62 questions. Try each one, then open the answer to check yourself and read the explanation.
The money payment made to owners of land and labour are
Answer: A (rent and wages)
Land earns rent and labour earns wages.
The price elasticity coefficient indicates
Answer: D (consumer responsiveness to price changes)
Price elasticity measures how strongly quantity demanded responds to a change in price.
Every society strives to pursue all the following economic objectives except
Answer: C (an inequitable distribution of income)
Societies aim at a fair (equitable) distribution of income, not an unfair one.
Which of the following best describes capital as a factor of production?
Answer: B (a stock of physical assets used for production)
Capital is man-made wealth (machines, buildings, tools) used to produce other goods.
The system whereby goods are exchanged for goods is known as
Answer: B (barter system)
Direct exchange of goods for goods without money is barter.
The graph of the function Y = a + bX is
Answer: A (linear)
X appears only to the power 1, so the graph is a straight line with intercept a and slope b.
Productivity per worker is best measured by
Answer: D (total output divided by number of workers)
Output per worker (average product of labour) = total output ÷ number of workers.
In determining costs, economists consider
Answer: C (implicit and explicit costs)
Economic cost includes both money (explicit) costs and the opportunity (implicit) cost of the owner's own resources.
The precautionary motive for holding money is to enable the holder to
Answer: B (overcome unforeseen contingencies)
People keep money as a precaution against unexpected events such as illness or accidents.
In the long run, all factor inputs are
Answer: A (variable)
The long run is a period long enough for the firm to change all its inputs.
The benefit that results from concentrating similar firms in an area is referred to as
Answer: D (external economies of scale)
Benefits a firm gets from the concentration of the industry around it are external economies of scale.
Per capita income in any West African country is measured by
Answer: A (dividing the GNP by total population)
Per capita income = national income (GNP) ÷ population.
A priority rating of aggregate individual wants is called
Answer: C (scale of preference)
A list of wants arranged in order of importance is a scale of preference.
Profit can be calculated by
Answer: A (subtracting total cost from total revenue)
Profit = total revenue − total cost.
The marginal revenue curve of a monopolist is
Answer: D (downward sloping from left to right)
A monopolist must lower price to sell more, so its MR curve slopes downward from left to right (below the demand curve).
When all factor inputs are doubled, the production possibility curve will
Answer: B (shift from left to right)
More resources let the economy produce more of both goods, so the curve shifts outward (to the right).
Income elasticity of demand is the measurement of the responsiveness of
Answer: B (quantity demanded to changes in income)
Income elasticity = % change in quantity demanded ÷ % change in income.
The establishment of industries in rural areas will help to reduce
Answer: C (rural-urban migration)
Jobs in rural areas remove a key reason for people moving from villages to towns.
Government imposes taxes mainly to
Answer: B (provide social amenities)
Taxes are the main source of revenue for providing public services and amenities.
In a perfect market, price and quantity to be bought are determined by the
Answer: C (forces of demand and supply)
In a perfect market no single buyer or seller controls price; demand and supply set it.
When price elasticity of supply is equal to 0.4, supply is said to be
Answer: A (inelastic)
An elasticity coefficient less than 1 means supply is inelastic.
In the money market, money can only be borrowed for
Answer: B (short term)
The money market deals in short-term funds; long-term funds come from the capital market.
Deflation can be controlled by increase in
Answer: D (the budget deficit)
Deflation is a persistent fall in prices due to low demand; a bigger budget deficit (more government spending or lower taxes) raises demand.
Mortgage banks give loans to investors on long term basis to
Answer: D (build houses)
Mortgage banks specialise in long-term loans for buying or building houses.
The situation whereby a government spends more than it budgets for a fiscal year is known as
Answer: D (deficit budget)
When government expenditure exceeds its revenue for the year, the budget is in deficit.
In a socialist economy, factors of production are owned and controlled by the
Answer: C (government)
Under socialism, the state owns and controls the means of production.
One quality of money which makes it possible to be carried easily is its
Answer: C (portability)
Portability means money is light and easy to carry about.
A form of tax in which the poor pay a higher rate than the rich is known as
Answer: A (regressive tax)
A regressive tax takes a larger proportion of a poor person's income than of a rich person's.
The reduction in the value of a country's currency in relation to the value of the currencies of other nations is known as
Answer: B (devaluation)
Devaluation is an official cut in the value of a currency against other currencies.
The creation of utility can be referred to as
Answer: D (production)
Production is defined as the creation of utility.
Government revenue will increase if tax is imposed on a good whose demand is
Answer: B (inelastic)
With inelastic demand, people keep buying after the tax raises the price, so tax revenue rises.
Occupational distribution of population is mainly influence by
Answer: A (economic factors)
The jobs people do depend mainly on economic factors such as the level of development, capital, skills and wages.
Proportional tax refers to
Answer: B (equal tax rate for all people)
Under a proportional tax, everyone pays the same percentage of income.
Which of the following is not an item of capital expenditure?
Answer: C (Payment of salaries and wages)
Salaries and wages are recurrent expenditure; the others create lasting assets.
The population which yields the highest level of income per head is known as
Answer: D (optimum population)
Optimum population gives the maximum income per head.
Price discrimination can only occur when there is
Answer: B (imperfect competition)
A seller needs some control over price, as in monopoly or other imperfect markets, to charge different prices.
Commodity market can best be described as a market in which
Answer: A (goods are sold)
A commodity market is where goods are bought and sold.
Provision of services is classified under
Answer: C (tertiary production)
Tertiary production covers commercial and personal services.
In ordinary partnership, the risks are
Answer: C (shared among the partners)
In an ordinary partnership all partners share the risks and have unlimited liability.
Balance of trade is defined as the relation between
Answer: D (visible exports and visible imports)
Balance of trade compares visible exports with visible imports.
Which of the following combination of qualities ensures a good tax system?
Answer: B (Economy convenience, certainty and equity)
Adam Smith's canons of taxation are equity, certainty, convenience and economy.
The quantity demanded of a commodity is influenced only by changes a
Answer: C (price of the commodity)
A change in quantity demanded (movement along the curve) is caused only by a change in the good's own price.
Which of the following is an indirect tax?
Answer: D (Sales tax)
Sales tax is on goods and can be passed on to buyers, so it is indirect; the others are taxes on income.
Where a pen and a book are demanded together, the demand is said to be
Answer: C (joint)
Goods demanded together (complements) are in joint demand.
The reward for capital is
Answer: A (interest)
Interest is the reward for capital.
Infant industries are industries that
Answer: B (are in their earlier stages of production)
Infant industries are newly established industries that are still growing.
The most common form of business enterprise in West Africa is the
Answer: A (Sole proprietorship)
Sole proprietorships are easy to start with little capital, so they are the most common.
In order to boost agriculture, West African countries should pay more attention to
Answer: D (mechanization)
Mechanization raises farm output and productivity on a large scale.
Gross National Product (GNP) less depreciation is known as
Answer: D (Net National Product)
NNP = GNP − depreciation.
West African economies can best be described as
Answer: A (agricultural)
Most West Africans work in agriculture, which dominates output and exports.
Section A: answer one question only from this section.
Given the demand function for commodity X Qd = 12 − 2P where Qd is the quantity demanded and P the price of the commodity. (a) Use the demand function to complete the table below.
P: 6, 5, 4, 3, 2, 1, 0
Qd: (blank)
(b) Draw the individual's demand curve (use of graph paper is essential). (c) What is the maximum quantity the individual can buy of commodity X per unit of time? (d) What is the relationship between quantity demanded and price in the function Qd = f(P)?
(a) Substitute each price into Qd = 12 − 2P
P = 6: Qd = 0; P = 5: Qd = 2; P = 4: Qd = 4; P = 3: Qd = 6; P = 2: Qd = 8; P = 1: Qd = 10; P = 0: Qd = 12
(b) Price on the vertical axis, quantity on the horizontal axis; plot the seven points and join them: a straight line sloping downward from (0, 6) to (12, 0), labelled D
(c) Maximum quantity = 12 units (when price is zero)
(d) Inverse (negative) relationship: the higher the price, the lower the quantity demanded, and vice versa
Multiply the price by 2 and subtract from 12 for each value.
Section A: answer one question only from this section.
The table below relates to the application of fertilizer to a fixed area of land and the production of maize. Use the table to answer the questions that follow.
Tonnes of fertilizer applied: 0, 1, 2, 3, 4, 5, 6, 7, 8, 9
Total production in bags: 1,000, 1,100, 1,250, 1,500, ---, ---, ---, 2,350, 2,380, 2,330
Marginal product: ---, 100, 150, 250, 400, 250, 125, ---, ---, ---
(a) What will be the total output of maize when no fertilizer is applied to the land? (b) Calculate the total production after the application of the following quantities of fertilizer (i) 4 tonnes; (ii) 5 tonnes; (iii) 6 tonnes (c) Calculate the marginal production after the application of the following quantities of fertilizer: (i) 7 tonnes; (ii) 8 tonnes; (iii) 9 tonnes (d)(i) After what level of the application of fertilizer does diminishing marginal returns occur? (ii) After what level of fertilizer application will the total output decrease?
(a) 1,000 bags
(b) Total production = previous total + marginal product
(i) 4 tonnes: 1,500 + 400 = 1,900 bags
(ii) 5 tonnes: 1,900 + 250 = 2,150 bags
(iii) 6 tonnes: 2,150 + 125 = 2,275 bags
(c) Marginal product = change in total production
(i) 7 tonnes: 2,350 − 2,275 = 75 bags
(ii) 8 tonnes: 2,380 − 2,350 = 30 bags
(iii) 9 tonnes: 2,330 − 2,380 = −50 bags
(d)(i) Diminishing marginal returns set in after 4 tonnes (MP falls from 400 to 250)
(ii) Total output decreases after 8 tonnes (MP becomes negative at the 9th tonne)
TP rises by the MP each time; MP is the difference between successive TPs.
Section B: answer four questions only from this section.
What would be the economic consequences if prices were fixed by the government?
Maximum price (fixed below equilibrium): excess demand / shortages
Black markets and hoarding develop
Rationing, queues and favouritism in distribution
Producers may cut supply or quality; less investment in the industry
Minimum price (fixed above equilibrium): excess supply / surplus
Government may have to buy and store the surplus; waste of perishable goods
A minimum wage above equilibrium causes unemployment
Prices no longer reflect relative scarcity, so resources are misallocated
Consumers on low incomes may benefit from cheaper essential goods; farmers may gain from guaranteed minimum prices
Diagrams of a price ceiling and a price floor earn marks
Treat maximum and minimum prices separately, with diagrams.
Section B: answer four questions only from this section.
Explain the advantages and disadvantages of a joint stock company as a form of business organization.
Advantages: limited liability of shareholders
Large capital from sale of shares, stocks and debentures
Continuity of existence (separate legal entity, can sue and be sued)
Shares are easily transferable
Economies of large-scale production
Can employ specialist managers
Disadvantages: costly and lengthy formation procedure
Lack of secrecy: accounts must be published
Separation of ownership from control may lead to inefficiency or fraud by managers
Slow decision making; less personal contact with customers and workers
Double taxation of profits (company tax and tax on dividends)
Possible diseconomies of scale
Explain at least four advantages and four disadvantages.
Section B: answer four questions only from this section.
What are the positive and negative effects of inflation on the economy?
Positive: mild inflation raises profits and encourages investment and production
Increases employment in the short run
Debtors gain (they repay with money of lower value)
Increases government revenue from taxes
Negative: fixed-income earners and pensioners lose purchasing power
Creditors and savers lose; saving is discouraged
Exports become dearer, worsening the balance of payments
Uncertainty discourages long-term planning and investment
Encourages hoarding and speculation
Leads to industrial unrest as workers demand higher wages
Widens the gap between rich and poor
Give both sides, each point explained.
Section B: answer four questions only from this section.
Distinguish between (a) Economic resources and non-economic resources (b) Want and Demand (c) Money Cost and Real Cost.
(a) Economic resources are scarce and command a price (e.g. land, labour, capital, machines); non-economic (free) resources are abundant and have no price (e.g. air, sunlight)
(b) A want is a desire for a good or service, whether or not one can pay; demand is the quantity of a good that people are willing and able to buy at a given price over a given period (want backed by purchasing power)
(c) Money cost is the amount of money spent to obtain or produce something; real (opportunity) cost is the alternative given up in making the choice
For each pair, define both terms and show the difference.
Section B: answer four questions only from this section.
Explain the advantages and disadvantages of monopoly.
Advantages: can enjoy economies of scale, lowering costs
Avoids wasteful duplication of services (e.g. public utilities)
Large profits can be used for research and innovation
Government monopolies can provide essential services cheaply
Price discrimination may allow poorer customers to be served
Disadvantages: charges higher prices and produces less than a competitive industry
Consumers have no alternative and may be exploited
Inefficiency, since there is no competition
Poor quality of goods and services
Restricts entry of new firms
Unequal distribution of income through abnormal profits
Give at least four advantages and four disadvantages.
Section B: answer four questions only from this section.
Why is the small scale trader important in West African countries?
Sells in small quantities to suit consumers with low incomes
Brings goods close to consumers, including in rural areas
Provides employment and self-employment for many people
Grants credit to regular customers
Gives personal services and advice to customers
Distributes goods of large producers and wholesalers
Requires little capital, so many people can enter
Provides market information to wholesalers and producers
Opens for long hours, offering convenience
Give and explain at least five points.
Section B: answer four questions only from this section.
How can West African countries promote indigenous industries?
Protect them with tariffs, quotas and import bans
Grant tax holidays and other incentives
Provide cheap credit through development banks
Provide infrastructure: power, water, roads, industrial estates
Train manpower and support research and technology
Indigenisation policies and patronage of local products ('buy local' campaigns)
Government partnership/joint ventures with local entrepreneurs
Encourage regional markets through ECOWAS
Provide raw materials and stable economic policies
Subsidies on inputs and export incentives
Explain at least five measures.
Section B: answer four questions only from this section.
(a) What is a customs union? (b) State three advantages and two disadvantages of a customs union.
(a) A customs union is an agreement among countries to remove tariffs and other trade barriers among themselves and to adopt a common external tariff against non-members
(b) Advantages (any three): wider market and economies of scale
Increased trade among members
Specialisation according to comparative advantage
Attracts foreign investment
Greater bargaining power with other countries
Disadvantages (any two): loss of customs revenue
Trade diversion from cheaper non-member sources
Industries concentrate in more developed members
Weaker industries in some members may collapse
Loss of sovereignty over trade policy
Define a customs union, then give three advantages and two disadvantages.
Section B: answer four questions only from this section.
Highlight the causes of Balance of Payments deficits in your country.
Dependence on a single export (oil) whose price fluctuates
Heavy importation of consumer goods, food and luxury items
Importation of capital goods and raw materials for industry
Low export earnings from agriculture
Heavy external debt service payments
Large payments for services: shipping, insurance, foreign experts, education and travel abroad
Repatriation of profits and dividends by foreign firms
Overvalued exchange rate making imports cheap and exports dear
Inflation making exports uncompetitive
Capital flight and smuggling
Highlight at least five causes.
Section B: answer four questions only from this section.
Describe the contributions of natural resources to the economy of your country.
Source of foreign exchange (crude oil, cocoa, timber, solid minerals)
Source of government revenue (royalties, rents, taxes)
Provide employment
Supply raw materials for industries
Provide energy (oil, gas, coal, hydro-electric power)
Land provides food for the population
Attract foreign investment
Encourage development of infrastructure and towns
Contribute to national income (GDP)
Describe at least five contributions, with Nigerian examples.