61 questions. Try each one, then open the answer to check yourself and read the explanation.
The study of Economics enables individuals to
Answer: D (make rational decisions)
Economics teaches how to choose among alternatives when resources are scarce, so it helps people make rational decisions.
Most of the problems of economies arise as a result of
Answer: A (competing demands for scarce resources)
Resources are limited while wants compete for them; this scarcity is the root of all economic problems.
Which of the following tools of economic analysis is used when data contains more than one category?
Answer: B (Component bar charts)
A component bar chart divides each bar into parts, so it can show several categories of data in one bar.
The reward to capital as a factor of production is
Answer: C (interest)
Land earns rent, labour earns wages, capital earns interest and the entrepreneur earns profit.
Mining is an example of
Answer: B (primary production)
Primary production takes resources directly from nature, as in mining, farming and fishing.
An owner-manager of a firm can also be called
Answer: B (an entrepreneur)
A person who owns, organises and bears the risk of a business is an entrepreneur.
If the fixed cost of a firm is 800 Naira and its variable cost is 2,700 Naira while its total output is 100 units, what is the average cost of the firm?
Answer: B (35 Naira)
Total cost = 800 + 2,700 = 3,500 Naira. Average cost = 3,500 ÷ 100 = 35 Naira.
Distribution of goods and services is hindered by
Answer: C (too many middlemen)
Too many middlemen lengthen the chain of distribution and raise prices; the other options help distribution.
A movement along the same demand curve either upwards or downwards as a result of changes in price implies
Answer: B (a change in quantity demanded)
A change in the commodity's own price moves the consumer along the same curve: a change in quantity demanded.
Middlemen in an economy perform the function of
Answer: A (distribution)
Wholesalers and retailers (middlemen) move goods from producers to consumers, i.e. distribution.
One of the factors affecting geographical distribution of population is
Answer: D (climatic conditions of the different parts of the country.)
Where people live depends on things like climate, soil and jobs; birth and death rates affect the size, not the spread, of population.
Standardization of products or services is a feature of
Answer: A (large firms)
Large firms mass-produce identical (standardised) goods to gain economies of scale.
The amount of satisfaction obtained from the consumption of a commodity at a particular time is called
Answer: C (total utility)
Total utility is the whole satisfaction from the units consumed at a given time.
What are inferior goods? These are goods
Answer: C (whose demand falls as income increases)
An inferior good is one people buy less of when their income rises, switching to better goods.
In the analysis of utility theory, the basis of demand is
Answer: A (marginal utility)
A consumer buys more of a good only while its marginal utility justifies the price, so marginal utility underlies demand.
In the normal market situation, when the price of a commodity rises, the
Answer: B (demand for the commodity will fall)
By the law of demand, a higher price leads people to buy less of the commodity.
When the quantity of a commodity supplied increases and the quantity demanded decreases, there will be
Answer: D (a fall in price.)
More supply and less demand create a surplus, which pushes the price down.
The mechanism which allows the price of a commodity to be fixed either above or below the equilibrium is known as
Answer: D (price control.)
Price control is government fixing a maximum price (below equilibrium) or minimum price (above equilibrium).
A debenture holder is entitled to payments in the form of
Answer: B (interest)
A debenture is a loan to a company, so its holder receives fixed interest.
The main difference between a private and a public enterprise is the
Answer: D (ownership structure.)
A private enterprise is owned by individuals while a public enterprise is owned by the government; ownership is the main difference.
The total amount of money raised by a company through issuance of shares to the public is
Answer: D (paid-up capital.)
Paid-up capital is the money actually received by a company from the shares it has issued.
Buying and selling of shares is a function performed mostly by the
Answer: B (stock exchange)
The stock exchange is the market where existing shares and securities are bought and sold.
Which of the following is not a reason for establishing public enterprises?
Answer: A (Discouraging investors)
Governments set up public enterprises to develop the economy and serve the public, not to discourage investors.
For a monopolist, the average revenue (AR) curve is
Answer: C (above the marginal revenue curve)
A monopolist must cut price to sell more, so MR falls faster than AR and the AR curve lies above the MR curve.
Advertising expenses would not be necessary under perfect competition because
Answer: A (consumers would have complete knowledge of goods)
Under perfect competition goods are identical and buyers have perfect knowledge, so advertising adds nothing.
The equilibrium level of output of a monopolist is determined at a point where
Answer: C (marginal cost equals marginal revenue)
Every profit-maximising firm, including a monopolist, produces where MC = MR.
Which of the following is a legal tender in West Africa?
Answer: D (Currency.)
Legal tender is money that must by law be accepted in payment: the notes and coins (currency).
The policy of government to increase the supply of money to meet its own expenditure plans is likely to be
Answer: C (inflationary)
Creating more money to spend raises total demand without more goods, so prices tend to rise (inflation).
The tendency for prices to rise while the value of money falls is known as
Answer: B (inflation)
Inflation is a persistent rise in the general price level, which reduces what money can buy.
One way to solve the economic problem of inflation in a country is by increasing the
Answer: A (supply of commodities)
Producing more goods meets the excess demand, so prices fall; the other options would push prices higher.
The motive for holding money for investing in securities is referred to as
Answer: B (speculative)
Keynes's speculative motive is holding money to buy securities when their prices are favourable.
A cheque book is issued to customers of a bank operating a
Answer: C (current account)
Cheques are drawn on a current account, which allows withdrawals on demand.
Amount proposed for payments of wages and salaries in a budget is regarded as part of
Answer: A (recurrent expenditure)
Wages and salaries are paid regularly every year, so they are recurrent expenditure.
The difference between the Gross National Product (GNP) and the Gross Domestic Product (GDP) is
Answer: D (net income from abroad.)
GNP = GDP + net factor income from abroad, so the difference is net income from abroad.
Which of the following agricultural systems is mainly for the cultivation of food crops for family consumption?
Answer: C (Subsistence farming)
Subsistence farmers grow food mainly to feed their own families.
Agriculture is important to the economy of West African countries because it is the source of
Answer: C (industrial input)
Agriculture supplies raw materials such as cotton, cocoa and palm oil to industries.
The economic system in which the state takes the economic decisions through detailed planning is
Answer: B (socialism)
Under socialism the state owns the main resources and plans what to produce.
A mixed economy combines the characteristics of both
Answer: A (planned and capitalist economies)
A mixed economy has both a private (capitalist) sector and a government (planned) sector.
In a rapidly growing economy, a change in technology which is labour saving is likely to cause
Answer: B (structural unemployment)
Labour-saving technology changes the structure of production and permanently replaces workers, which is structural unemployment.
Which of the following is a form of tax evasion?
Answer: A (Wrong declaration of earnings)
Tax evasion is illegally avoiding tax, for example by under-declaring income.
Where the burden of a tax finally rests is called
Answer: C (incidence of taxation)
The incidence of a tax is the person who finally bears its burden.
An increase in the quantity of goods and services produced in a country which raises her national income is known as
Answer: B (economic growth)
Economic growth is a rise in a country's output and national income; development also includes better living standards.
The formula (Index of export prices)/(Index of import prices) × 100 is used to measure the
Answer: C (commodity terms of trade)
The commodity terms of trade compares export prices with import prices.
Use the table below to answer the question.
Products | Ghana | Sierra Leone
Coffee | 8 tonnes | 2 tonnes
Cocoa | 7 tonnes | 5 tonnes
If specialization should take place, then
Answer: D (Sierra Leone should produce cocoa and Ghana coffee.)
Ghana is 4 times better at coffee but only 1.4 times better at cocoa, so Ghana has a comparative advantage in coffee and Sierra Leone in cocoa.
Which of the following is an invisible item?
Answer: A (Banking services)
Invisible items are services such as banking, insurance and shipping; the others are physical goods.
In an attempt to correct a deficit balance of payment, a country may decide to increase
Answer: A (domestic production)
Producing more at home reduces imports and raises exports, which reduces the deficit.
Which of the following is an objective of economic integration?
Answer: B (Free movement of persons, goods and services)
Economic integration removes barriers so people, goods and services move freely among member countries.
One of the functions of the International Monetary Fund (IMF) is to
Answer: C (give financial assistance to member states that have temporary balance of payment difficulties)
The IMF lends to members facing short-term balance of payments problems.
The full meaning of OPEC is
Answer: D (Organization of Petroleum Exporting Countries.)
OPEC stands for the Organization of Petroleum Exporting Countries.
Given that the prices and quantities supplied per period of time in litres of gasoline is expressed as:
Qs = 25 + 0.25P
where Qs is quantity supplied
P is price
(a) Determine the quantity supplied when price per litre is (i) 0 Naira; (ii) 24 Naira; (iii) 40 Naira; (iv) 60 Naira; (v) 80 Naira.
(b) From your calculations in (a) (i) present the supply schedule; (ii) draw the supply curve.
(a) (i) 25 + 0.25(0) = 25 litres
(ii) 25 + 0.25(24) = 31 litres
(iii) 25 + 0.25(40) = 35 litres
(iv) 25 + 0.25(60) = 40 litres
(v) 25 + 0.25(80) = 45 litres
(b)(i) Schedule: Price (N) 0, 24, 40, 60, 80 against Quantity (litres) 25, 31, 35, 40, 45
(ii) Price on the vertical axis, quantity on the horizontal axis; plot the five points and join them: an upward-sloping straight line that starts at 25 litres when price is 0; label it S and title the graph.
Substitute each price into the equation; a correct graph needs labelled axes, a suitable scale and the curve labelled S.
The pie chart below shows the age distribution of population in thousands of an island Y for the year 2000. The total population of the island is 245,000. Use the information supplied to answer the questions that follow. (Show all workings clearly).
(a) Calculate the number of persons in the different age groups.
(b) What is the dependency ratio of the population?
(c) Give three implications of the above population structure.
(a) 0–16 years: 220/360 × 245,000 = 149,722
17–45 years: 75/360 × 245,000 = 51,042
46–60 years: 43/360 × 245,000 = 29,264
61+ years: 22/360 × 245,000 = 14,972
(b) Dependants (0–16 and 61+) = 164,694; working population (17–60) = 80,306
Dependency ratio = 164,694 ÷ 80,306 ≈ 2.05 (about 205 dependants per 100 workers)
(c) Any three: heavy burden on the small working population; low savings and investment; high government spending on schools, health and welfare; small labour force limits output; high future population growth because most people are young; low standard of living.
Each sector's share = its angle ÷ 360 × total population; dependants are the young and the old.
(a) Distinguish between wants and demand.
(b) With the aid of diagrams, show the effect on demand when: (i) there is a reduction in the number of consumers; (ii) prices of substitutes increase; (iii) there is a decrease in the price of the commodity.
(a) Wants are human desires for goods and services, which are unlimited; demand is the quantity of a good consumers are willing and able to buy at a given price at a given time (want backed by ability to pay).
(b)(i) Fewer consumers: demand curve shifts to the left (D0 to D1); less is bought at every price.
(ii) Dearer substitutes: demand for this good increases; curve shifts to the right.
(iii) Fall in the good's own price: no shift; movement down along the same curve to a larger quantity demanded (extension of demand).
Each diagram: price on the vertical axis, quantity on the horizontal, curves and quantities labelled.
Changes in other factors shift the curve; a change in the good's own price moves along it.
(a) What is an economic system?
(b) Outline any four features of a capitalist economy.
(a) An economic system is the way a society organises the ownership and use of its resources to decide what, how and for whom to produce.
(b) Any four: private ownership of the means of production; profit motive; price mechanism (market forces) allocates resources; consumer sovereignty; freedom of enterprise and choice; competition; little government interference; inequality of income and wealth.
Define first, then give four distinct features with a short explanation each.
(a) What is population census?
(b) Describe the problems faced in conducting a population census in your country.
(a) A population census is an official count of all the people living in a country at a given time, usually with details such as age, sex, occupation and location.
(b) Any of: high cost/inadequate funds; illiteracy and ignorance of its purpose; religious and cultural beliefs (e.g. secluded women); political manipulation and inflation of figures; poor transport and communication to remote areas; shortage of trained enumerators; insecurity; nomadic movement of people; poor record-keeping and lack of accurate maps.
Explain each problem in a sentence rather than listing words.
(a) What is elasticity of supply?
(b) When is supply elastic?
(c) Explain any four factors that influence elasticity of supply.
(a) Elasticity of supply is the degree of responsiveness of quantity supplied to a change in the price of the commodity (% change in quantity supplied ÷ % change in price).
(b) Supply is elastic when the percentage change in quantity supplied is greater than the percentage change in price (coefficient greater than 1).
(c) Any four: time (supply is more elastic in the long run); nature of the commodity/perishability; availability of spare capacity and stocks; cost and ease of moving factors of production; production period (farm goods take longer); ease of entry of new firms; government policy.
Elastic supply means a coefficient above 1.
(a) Why would a producer (i) enter a competitive market? (ii) leave a competitive market?
(b) In what two ways do consumers benefit from perfect competition?
(c) Give the two conditions necessary for profit maximization for a perfectly competitive firm.
(a)(i) A producer enters when existing firms are earning supernormal (abnormal) profits, since there are no barriers to entry.
(ii) A producer leaves when it makes losses, i.e. price (AR) is below average cost in the long run (or below average variable cost in the short run).
(b) Any two: goods are sold at the lowest possible price (P = minimum AC in the long run); uniform price for all buyers; consumers have perfect knowledge so are not exploited; resources are used efficiently; homogeneous goods of the same quality.
(c) Marginal cost equals marginal revenue (MC = MR = price); and the MC curve cuts MR from below (MC rising at that point).
Profit maximisation needs MC = MR with MC rising.
(a) Explain the following strategies of industrialization: (i) Import substitution; (ii) Export promotion.
(b) Highlight any four objectives of industrial development programmes in your country.
(a)(i) Import substitution: producing at home goods that were formerly imported, usually protected by tariffs and import restrictions, to save foreign exchange.
(ii) Export promotion: encouraging industries to produce for foreign markets, through incentives such as subsidies, tax relief and export credit, to earn foreign exchange.
(b) Any four: create employment; diversify the economy; save and earn foreign exchange; raise national income and standard of living; use local raw materials; acquire technology and skills; reduce dependence on foreign goods; improve balance of payments.
Define each strategy and say how it is carried out.
(a) Explain the following: (i) Peasant farming; (ii) Commercial farming; (iii) State farming.
(b) In what two ways will increased commercial farming contribute to the development of the economy of your country?
(a)(i) Peasant farming: small-scale farming on small plots with simple tools and family labour, mainly for the family's food with a small surplus sold.
(ii) Commercial farming: large-scale farming mainly for sale and profit, using machines, hired labour and modern methods.
(iii) State farming: farms owned, financed and managed by the government.
(b) Any two: more food at lower prices; more raw materials for industries; more exports and foreign exchange; employment and higher incomes; more government revenue; market for industrial goods.
Give a clear definition of each type of farming.
(a) What is (i) commodity money? (ii) token money? (iii) fiduciary issue? (iv) quasi money?
(b) State any four functions of money.
(a)(i) Commodity money: goods that are generally accepted as money and also have value as goods, e.g. cowries, salt, cattle.
(ii) Token money: money whose face value is greater than the value of the material it is made of, e.g. coins and notes.
(iii) Fiduciary issue: the part of currency issued by the central bank that is not backed by gold or foreign reserves, only by government securities/confidence.
(iv) Quasi money (near money): assets that are easily converted into money but are not themselves a medium of exchange, e.g. savings and time deposits, treasury bills, bills of exchange.
(b) Medium of exchange; measure (unit) of value; store of value; standard of deferred payment.
Four functions of money: medium of exchange, unit of account, store of value, standard of deferred payment.
(a) What are the sources of government revenue?
(b) How does a government finance its budget deficit?
(a) Taxes (direct and indirect); fees, fines and licences; rents and royalties (e.g. from oil); profits of public enterprises; grants and aid; loans (internal and external); sale of government property.
(b) Borrowing from the public through bonds and treasury bills; borrowing from the central bank (printing money); borrowing from commercial banks; foreign loans; grants and aid; drawing from reserves; sale of government assets (privatisation); raising taxes.
A deficit means spending exceeds revenue, so the gap must be borrowed or covered from other sources.
(a) What are natural resources?
(b) Describe any four roles natural resources play in economic development.
(a) Natural resources are gifts of nature that can be used to produce goods and services, e.g. land, minerals, forests, water and fish.
(b) Any four: supply raw materials for industries; earn foreign exchange through exports; provide government revenue (royalties, rents, taxes); create employment; attract foreign investment; provide food; provide energy (oil, gas, water power); encourage development of infrastructure in their areas.
Explain how each role leads to growth or higher living standards.