62 questions. Try each one, then open the answer to check yourself and read the explanation.
The three principal economic units in any system are
Answer: C (households, firms and governments)
Households, firms and government are the three decision-making units in every economy.
The satisfaction derived from the use of a commodity is its
Answer: D (utility.)
Utility is the satisfaction a consumer gets from using a good or service.
The reward which accrues to labour for participating in production is
Answer: B (wage)
Labour is paid wages; capital earns interest and the entrepreneur earns profit.
The Malthusian theory of population does not concern itself with
Answer: D (development and growth of manpower.)
Malthus compared population growth with food supply and discussed checks; he did not deal with manpower development.
One characteristic of labour is that it is
Answer: C (mobile)
Labour can move from place to place and from job to job, so it is mobile.
A country where labour is not sufficient to make proper use of the natural resources is said to have an
Answer: D (under-population.)
Under-population means too few people to make full use of the available resources.
When population is classified according to professions, it is called
Answer: D (occupational distribution of population.)
Grouping people by the jobs they do is the occupational distribution of population.
What must be added to variable cost to give total cost?
Answer: C (Fixed cost)
Total cost = fixed cost + variable cost.
Revenue is the
Answer: D (total money realized from sales.)
Revenue is the money a firm receives from selling its output (price × quantity).
Given that TR is total revenue, then TRn − TR(n−1) can be used to find the
Answer: A (marginal revenue)
The extra revenue from selling one more unit (the n-th) is marginal revenue.
The lower the price of a commodity, the greater the quantity demanded. This is based on the assumption that consumers'
Answer: B (income remains the same)
The law of demand holds other things equal, including the consumers' income.
The demand for beans in bags is given by the function Q − 36 + 0.4P = 0. Where P is price in naira and Q is quantity, find Q when P = 20 naira.
Answer: C (28 bags)
Q = 36 − 0.4P = 36 − 0.4(20) = 36 − 8 = 28 bags.
If the price of good X rises and the quantity demanded of good Y increases then the two goods X and Y must be
Answer: B (substitutes)
When X becomes dearer people switch to Y, so X and Y are substitutes.
Use the following demand schedule to answer the question.
Price (N) | Quantity Demanded
15 | 60
13 | 70
The percentage change in quantity demanded is
Answer: C (16.7%)
Change = 70 − 60 = 10; 10/60 × 100 = 16.7%.
In a situation where demand is perfectly elastic, imposition of a tax on a commodity to raise its price will result in
Answer: C (consumers shifting completely to substitute products)
With perfectly elastic demand any rise in price makes buyers abandon the good for substitutes.
Patents are examples of
Answer: B (legal barriers to entry)
A patent is a legal right that stops other firms from producing the invention.
Which of the following is a characteristic of monopoly?
Answer: C (A single seller)
A monopoly is a market with only one seller.
When a firm is nationalized,
Answer: B (it has the right to draw on state funds for capital investment)
A nationalised firm is owned by the state, so it can be funded from public money.
The practice whereby a business is owned by two or more independent firms is termed
Answer: B (joint venture)
A joint venture is a business jointly owned by two or more firms (or a firm and government).
The main objective of privatizing a government business is to
Answer: D (increase the level of efficiency.)
Privatisation transfers public firms to private owners mainly to make them run more efficiently.
The return on investment that is just sufficient to satisfy the owner of a business is called
Answer: C (normal profit)
Normal profit is the minimum profit that keeps the owner in the business.
Which of the following is a middleman in the chain of distribution?
Answer: D (A retailer.)
Wholesalers and retailers stand between producers and consumers, so they are middlemen.
A negative effect of the presence of a large number of middlemen in the distributive network is
Answer: D (higher price of goods.)
Each middleman adds a profit margin, so many middlemen raise the final price.
An example of a producer good is a
Answer: B (hammer)
A hammer is used to produce other goods; the others are consumer goods.
To promote the development of the agricultural sector, governments of West African countries should
Answer: C (support the marketing of farm produce)
Helping farmers sell their produce raises their income and encourages more farming; the others hurt agriculture.
The most important quality of money is that it must be
Answer: B (generally acceptable)
Anything can serve as money only if people generally accept it in payment.
A certain amount of money is needed for everyday expenditure like buying of goods, transportation and others. This is
Answer: A (transaction demand for money)
Money held for day-to-day spending is the transactions demand for money.
Long-term loans can be secured from
Answer: C (development banks)
Development banks give long-term loans for agriculture and industry; commercial banks mostly lend short term.
The value of money is generally measured in relation to the
Answer: B (general price level)
The value of money is what it can buy, which falls as the general price level rises.
Which of the following is true under rapid inflation? People
Answer: D (hardly want to lend money.)
Inflation reduces the real value of money paid back later, so lenders lose and people avoid lending.
Which of the following financial institutions was originally known as a Building Society?
Answer: C (Mortgage bank)
Building societies lent money for housing; such institutions are now mortgage banks.
A non-bank financial intermediary which is regarded as a pool of risks is the
Answer: C (insurance company)
An insurance company collects premiums from many people to cover the losses of a few: it pools risks.
A foreign exchange market deals in
Answer: B (currencies)
The foreign exchange market is where national currencies are bought and sold.
Which of the following institutions assists the government in managing the national debt?
Answer: B (The Central Bank)
The central bank is the government's banker and manages its debt.
If tax takes a large proportion of the income of people with lower income, the tax is
Answer: C (regressive)
A regressive tax takes a bigger share of the income of the poor than of the rich.
Which of the following is an example of direct tax?
Answer: B (Income tax)
A direct tax is paid straight to government by the person who bears it, like income tax.
Monetary control measures are coordinated by
Answer: D (the Central Bank.)
The central bank carries out monetary policy for the government.
A country whose economy is buoyant is likely to have
Answer: C (a strong currency)
A strong, growing economy attracts demand for its exports and its currency, so its currency is strong.
The Net National Product (NNP) is Gross National Product (GNP) less
Answer: C (depreciation)
NNP = GNP − depreciation (capital consumption).
If the population of a country is low and the Gross National Product is high, the per capita income will be
Answer: A (high)
Per capita income = GNP ÷ population; a large GNP shared among few people gives a high figure.
The population of a country in a certain year was fifty million and the per capita income was $2,050. What was the national income?
Answer: C ($102,500 million)
National income = 50 million × $2,050 = $102,500 million.
One of the advantages of capitalism is that
Answer: C (efficient allocation of resources is assured)
Competition and the price mechanism push resources to their most profitable, efficient uses.
Which of the following contributes the highest amount of foreign exchange to the economy of West African nations?
Answer: D (Extraction, farming and tourism.)
West African exports are mainly minerals (oil, gold), farm produce (cocoa) and tourism.
International trade depends on the concept of
Answer: C (comparative cost advantage)
Countries gain from trade by specialising where they have a comparative cost advantage.
One advantage of international trade is that
Answer: D (it makes variety of goods available.)
Trade gives consumers goods their own country cannot produce, widening choice.
The practice of selling goods overseas and often below the cost of production is known as
Answer: B (dumping)
Dumping is selling goods abroad below cost or below the home price.
A summary of all the receipts and payments of a country in international transactions is called
Answer: B (balance of payment)
The balance of payments records all a country's receipts from and payments to the rest of the world.
Which of the following countries export cocoa?
Answer: C (Nigeria and Ghana)
Ghana and Nigeria are major West African cocoa exporters.
Which of the following are examples of transfer payments?
Answer: A (Gifts and donations)
Transfer payments are received without giving any good or service in return, such as gifts and donations.
ECA means
Answer: A (Economic Commission for Africa)
ECA is the United Nations Economic Commission for Africa.
The table below shows Mr. Y's schedule of total utility for oranges and mangoes. The prices of oranges and mangoes are set at $1.00 each. Mr. Y has $10.00 to spend on the goods. Use the information contained in the table to answer the questions that follow.
Oranges | Total utility | Mangoes | Total utility
1 | 100 | 1 | 50
2 | 190 | 2 | 95
3 | 270 | 3 | 135
4 | 340 | 4 | 170
5 | 400 | 5 | 200
6 | 450 | 6 | 225
7 | 490 | 7 | 245
8 | 520 | 8 | 260
(a) Calculate the marginal utility for all the levels of consumption for the goods.
(b) At equilibrium, how many (i) oranges, (ii) mangoes will the consumer buy?
(c) (i) State the law of diminishing marginal utility. (ii) State the marginal condition for utility maximization.
(a) MU = TUn − TUn−1
Oranges: 100, 90, 80, 70, 60, 50, 40, 30
Mangoes: 50, 45, 40, 35, 30, 25, 20, 15
(b) Spend $10 so that MU per dollar is equal: (i) 7 oranges (MU 40); (ii) 3 mangoes (MU 40); 7 + 3 = 10 dollars.
(c)(i) As a consumer takes more and more units of a commodity in a given period, the extra satisfaction from each additional unit eventually falls.
(ii) MUO/PO = MUM/PM (and all income is spent).
Equilibrium is where the last dollar spent on each good gives the same marginal utility and the whole $10 is used.
Study the diagram below carefully and use the given information to answer the questions that follow.
(a) Determine: (i) the profit maximizing output; (ii) the firm's profit if it produces 600 units of output; (iii) the total cost if the firm produces 400 units.
(b) Calculate the: (i) total revenue; (ii) profit of the firm at the output level of 900 units.
(c) What will happen if a firm's market price falls below its average variable cost?
(a)(i) 900 units, where MC = MR (MC cuts MR from below).
(ii) At 600 units price (MR = AR) = $10 and ATC = $6: profit = (10 − 6) × 600 = $2,400 (TR $6,000 − TC $3,600).
(iii) TC = ATC at 400 units × 400, with ATC read from the graph (the printed graph does not show a clear ATC value at 400 units).
(b)(i) TR = 10 × 900 = $9,000.
(ii) ATC at 900 units is about $8 (dashed line): TC ≈ 8 × 900 = $7,200, so profit ≈ 9,000 − 7,200 = $1,800.
(c) The firm cannot cover even its variable costs, so it shuts down (stops production) in the short run.
Read ATC at each output from the graph, then TC = ATC × Q and profit = TR − TC.
(a) Give two major views of Rev. Thomas Malthus in population theory.
(b) How relevant are his views to the economic realities of West African countries?
(a) Population tends to grow in geometric progression (1, 2, 4, 8…) while food supply grows in arithmetic progression (1, 2, 3, 4…); population would outstrip food; positive checks (famine, disease, war) and preventive checks (late marriage, moral restraint) would bring population back in line; population doubles about every 25 years.
(b) Partly relevant: rapid population growth, food shortages, hunger, poverty and high dependency are visible in many West African countries.
Less relevant: improved farming technology, fertilisers and food imports have raised food supply; family planning and education are reducing birth rates; Malthus ignored international trade and technical progress.
Give his two progressions and the checks, then weigh evidence for and against in West Africa.
(a) What is an economic system?
(b) Explain any three characteristics of a mixed economic system.
(c) State any two disadvantages of a mixed economic system.
(a) The way a society organises ownership and use of its resources to answer what, how and for whom to produce.
(b) Any three: both private and public ownership of the means of production; price mechanism works alongside government planning and regulation; profit motive exists with social welfare goals; government provides essential services and controls strategic industries; consumers have freedom of choice within regulations.
(c) Any two: inefficiency and corruption in public enterprises; government controls can discourage private initiative; conflict between public and private sectors; bureaucracy and delays; tax burden to finance the public sector.
A mixed economy combines features of capitalism and socialism.
(a) Define elasticity of supply.
(b) When is supply described as (i) elastic; (ii) inelastic?
(c) Outline any two factors that influence elasticity of supply.
(a) The degree of responsiveness of quantity supplied to a change in price: % change in quantity supplied ÷ % change in price.
(b)(i) Elastic: % change in quantity supplied is greater than % change in price (coefficient > 1).
(ii) Inelastic: % change in quantity supplied is less than % change in price (coefficient < 1).
(c) Any two: time period; nature/perishability of the good; availability of spare capacity and stocks; mobility of factors of production; length of the production period; ease of entry of firms.
Elastic means coefficient greater than 1; inelastic less than 1.
(a) State the law of diminishing returns.
(b) What is (i) marginal product, (ii) average product?
(c) Explain any three factors that determine the size of firms.
(a) If more and more units of a variable factor are added to a fixed factor, the marginal product of the variable factor will at first rise but will eventually fall.
(b)(i) Marginal product: the change in total product from employing one more unit of the variable factor (ΔTP/ΔL).
(ii) Average product: total product divided by the number of units of the variable factor (TP/L).
(c) Any three: size of the market; availability of capital; managerial ability of the entrepreneur; nature of the product; government policy; availability of raw materials and labour; level of technology; type of business organisation.
Marginal product is the extra output; average product is output per unit of the variable factor.
(a) Distinguish between labour and labour force.
(b) State four reasons for the differences in earnings among workers.
(a) Labour is the human effort, physical and mental, used in production in return for a reward; labour force (working population) is the number of people of working age who are willing and able to work, whether employed or seeking work.
(b) Any four: differences in skill, education and training; nature of the job (risk, unpleasantness); demand and supply of each type of labour; trade union strength; government policy (minimum wage); differences in productivity; experience and length of service; discrimination by sex, location or race; prestige of the job.
Labour is the factor of production; labour force is the group of people available to work.
Explain each of the following: (a) Nationalization; (b) Commercialization; (c) Privatization; (d) Joint Ventures.
(a) Nationalization: government taking over ownership and control of privately owned businesses, usually with compensation.
(b) Commercialization: reorganising a public enterprise to run on commercial lines, covering its costs and making profit, without government subsidy, while it stays government-owned.
(c) Privatization: transfer of ownership of public enterprises, wholly or partly, to private individuals or firms, usually by selling shares.
(d) Joint venture: a business owned and controlled jointly by two or more parties, e.g. government and foreign firms, sharing capital, risks and profits.
Give a clear one-line definition and an example for each.
(a) Outline any three disadvantages of monopoly.
(b) In what two ways can monopoly power be controlled?
(a) Any three: higher prices than under competition; restricted output; consumers have no choice; poor quality goods and services; exploitation of consumers through price discrimination; inefficiency because there is no competition; abnormal profits at consumers' expense.
(b) Any two: price control/regulation by government; nationalisation; anti-monopoly laws; heavy taxes on monopoly profits; encouraging competition (removing barriers, allowing imports); consumer protection agencies.
Each disadvantage should show how consumers lose.
Explain (a)(i) supply of money (ii) value of money
(b) Highlight the three motives for holding money.
(a)(i) Supply of money: the total stock of money in circulation in an economy at a given time, i.e. currency with the public plus bank deposits.
(ii) Value of money: the purchasing power of money, the quantity of goods and services a unit of money can buy; it moves inversely with the general price level.
(b) Transactions motive (day-to-day spending); precautionary motive (for emergencies); speculative motive (to take advantage of changes in interest rates and bond prices).
These are Keynes's three motives for liquidity preference.
(a) Distinguish between food crops and cash crops.
(b) Outline any four contributions of agriculture to the economic development of your country.
(a) Food crops are grown mainly for consumption by the farmer and the local population (e.g. yam, cassava, maize); cash crops are grown mainly for sale, often for export or industry (e.g. cocoa, cotton, rubber).
(b) Any four: provides food; provides raw materials for industries; earns foreign exchange through exports; provides employment; source of government revenue; market for industrial goods; provides capital through savings of farmers; contributes to national income.
Food crops feed people; cash crops earn money.
(a) What is economic integration?
(b) Highlight any three problems of economic integration in West Africa.
(a) Economic integration is the coming together of two or more countries to remove trade barriers and co-ordinate their economic policies for mutual benefit, e.g. ECOWAS.
(b) Any three: different currencies and exchange controls; political instability and lack of commitment; similar products, so little trade among members; poor transport and communication links; loss of customs revenue; unequal sharing of benefits among members; language differences and colonial ties; smuggling; insecurity.
Explain each problem briefly with reference to ECOWAS.