collateral limits the loans they can create.
Which of the following explains marginal cost?
Answer: E (The addition to total cost resulting from the production of an additional unit)
Marginal cost is the change in total cost when one more unit is produced.
The effect of an increase in price on the demand for a commodity with elastic demand will be
Answer: B (a decrease in the demand for the commodity)
When demand is elastic, a price rise causes a more than proportionate fall in quantity demanded.
If AC = Average Cost of production, FC = Fixed Cost of production, VC = Variable Cost of production, and TC = Total Cost of production, then
Answer: D (VC = TC − FC)
TC = FC + VC, so VC = TC − FC.
Which of the following does not require the use of information from census?
Answer: E (Controlling geographical mobility of labour among the states or regions)
Census figures guide revenue sharing, planning, constituencies and amenities; movement of labour is not controlled using census data.
Which of the following is not a function of an insurance company?
Answer: C (Collection of deposits from the public)
Insurance companies collect premiums, not deposits; accepting deposits is done by banks.
Malthus observed in his theory that population was growing
Answer: C (in geometrical progression)
Malthus said population grows geometrically (1, 2, 4, 8…) while food grows arithmetically.
At optimum population level, a country has its
Answer: D (highest output per head)
Optimum population is the size at which output (income) per head is highest.
Which of the following does not give a characteristic of money?
Answer: E (Medium of exchange)
Medium of exchange is a function of money, not a characteristic.
Which of the following constitutes the major component of money supply in a developed economy?
Answer: A (Demand deposits)
In developed economies most payments are made by cheque, so demand deposits form the largest part of money supply.
A point along a consumer's indifference curve shows
Answer: C (a combination of two commodities from which he derives the same satisfaction)
Each point on an indifference curve is a combination of two goods giving the consumer the same satisfaction as every other point on it.
If a monopolist is attempting to maximize profit, which of the following should he attempt to do?
Answer: B (Equate marginal cost to marginal revenue)
Every profit-maximising firm, including a monopolist, produces where MC = MR.
The greatest foreign exchange earner for Nigeria before the advent of petroleum was
Answer: C (agriculture)
Before oil, exports of cocoa, groundnuts, palm produce and other crops earned most of Nigeria's foreign exchange.
A budget is defined as a
Answer: E (summary of expected income and expenditure)
A budget is a statement of expected income (revenue) and planned expenditure for a period.
The real value of money is
Answer: B (what it can buy at a particular time)
The real value of money is its purchasing power, the quantity of goods and services it can buy.
A tax whose rate increases as income increases is
Answer: B (a progressive tax)
Under a progressive tax, the rate rises as income rises.
Which of the following best describes the multiplier?
Answer: C (Ratio of change in income to the expenditure that brought it about)
Multiplier = change in income ÷ change in (investment) expenditure that caused it.
Net National Product (NNP) is equal to the
Answer: B (Gross National Product (GNP) less depreciation)
NNP = GNP − depreciation (capital consumption).
Terms of trade simply means the price
Answer: C (ratio of export to import)
Terms of trade = index of export prices ÷ index of import prices (× 100).
Balance of trade can be defined as
Answer: A (the value of imports in relation to the value of a country's exports)
Balance of trade compares the value of visible exports with the value of visible imports.
Which of the following is not a feature of a perfect market?
Answer: C (Preferential treatment)
In a perfect market no buyer or seller is favoured; preferential treatment belongs to imperfect markets.
Which of the following is not a source of raising funds for a public limited liability company in West Africa?
Answer: E (Sales of bonds)
Companies borrow long-term through debentures; bonds in West Africa were issued mainly by governments.
Which of the following is not an objective of the Indigenisation Policy in Nigeria? To
Answer: D (eliminate foreign participation in the Nigerian economy)
Indigenisation aimed to increase Nigerian ownership, not to drive out foreign investors completely.
Where was oil first discovered in commercial quantities in Nigeria?
Answer: A (Oloibiri)
Shell-BP struck oil in commercial quantity at Oloibiri (now in Bayelsa State) in 1956.
Where is the headquarters of the African Development Bank (ADB) located?
Answer: E (Abidjan)
The African Development Bank's headquarters is in Abidjan, Côte d'Ivoire.
International trade takes placed because of differences in
Answer: A (production cost)
Countries have different resources, so their costs of production differ; each gains by trading what it makes more cheaply.
Section A: answer one question only from this section.
Table of Input and Output
Variable units of labour: 1, 2, 3, 4, 5, 6, 7, 8
Fixed factors (hectares of land): 3, 3, 3, 3, 3, 3, 3, 3
Total product (kg): 8, 18, 36, 48, 55, 60, 60, 56
Average product (kg): 8, 9, P, 12, 11, Q, 8.6, 7
Marginal product (kg): –, 10, 18, R, 7, 5, S, T
Use the table above to answer the following questions: (a) Complete the table by calculating the missing figures P, Q, R, S, T. (b) Draw the Total Product (TP) curve and Marginal Product (MP) curve in one diagram. (No graph sheet is required) (c) Explain the relationship between TP and MP.
(a) AP = TP ÷ labour; MP = change in TP
P = 36 ÷ 3 = 12 kg
Q = 60 ÷ 6 = 10 kg
R = 48 − 36 = 12 kg
S = 60 − 60 = 0 kg
T = 56 − 60 = −4 kg
(b) Labour on the horizontal axis, product on the vertical axis; TP rises steeply, flattens to a peak of 60 at 6–7 units, then falls; MP rises to 18 at 3 units, then falls, cuts the axis (zero) at 7 units and becomes negative
(c) While MP rises, TP rises at an increasing rate
When MP falls but is positive, TP still rises but at a decreasing rate
When MP is zero, TP is at its maximum
When MP is negative, TP falls
MP is the slope of TP: positive MP means TP is rising, zero MP means TP is at its peak.
Section A: answer one question only from this section.
SUPPLY AND DEMAND SCHEDULE
Price per unit (N): 5, 6, 7, 8, 9, 10
Quantity demanded per week: 500, 400, 300, 250, 150, 50
Quantity supplied per week: 60, 150, 300, 400, 500, 600
Use the schedule above to answer the following questions: (a) At what price and quantity does the market attain equilibrium and why? (b) At what prices does the market exhibit excess demand and by how many units? (c) At what prices does the market exhibit excess supply and by how many units? (d) At what price will the supplier be willing to sell most? What quantity will he be willing to sell at that price?
(a) Equilibrium price N7, quantity 300 units per week, because at N7 quantity demanded (300) equals quantity supplied (300)
(b) Excess demand at N5: 500 − 60 = 440 units
Excess demand at N6: 400 − 150 = 250 units
(c) Excess supply at N8: 400 − 250 = 150 units
Excess supply at N9: 500 − 150 = 350 units
Excess supply at N10: 600 − 50 = 550 units
(d) At the highest price, N10, he is willing to sell the most: 600 units
Excess demand occurs below the equilibrium price, excess supply above it.
Section B: answer three questions only from this section.
(a) What is meant by the supply of a commodity? (b) What are the probable factors that can bring about changes in the supply of beans?
(a) Supply is the quantity of a commodity that producers are willing and able to offer for sale at a given price over a given period of time
(b) Changes in the cost of production (labour, fertiliser, seeds, transport)
Weather and climatic conditions (rainfall, drought)
Pests and diseases
Changes in technology (improved seeds, mechanisation, storage)
Number of farmers/producers of beans
Prices of other crops competing for the same land (e.g. maize, rice)
Government policy: subsidies, taxes, credit to farmers
Expected future prices; season of harvest
Natural disasters, communal conflicts, transport problems
Distinguish supply from total production, then explain at least five factors.
Section B: answer three questions only from this section.
Describe the effects of inflation on the economy of a country.
Inflation is a persistent rise in the general price level
Fixed income earners (workers, pensioners) lose purchasing power
Debtors gain and creditors lose, because money repaid is worth less
Savings are discouraged as money loses value
Producers and traders may gain from higher prices and profits, encouraging investment in the short run
Exports become less competitive and imports cheaper, worsening the balance of payments
Uncertainty makes business and government planning difficult
Leads to workers' demands for higher wages and industrial unrest
Redistributes income arbitrarily, widening inequality
Money may lose its store-of-value function; speculation and hoarding increase
Show who gains and who loses, and the effects on saving, trade and planning.
Section B: answer three questions only from this section.
(a) What is a tax? (b) Highlight the various tax systems.
(a) A tax is a compulsory levy imposed by government on individuals, firms and goods, for which no direct service is given to the payer in return
(b) Progressive tax: the rate rises as income rises (e.g. personal income tax/PAYE)
Proportional tax: the same rate is charged on all levels of income
Regressive tax: the rate falls as income rises, so the poor pay a larger proportion of their income
Direct taxes (on income and wealth) and indirect taxes (on goods and services) may also be described
Define tax, then explain progressive, proportional and regressive systems with examples.
Section B: answer three questions only from this section.
Give five reasons why Government participates in business enterprise.
To provide essential services (water, electricity) that private firms may not provide adequately
To prevent private monopolies exploiting consumers
To control strategic industries (iron and steel, arms, oil) for national security
Some projects need capital too large for private investors (e.g. railways, refineries)
Some ventures yield too little profit to attract private investors but are socially necessary
To generate revenue for government
To create employment
To reduce foreign domination of the economy
To promote balanced development of all regions
Five reasons, each briefly explained.
Section B: answer three questions only from this section.
(a) Define tariffs (b) What are the reasons for imposing tariffs?
(a) Tariffs are taxes (duties) imposed on goods entering (or leaving) a country
(b) To protect infant industries from foreign competition
To raise revenue for government
To correct a balance of payments deficit by reducing imports
To discourage importation of harmful or luxury goods
To prevent dumping
To protect employment in local industries
To retaliate against tariffs imposed by other countries
To conserve foreign exchange
Define tariffs, then explain at least five reasons.
Section B: answer three questions only from this section.
In what ways will the efficient functioning of the Economic Community of West African States (ECOWAS) hasten the economic growth of its member states?
Removal of trade barriers enlarges the market and increases trade among members
A larger market allows large-scale production and economies of scale
Free movement of people, labour and capital improves allocation of resources and reduces unemployment
Joint projects (roads, telecommunications, energy) improve infrastructure
Specialisation according to comparative advantage raises efficiency
The bigger economic bloc attracts foreign investment
Stronger bargaining power in dealing with other countries and blocs
Co-operation in research, agriculture and industry
Compensation and development funds help poorer members
Explain how each benefit leads to growth.
Section B: answer three questions only from this section.
Why are West African countries referred to as under-developed?
Low per capita income and mass poverty
Low level of savings and capital formation
Low level of technology and productivity
Dependence on agriculture and primary products; few industries
High rate of population growth
High levels of unemployment and under-employment
High illiteracy and shortage of skilled manpower
Poor infrastructure (roads, power, water, health)
Political instability
Dependence on foreign aid and persistent balance of payments problems
Poor standard of living: low life expectancy, high infant mortality
Give and explain at least five features of under-development.
Section B: answer three questions only from this section.
Identify the likely problems that can be encountered in the compilation of National Income Account in Nigeria.
Inadequate and unreliable statistical data
Large subsistence (non-monetised) sector whose output is not recorded
Danger of double counting intermediate goods
Difficulty in valuing depreciation and inventories (stocks)
Price changes (inflation) make values hard to compare
Problem of valuing self-provided and unpaid services (e.g. housewives)
Illiteracy: many people keep no records of income
Tax evasion leads people to under-declare income
Difficulty in estimating net income from abroad
Classification problems: deciding which goods are final and which are intermediate; treatment of transfer payments
Explain at least five problems, with Nigerian examples.