1. If the government is interested in raising the highest in the raising the highest revenue from a tax system, then for any two commodities A. it is better to tax one whose demand is more elastic B.it is better to tax one whose demand is more inelastic C. revenue will be the same for both commodities D. it is not possible to say which will yield higher revenue E. government cannot make which revenue from taxing commodities
A is correct. The government most times is not interested in hampering the level of consumption because they are interested in the welfare of the citizen. They would rather prefer to tax a commodity whose in demand elastic since the tax burden would be would be shared by both the consumer and the producer but producer will bear more of the burden.
2. Production in economics occurs when A. a commodity or service is sold B. utility is created or added C. a commodity is manufactured D. raw materials are produced or extracted from the mines E. all of these
E is correct. Recall that production involves three industries namely; primary industry ( they extract raw materials), secondary industry ( this include construction and manufacturing) and tertiary industry (they render services).
3. From an economic point of view, an activity does not have a cost when A. someone else pays for it B.the returns are greater than costs C. the choice involves giving up nothing D. the government pays for it E. it is paid from a gift
C is correct. Recall that cost in economics is the opportunity cost/true cost/real cost which are wants left unsatisfied because of scarce resources resources. Note that an accountant is interested in the money cost while an economist is interested in the opportunity cost
4. Which would you mot consider an agro-based industry in Nigeria? A. a diary enterprise producing milk B. a yam flour mill C. a poultry industry D. a fertilizer plant E. none of the above
E is correct. All options are related to agriculture
5. Price control indicates the following A. price is a fixed equilibrium level B. price is fixed above equilibrium level C. price is not fixed but is determined by the supply and demand D. price is fixed below equilibrium level E. none of the above
Dis correct. Since he government want to guarantee the consumption of the consumers. Thy usually fix price at a price lower than the market clearing price (equilibrium price).
6. The terms of trade are said to be favorable only if A. value of total exports equals value of total imports B. value of merchandise exports is greater than value of merchandise imports C. there are no balance of payments problem D. there is an imports E. foreign exchange reserves do not change
D is correct. For terms of trade to be favourable recall that the formula is PX /PI × 100. Note it must be greater than 100% and the only way this is achievable is when index of export is greater than import.
7. Which is dominant form of tax in Nigeria? A. direct tax B. indirect tax C. inheritance tax D. E. Value personal income tax E. value added tax
A is correct. Direct taxes are an important source of government revenue.
8. Which is not a function of central banks in West Africa? A. dealing in foreign exchange B. issuing of currencies C. accepting deposits from private customers D. acting as government bank E. acting as bankers’ bank
C is correct. The central bank does not transact with individuals regardless of their level of wealth.
9. Which is not a cause of high population growth in Nigeria? A. family planning unit of Nigeria B. improved medical facilities C. reduction in death rate D. improved hygiene E. increased birth rate
A is correct. Family planning is a method of controlling exploding population t decisively putting limits to the number of children a family should have by couples involved. Note population study is sometimes referred to as demographic studies.
10. In the figure we can describe the demand as A. perfectly elastic B. having unit elasticity C. perfectly inelastic D. fairly elastic E. all of the above
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11. Commercial banks can create money in the following ways A. by issuing coins and paper money B. by borrowing money from banks abroad C. by receiving deposits from individuals D. by printing money on the instructions of the central bank E. none of the above
E is correct. Commercial banks create money by advancing loans.
12. Utility of a commodity means A. its usefulness B. power to satisfy a want C. price of the commodity D. satisfaction derived from the production of commodity E. its adaptability
D is correct. Note that utility is not the same s usefulness. A commodity may not be useful but possess utility
13. International trade arises because A. one country has more abundant resources than the other country B. one country has the technology to produce the commodity whilst the other has not C. one country has maximum comparative advantage or minimum comparative disadvantage in the production of a commodity over the other country D. one country has more manpower to produce the commodity than the other country E. all of the above
C is correct. The central ideology behind international trade is that one country can produce a commodity at a cheaper rate (have comparative advantage over others) and the cost of producing the other products is costly.
14. By balance of visible trade we mean A. import and export of goods B. import and export of services C. balance of current account in the balance of payments D. balance of capital account in the balance of payments E. all of these
A is correct. The word visible means that it can be seen, touched and felt there are also called merchandise. It must be noted that invisible trade are basically services.
15. Nigeria earns the major part of her foreign exchange from the export of A. manpower to other countries B. crude oil C. petroleum products D. groundnuts and cotton E. palm oil and cocoa
B is correct. Crude oil is the driver (mainstay) of the Nigerian economy. Note that Nigeria is a mono –economy ( an economy which is lowly diversified and depends on one major source of income).
16. In the above diagram, supply and market conditions of sugar in a Nigerian market are given. An indirect tax of 10 kobo per kg is imposed. It will be paid A. wholly by the suppliers B. wholly by the consumer C. partly by the supplier and partly by the consumer D. wholly by the middlemen E. partly by the stockholder and partly by consumer
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17. Which would you not consider an advantage of A. one- man businesses B. limited liability C. quick decisions making D. personal contact with customers E. none of the above
C is correct. Since the sole proprietorship is the alfa and omega of the business he mostly makes all decisions on the spot.
18. The budget of Nigeria will be in deficit if A. revenue expenditure exceeds the revenue receipts B. capital expenditure exceeds the capital receipts C. revenue and capital expenditure exceeds the revenue and capital receipts D. the government is spending more than its income E. all of the above
E is correct. The budget is a fiscal document showing government estimated revenue and proposed expenditure during a period of time usually a year. There are three categories of budget. Balanced budget (this when estimated revenue and proposed expenditure of the government are equal or the difference between government revenue and expenditure is zero), budget surplus (this is when the government revenue is greater than the proposed expenditure of the government) and budget deficit (this is when the government revenue is less than the proposed expenditure).
19. An economic problem arises when A. manufactured goods are in short supply B. money is in short supply C. buyers are many D. sellers are few E. scarcity and choice are involved
E is correct. The fundamental problem of any economy is the scarcity of resources, this brings about the problem of allocating them (choice)
20. By subsistence production mean A. goods and services are produced for consumption only B. goods and services are sold to others C. raw materials are produced in the country D. goods and services are produced for the market E. none of these
A is correct. Subsistence means just a little for survival rather than having in abundance for sales.
21. Division of labour means that A. the labour is divided into different sections B. the work is divided into different parts to be completed by each labourer C. production is completed by different departments of a factory D. commodities are produced at different times by a single labourer E. the labour force in the country is not united
B is correct. Recall that division of labour was propounded by Adam Smith and this is the major reason behind his portrait is on the 20 pounds note.
22. A limited liability company is owned by A. an individual B. two or more partners C. shareholders D. government E. a bank
C is correct. Shareholders are the owners of the business.
23. If the price of a commodity falls and the quantity purchased of it does not rise, the commodity can be described as A. normal B. abnormal C. inferior D. superior E. Scarce
B is correct. Recall that abnormal demand is a demand pattern that does not conform to the basic law of demand. For this question the lower the price the lower the quantity demanded which is a complete reversal of the law of demand.
24. Mr. A earns N300 and pays N15 in tax. Mr. B earns N100and pays N100 and pays N6 in tax. This tax system can be described as A. proportional tax B. progressive tax C. competitive tax D. excise tax E. regressive tax
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25. Which sector can you say is growing the fastest in the Nigerian economy? A. agriculture B. industry C. education D. transport E. labour
C is correct.
26. Which is not a method of raising capital funds in Nigeria? A. borrowing from abroad B. internal borrowing C. Nigerianization of foreign companies D. gifts from abroad E. selling government bond
C is correct. This question relates to public debt. There are two types of public debt namely; domestic debt and foreign (external debt).
27. If a firm doubles its output and its costs increases by 60%, the firm is experiencing A. increasing costs B. economies of scale C. decreasing returns D. decreasing costs E. none of the above
A is correct. Note economies of scale is the advantage a firm enjoys. There two types of economies of scale namely; internal economies of scale which is the advantage a firm derives from its expansion. External economies of scale is the advantage a firm derives as a result of the existence of other firms around it. When a firm incurs extra cost from expansion which is not covered by the returns, there is internal diseconomies of scale and an if a firm suffer losses or incurs extra cost as a result of the existence of other firms around it we say the firm is experiencing external diseconomies of scale.
28. The fundamental problem of Economics is A. money B. poverty C. unemployment D. the scarcity of the resources relative to wants E. inflation
D is correct. Economics is useless if there was no scarcity. It is because of scarcity that exist that made the study of and understanding of economics relevant.
29. If you do not have to give up anything in order to get a particular thing, then its opportunity cost is A. zero B. not measurable C. its price in money D. infinite E. equal to one
A is correct. Economists are interested in the alternatives forgone rather than the money cost. (the actual amount spent to acquire a product)
30. Which of the following is the standard concept for measuring and analyzing population growth? A. the rate of natural increase B. the net migration C. the rate of population increase D. the fertility rate E. all of the above
E is correct. Note: Net migration is the difference between immigration (movement into a country) and emigration (movement out of the country). The natural growth rate is the growth rate that is not affected by external forces/factors or the uninduced growth rate. Note also that when net migration is positive immigration > emigration and when it is negative immigration < emigration.
31. When we draw a market demand curve, we A. ignore tastes, income and other prices B. assume that taste, income and other prices do not matter C. assume that tastes, incomes and all other prices change in the same direction as prices D. assume that tastes, incomes and all other prices remain constant E. both A and B above
D is correct. Did you know that it is incomplete to state the law of demand as “the higher the price the higher the quantity demanded and vice versa”. This because the affix; “ all other things being equal (ceteris paribus)” must be included because the law of demand is based on certain assumptions such as the above.
32. Capital earns income because A. it is productive B. it is expensive C. it is always cheaper to substitute capital for labour D. it is technically more efficient than labour E. both A and B above
A is correct. Recall that the economist definition of capital is the wealth set aside in the creation of further wealth. This asserts the fact that capital is productive.
33. In a free market economy, the rationing of scarce goods is done principally by A. the government B. business organization C. the price mechanism D. consumer E. both A and B above
C is correct. The price mechanism is a system that allocates resources among competing ends. Note that the price mechanism is also called the price system.
34. A disadvantage of the corporate form of business is the A. risk of the owners of loss of personal effect if the business should fail B. ability of the corporation raise financial resources C. limited life span of the corporation D. problems presented by separation of ownership from control E. none of the above
D is correct. The shareholders are the owners of the business but the board of directors are responsible for managing (includes planning, organizing, coordinating controlling) the business.
35. The value of money depends primarily on A. the gold backing of the currency B. the gold backing of both currency and deposits C. the general price level D. government decree that it is legal tender E. none of the above
C is correct. The general price level is the average price of commodities in a country. If the general price level increases we say inflation has set in, inflation itself erodes (decreases) the value of money. In other words if price level increases, inflation will rise and the value of money will fall.
36. A commercial bank is able to create money A. by printing it B. by maintaining reserves C. by creating a demand deposit as it gives a new loan D. by issuing cheques to depositors E. by borrowing from the central bank
C is correct. The money deposited in the bank is not idle. It is given out in loans for investment purposes which in turn generates more money for the bank, this is what is known as money creation. In summary the central bank issues currency while the commercial banks create money.
37. Which one of the following is not one of the balance of payments entries? A. the current account B. foreign reserves C. import and export duties D. short term capital E. long term capital
B is correct.
38. Which of the following taxes appear generally progressive in nature? A. sales taxes B. the personal income tax C. property tax D. corporation taxes E. none of the above
B is correct. Most countries adopt the Pay as You Earn (P.A.Y.E) which is the higher you earn the higher you pay in taxes.
39. in subsistence economy A. there is no shortage of goods and services B. the state is sole owner of resources C. production is largely oriented towards consumption in the rural sector D. there is no exchange of goods and services E. women predominate in all economic activities
C is correct. Subsistence production means producing for consumption rather than sales.
40. Which of the following is a correct definition of equilibrium price? A. a price which covers production cost B. a price which maximizes entrepreneur’s profits C. a price at which the quantity demanded equals the quantity supplied D. a price at which competitive firm is at equilibrium E. a price which stabilizes farmers’ income
C is correct. The equilibrium price is the price where quantity demanded of a commodity is equals to the quantity supplied of the commodity.
41. in a normal (typical) demand schedule, the quantity demanded is A. directly related to price B. inversely related to price C. independent of price D. proportionally related to supply E. solely dependent on haggling skill
B is correct. Recall that under the law of demand if price increases, demand falls. This implies that price and quantity are moving in opposite direction i.e QD α 1/P. For supply on the other hand, the higher the price, the higher the quantity supplied. This implies that price and supply move in the same direction QS α P. Note it can also be said that demand and price have a negative relationship so I can state the law of demand as “ other things being equal, demand is inversely related to price”. And supply on the other hand supply has positive relationship with price. So we can state the law of supply as “ supply and price are directly related”.
42. Division of labour is limited by the A. availability of raw materials B. size of the labour force C. size of the firm D. absolute size of the country’s population E. per capita income and number of potential buyers
E is correct. This option relates to the size of the market ( number of potential buyers).
43. In a limited liability company, the greatest risk is borne by A. debenture holder’s B. company executives C. ordinary shareholders D. preference shareholders E. board of directors
C is correct. The ordinary shareholders are the real owners of the business. They receive dividend last and are the last to settled in the event of liquidation.
44. Which of the following is not a function of Nigerian commercial banks? A. acceptance of deposits B. lending of money C. investment in securities D. issue of currency E. selling and buying of travelers cheques
D is correct. Issuance of currency is the function of the central bank.
45. In Nigeria, cheques are not money because A. their use in confined to business houses B. there are no banks I rural areas C. they are no legal tender D. they are not generally acceptable as a medium of exchange E. most Nigerians cannot identify them
C is correct. Cheques are not money but can serve the purpose of money but can serve the purpose of money. However, the seller of a product is not compelled to accept it this makes it not to be a legal tender.
46. Indicate which of the following are invisible trade in a country’s country balance of payments A. oil exports and imports B. Gold and foreign reserves C. foreign investments D. dividends and profits E. expenditure on shipping and tourism
E is correct. Recall that invisible trade are services.
47. Which of the following is not a measure for controlling inflation? A. reduction in money supply B. wage restraints and wages freeze C. reduction in taxes and increases in government spending D. price control E. credit transactions
C is correct. Wage restraint and freezing has to do with specific persons and not the entire populace is affected, this has almost zero effect on inflation control.
48. Which of the following is not a determinant of changes in supply? A. change in the costs of production B. technical progress C. weather D. changes in the number of producers E. changes in the number of buyers
E is correct.
49. The marginal physical product of labour is A. the output of labour unaided by machinery B. the extra revenue from the output of one additional worker C. the difference in the output of two workers D. additional output achieved when one extra worker is added to fixed account of other factors E. none of the above
D is correct. Note anytime you see the word marginal ensure you look out for is either additional or extra
50. One of the disadvantages of division of labour is that A. there is saving of time B. it results in workers acquiring greater skill at their jobs C . There is a greater risk of unemployment D. it makes it possible the use of machinery E. it makes the worker less fatigued by his work
C is correct. Division of labour promotes labour intensive technique more which is close to saying more employment opportunity.