Economics 1979

1. Which of the following is true of occupational distribution of the labor in West Africa? A.  a large percentage of the labor force engage in agriculture  B. agriculture is the most important occupation in west  C. the manufacturing sector employs a large percentage of the population D. agriculture does not constitute an important source of paid employment E. the public sector forms an important source of paid employment

The correct option is A. agriculture is the mainstay of many rural dwellers in West Africa and this rural dwellers account for majority of the population

2.Which of the following is not true of the theory of optimum population A. it is possible for a densely populated country to be unpopulated if it has  inefficient labor  to make the most effective use of its   B. the quantity of labor which combined with the  factors gives minimum output C. the quantity of labor which combined with the other factors gives the maximum output is known as the optimum population D. the test of over-population is whether its exceeds the optimum E. it is possible for a thinly populated country to be over populated if it has a poor supply of other factors

The correct option is B. optimum population is a type of population that yield maximum output when combined with available resources in the country

3.Production covers all but one of the following activities A. changing the position of a good in time as, for example, holding stocks of goods until they are required B. the provision of some kind of services e.g. retailing C. changing the form of a good from raw materials to finished products D. changing the situation of a good as for example, from a factory in Lagos to a retail shop in Port Harcourt E. the use of goods and services that satisfy individual wants

The correct option is E. Production entails all activities that are involved in ensuring goods or services reach the final consumer. Note option E is consumption and not production

4.If two commodities are good substitute for one another e.g. butter and margarine, an increase in the demand for one will reduce the demand for the other. This type of demand is called A. composite demand B. elastic demand C. derived demand D. competitive demand E. inelastic demand

The correct option is D. when a commodity can serve the purpose served by another commodity, if he consumer buys one of the commodity there is no need to buy the other which in turn reduces the demand for the other one. For example meat and fish. If during a particular weekend you buy fish you may not need to by meat any more. Invariably the meat seller’s customer has reduced by one for that day.

5.One of the reasons why conditions of supply of a commodity may change is A. a change in real income B. Changes in the technique of production C. a change of fashion or taste D. change in price of the commodity itself E. changes in population

The correct option is B. The other options are the factors affecting demand and not supply. If the production method is improved upon, this may save costs for the firm and this will also lead to greater output and increase in supply

6.When the demand curve shifts to the right, it indicates that a larger quantity is demand at each price. This is caused by one of the following: A a fall in the income B. a rise in price of complement C. a falling the price of substitute D. a change in the taste against the commodity E. none of the above

The correct option is C. recall that a joint or complementary demand requires that two commodities be bought at the same time. Now for example, if we have fixed amount of 1,000 NGN to be spent and with this amount we usually buy 5 units of commodity X and 10 units of commodity Y. if the price of X increases and we want to maintain the 5 units purchased it will reduce the demand for Y. so B cannot be the answer. Option D is wrong because when the taste of a person changes against a commodity then the demand will reduce. Option A cannot be the answer because it relates to income and the question is talking about price.

7.When the price of a commodity is below the equilibrium price the quantity demanded will exceed the quantity supplied. Such a situation is referred to as A. elastic supply B. joint demand  C. excess supply D. derived demand E. none of the above

The correct option is E. the answer is excess demand which is below the equilibrium point. Recall that a consumer will always like to consume at the lowest possible price and when price is low people will want to demand in excess.

8.The central bank control the activities of other banks by all but one of the following. Which one? A. the use of bank rate B. the purchase or sale of government on the open market C. special deposits D. the use of directives E. taxation

The answer is E. Taxation is a fiscal policy tool which included government expenditure also. The policy available to the central bank is the monetary policy which include bank rate which is the rate the central bank charges commercial banks. Moral suasion which is a gentle appeal by the central bank to commercial banks. Others are open market operation (OMO), special deposit, special directives, liquidity ratio etc.

9.Which of these alternatives is wrong? Central banks are A. bankers to the government B. bankers to commercial bank C. merchant bank Controllers and regulator of the money supply E. issuer of bank notes

The answer is C. The central bank performs all the functions listed above. Note that the merchant bank is aptly referred to as a wholesaler bank and the commercial bank as retailer bank

10.The principle of comparative advantage or comparative cost is not based on one of the following assumptions A. there are restrictions in trade B. there are no costs of transport C. there is perfect competition D. there are no tariffs or import and export quota E. there are two commodities entering into international trade

The correct option is A. the theory of comparative advantage was developed by David Richardo. However this was a development on the first theory absolute advantage that was propounded by Adam Smith. The assumption included

  1. There are two countries and two commodities traded in the world
  2. There is free trade i.e. no restriction to international trade
  3. No transportation cost
  4. Labor is the only productive factor or labor theory of value

11. Which of the following is not a direct tax? A. company income tax B. capital tax C. purchase tax D. personal income tax E. capital gain tax

The answer is   C. direct taxes are taxes imposed on individual’s income, that of companies and property. They include personal income (tax imposed on individual’s income), cooperate tax (tax imposed on the profit of companies), property tax (tax imposed on a person’s property), capital gain tax (this is tax imposed on profit made on the sales of a property).

12.Division of labor means A. dividing the labor into different categories B. splitting the process of  production into different parts to be completed by each person C. dividing the goods and services into different sections D. assigning different duties of laborers E. group of laborers working in a factory or shop

The answer is B. Note division of labor involves splitting the task or process into smaller units and assigning labor various sub-division

13.By utility we mean A. usefulness B. power of satisfying a want C. beneficial D. advantageous E. consumable

The answer is B. Utility is not the same thing as usefulness something might possess utility to a consumer but might be injurious to his health e.g. cigarette

14.Which of the following is not an indirect tax? A. excise duty B. company tax C. import duty D. excise duty E. sales tax

The answer is B. indirect tax is a tax imposed on goods and services. Did you know everyone pays tax? Yes of course because the goods and services you buy are tax but you are paying it indirectly. In other words the producer is taxed directly and he includes the tax in his prices.

15.Average cost is A. the total cost of production B. the extra cost of producing one additional unit of output C. the cost of producing a unit of output D. variable costs E. overhead costs

The answer is C. the average cost is the cost of producing a unit of a commodity or say total cost per unit. It is given mathematically as AC = TC/Q

16.Opportunity cost is the A. price of scarce goods B. resources required for making a commodity C. cost of luxury goods D. accrual of financial losses by chance E. alternative that is forgone in order to satisfy a want

The answer is E. the opportunity cost is also called true cost or real cost is the forgone alternatives or the wants that are left unsatisfied.

17.The quantity supplied of a commodity increases when A. production increases B. demand increases C. price of the commodity increases D. population of the country increases E. more commodities are imported

The correct answer is B. a video link will be added for proper understanding

18.A video link will be added

19.The country will be over-populated when A. the birth rate is high B. the death rate is low C. the growth rate is high D. the population is increasing more than the resources of the country E. unemployment is high in the country

The answer is D. Note: when we are talking about over population, under population and optimum population we are comparing the population and the resources. So friends take note of this. Although the other options are tenable answers but they do not underscore the basic idea

20.The value of money is generally measured by reference to A. the interest rate charged in bank loans B. the general price level C. the size of a county ‘s gold stock D. the level of economic development in a country E. the price of stocks and shares on the stock exchange

The answer is B. the general price level shows the level of inflation and erodes the value of money today. Think deeply what 5 NGN buy around year 2005 can cannot be bought now not even sachet water. This is very important when investing money this is what is known in normal finance parlance as ‘the time value of money’

21.If the quantity demanded of a commodity increases from 20 to 30 when there is an increase in price from N4 to N5, the elasticity of demand is A. 0 B. 1 C. 2 D. 5 E. 10

The answer is C.  A video will be uploaded

22.The total value of goods and services sold and bought by a country across its border during a given period, usually a year is known as A. visible trade B. invisible trade C. balance of payments D. balance of trade E. terms of trade

The answer is D. balance of trade is the largest component in the balance of payment account.

23.Which of the following types of capital is not rewarded by means of dividends A. ordinary shares B. preference shares C. cumulative preference shares D. participating preference shares E. debenture

The answer is E. a debenture holder is a creditor to the business. Debenture occurs when a firm borrows money from an individual and this person is given a debenture certificate and entitled to an interest.

24.Which of the following is not usually the function of wholesaler? A. transport B. storage C. advertising D. after-sales service E. branding  

The answer is E. it is the duty of the producer to give the product a name and a logo etc.

25.Net national income A. gross national income minus depreciation B. gross domestic product plus net income from abroad C. nominal national income deflated by the price level D. gross national income divided by total population E . gross national product plus subsidies minus taxes

The answer is A. Note: whenever you come across the word net in National income depreciation has to be subtracted in the formula.

26.If Mr. A earns N2,000  a year while Mr. B earns N8,000  a year but Mr. A pays N200 per annum in tax while Mr. B pays N400 such a tax is A. progressive B. indirect C. regressive D. proportional E. none of the above

A video link will be uploaded

27.Which of the following is not an assets of a commercial bank? A. cash B. money at call C. treasury bills D. reserve funds E. loans and overdrafts

The answer is B. this is a short term finance for the bank in the money market. Commercial banks lend one another money and recall that money borrowed is a liability  

28.The lowering of the exchange rate between a country’s currency and other currencies is known as A. the foreign exchange rate B. deflation C. exchange control D. the law of comparative advantage E. none of the above

The answer is E. the definition above is for a concept in economics called devaluation. It is usually adopted to correct an adverse (deficit) balance of payment because it make export cheaper and import export expensive

29.When the average physical product curve is rising, the marginal physical is A. below it B. above it C. falling D. zero E. none of the above

The answer is B. see the graph below

Total Product, Average Product and Marginal Product
  • When Average Product is rising, Marginal Product lies above Average Product.
  • When Average Product is declining, Marginal Product lies below Average Product.
  • At the maximum of Average Product, Marginal and Average Product equal each other.

30.The proportion of currency in the money supply A. is higher is developing countries than advanced countries B. is lower in developing countries than advanced countries C. is the same in the both developing and advanced countries D. grows as the economy develops E. none of the above  

Option A is correct. Most developed countries have gone cashless which has significantly reduced the volume of money in circulation but developing countries still embark on cash transaction.

31.If a government is running a deficit , this means A. terms of trade are unfavorable B. more project cannot be undertaken C. tax inflows is greater than expenditure D. aggregate demand is greater than aggregate supply E. none of the above

The answer is E. a budget deficit occurs when the revenue of the government (most especially in taxes) is less than the expenditure of the government

32.Pure monopoly describes a market where A. there are many sellers and few buyers B. goods are sold at different prices C. entry is not blocked but no one cares to enter D. a few sellers and one buyer exist E. none of the above

The answer is E. a monopoly is a type of imperfect market or competition in which there is only one seller or producer with many buyers

33.Which of the following assets of a commercial does not yield revenue? A money in the tills of the bank B. money at call C. treasury certificates D. treasury bills E. bill of exchange

The answer is A. money in till are idle and bear no interest until when lent out or invested.

34.Which of the following is not a component of National Income? A wages earned by doctors B. rent paid to landlords C. indirect taxes D. undistributed company profit E. interest earned on loans

The answer is C. indirect taxes relates to personal income and not national income

35.Which of the following financial institution cannot direct loans to individuals? A. the agricultural bank B. the industrial bank C. the central bank D. the co-operative bank E. the standard bank

The answer is C. The central bank does not transact with the public.

36.An ad-valorem tax means A. total amount an income tax B. a certain percentage tax on the volume of commodity D. a tax on capital gains E. a profit tax

The answer is B. it a type of tax imposed based on the value of the property. The other tax is specific tax which is imposed regardless of the value of the property.

37.The foreign exchange rate of a country is A. the interest rate fixed by the central bank B. the price of one national currency in terms of another C. the rate at which the central bank issues money D. the rate of interest on government bond E. none of the above

The answer is B. the foreign exchange the price of one currency in terms of one currency. In other words how much of one currency is needed to have unit of the other currency

38.The “terms of trade” means A. the trade agreement between two countries B. the difference in the volume of exports of two countries C. the value of a unit of export in relation to the value of a unit of import D. the proportion of the value of exports to the value of total trade E. none of the above

The answer is C. terms of trade is the rate at which a countries export exchange for its import. In other words how much locally produced goods do we need to give out for us to have certain volume of imported goods

39.Which is the most liquid of the following financial assets held by an individual? A. outstanding balance on the current account of a commercial bank B. a credit balance on a savings account C. a crossed postal order D. an insurance policy E. all the above

The answer is B. Liquidity of assets simply refers to how quickly the assets can be converted into cash. Of course a saving account is a demand deposit account which can be withdrawn at any time that makes it the most liquid

40.The price mechanism A. regulates supply and demand B. rations the consumers C. rewards the producers D. allocates scarce resources E. does all of the above

The answer is D. the price mechanism is also called price system and it helps to allocate scarce resources among competing ends

41.When marginal cost equals marginal revenue product A. the firm is producing at a loss B. the firm is at the breakeven point C. the firm us making at least profit D. the supplementary cost of the firm is highest E. the firm has maximum profit

The answer is B. the point where the extra cost of producing one more unit is equal to the amount earned by selling one extra unit is the break–even point i.e. where the firm is not incurring a loss and it is not making profit

42.A video link will be added

43.Disposable income equals A. personal income less business profit B. personal income less taxes and subsidies C. national income less borrowing from abroad D. national income plus transfer payments E. personal income less taxes plus subsidies

The answer is E. disposable income is the income available to individuals after deducting direct taxes and adding subsidies (subsidy reduces the amount spent on an essential commodity)

44.What do we call a market where there is a large number of buyers and sellers such that no one has an appreciable influence on prices? A. free market B. perfectly competitive market C. controlled market D. stock exchange market E. open market

The answer is B. a perfect competition is a market where there are many buyers and sellers of a commodity and there is no single participant (buyer and seller) capable of influencing the price.

45.A typical corporate form of business organization is owned by A. presidents of the country B. shareholders C. the general manager and the executives of the business concern D. a local government E. foreigners and citizens of the country

The answer is B. A company is owned by shareholders but managed by the board of directors.

46.The burden of tax on a commodity whose demand is infinitely inelastic A. is zero B. will be borne by seller alone C. will be borne by buyer alone D. will be borne by both seller and buyer  E. is impossible to tell who bears it

The answer is C. goods that have price inelastic demand are goods the consumer can do without. Therefore when a commodity is inelastic, the tax burden is borne by both the buyer and the seller but the buyer bears more and if is perfectly or infinitely inelastic the buyer bears the price burden alone

47.The predominance of non-working wives and housemaids in west Africa A. will underestimate the national income of the countries B. will overestimate the national income of the countries C. will lead to constant per capita income over the years D. will lead to balance of payment deficits E. will cause unfavorable terms of trade

The answer is A. these are one of the activities classified as non-marketable activities

48.Inflation can be curbed by A. increasing aggregate demand B. paying higher wages C. increasing government expenditure D. reducing aggregate demand E. a deficit budget

The answer is the D. The idea behind this question is the option that doesn’t increase the money in circulation

49.In most cases the marginal utility derived from a particular good A. increases as additional units are consumed B. paying  higher wages C. decreases at a constant rate as additional units are consumed D. decreases additional units are consumed E. remains constant as additional units are consumed

The answer is D. This is testing your knowledge of the law of diminishing marginal utility

50.Infant industries are A. baby food and baby clothing factories B. those which are introducing new products C. cases of arrested development  D. industries temporarily protected by tariff barriers until mature enough to compete on world market E. industries that are allowed to remain permanent cases of adolescence

The answer is D. infant industries are newly established industries that do not have a solid footing to compete with existing industries and are therefore protected by the government

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Bolujoko Olumayowa

Bolujoko is an academic and business enthusiasts who is giving in to knowledge sharing through exposing compatriots (students) the reason behind certain concept using illustration they can relate with.

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