JAMB Economics

A: interest

In the standard classification of factor rewards, capital earns interest. Land earns rent and labour earns wages; risk is not itself a payment category.

D: build houses.

Mortgage lending provides long-term finance secured against property. House construction and purchase are therefore the relevant uses among the options.

B: rural-urban migration

Rural industry creates local employment opportunities, reducing the incentive for residents to move to towns for work. It can therefore reduce rural-to-urban migration.

D: comparative cost advantage

Comparative advantage explains gains from specializing in goods with lower opportunity costs and trading. Countries need not be absolutely more productive in every good to benefit.

A: co-operatives

Cooperatives are owned by members who use their services. A consumer cooperative illustrates this directly: the customers join together to own and operate the business.

C: commodity terms of trade

Commodity terms of trade compare export prices with import prices. Dividing the export price index by the import price index and multiplying by 100 measures that relative price relationship.

D: Sierra Leone should produce cocoa and Ghana coffee

Ghana gives up 7/8 tonne of cocoa per tonne of coffee, compared with 9/2 in Sierra Leone. Sierra Leone gives up less coffee per tonne of cocoa, so it specializes in cocoa and Ghana in coffee.

D: Organisation of Petroleum Exporting Countries.

OPEC stands for Organization of the Petroleum Exporting Countries. The name identifies a group of petroleum-exporting member countries, rather than a category of petrol products.

D: allocate scarce resources to satisfy human wants.

Economics studies choices about allocating scarce resources among competing uses. Since resources are limited relative to wants, allocation and its trade-offs are central.

B: factors of production

Factors of production are the productive resources used to make goods and services. They are commonly grouped as land, labour, capital and entrepreneurship.

B: scarcity of resources

Scarcity means available resources cannot satisfy every competing want. Economics is needed to study the choices and opportunity costs that this limitation creates.

B: complementary demand

A battery-powered torch and its battery are used together. Demand for one is linked to use of the other, making them complementary goods.

C: 3.2

The weighted sum is 2x2 + 3x5 + 4x2 + 5x1 = 32. There are 10 observations, so the mean is 32/10 = 3.2.

C: 3

There are 10 observations. In order, positions 3 through 7 all contain 3, so both the fifth and sixth values are 3. Their average, the median, is 3.

D: unlimited while means are scarce

Human wants are described as unlimited because satisfying some leads to further wants. The means available to satisfy them remain scarce, requiring choices.

A: $2,400.00

Education occupies 120 out of the full 360 degrees, or one-third of the budget. One-third of $7,200 is $2,400.

B: 3:4

Sector spending is proportional to the angle in the pie chart. Health to agriculture is 60:80; dividing both by 20 gives 3:4.

D: Machinery

Machinery is fixed capital: it can be used repeatedly over several production cycles. Circulating capital is used up or turned over during production.

A: David Ricardo

David Ricardo developed the theory of comparative advantage. Its central insight is that trade can benefit countries when they specialize according to relative opportunity costs.

C: terms of trade

Terms of trade express the price of exports relative to imports. They indicate how much can be obtained in imports for a given amount of exports.

C: total population

Labour efficiency concerns output per worker, influenced by skills, working conditions and attitudes. Total population is a headcount and does not itself measure worker efficiency.

D: fiscal policy

Fiscal policy uses government spending and taxation to influence the economy. Monetary policy instead operates through money, credit and interest-rate conditions.

A: UNO

The United Nations Economic and Social Council established the Economic Commission for Africa in 1958. It is a UN regional commission, so UNO is the correct organization.

C: 160

The groups at or above the pass mark of 40 contain 100, 40 and 20 students. Adding these frequencies gives 160 students who passed.

A: 280

Add the frequencies of all five recorded groups: 40 + 80 + 100 + 40 + 20 = 280. This gives the total number of students in the chart.

C: consumption

Utility is the satisfaction a person obtains from consuming a good or service. It describes the benefit to the consumer rather than the act of production or distribution.

C: a craft union

A craft union organizes workers who share a particular trade or skill. An industrial union instead groups workers across occupations within an industry.

C: share revenue between the different tiers of government

A revenue allocation formula specifies how public revenue is distributed among tiers of government. It determines their shares rather than dividing revenue between public and private businesses.

B: 9

Seven observations with mean 7 must sum to 49. The six known values sum to 40, leaving Z = 49 - 40 = 9.

C: N2.00

At equilibrium, 15 - 2P = 5 + 3P. Thus 10 = 5P and P = N2; both quantities then equal 11.

D: consumer wants in order of priority

A scale of preference orders wants from most to least important. It helps a consumer choose which wants to satisfy first when resources are limited.

B: the ability to either control price or output

A monopolist faces the market demand curve and can choose a price or an output level. Demand determines the corresponding quantity or price, so both cannot be chosen independently.

C: easy transferability of shares

Public-company shares are generally more readily transferable than shares in a private company, which commonly restricts transfers. Limited liability and separate identity are shared features.

C: extraction of crude oil

Extracting crude oil is an upstream activity. Refining and distribution of petroleum products belong to later stages in the petroleum chain.

D: birth rate - death rate

Natural population growth excludes migration and equals births minus deaths. With rates measured on the same population base, it is birth rate minus death rate.

C: composite

Composite demand means one commodity is wanted for several different uses. Palm oil used both for soap making and cooking illustrates this multiple-use demand.

A: interest

Capital, such as equipment used in production, receives interest in the standard factor-reward classification. Profit is the return associated with entrepreneurship.

C: demand-pull inflation

Demand-pull inflation arises when aggregate spending exceeds what the economy can supply at existing prices. Excess demand pushes the general price level upward.

B: Inflation and deflation

Inflation and deflation change money values even if real production does not change. National-income comparisons must therefore adjust for price changes to measure real output consistently.

C: capitalism

Capitalism emphasizes private choice in production and consumption, operating through markets. This freedom is a characteristic of the model, though actual economies also impose rules.

B: variable cost

Raw materials are used up as output is produced. Their total cost normally changes with production volume, making them variable costs.

D: efficiency in the use of factors of production

More efficient use of labour, capital and other inputs can produce greater output from the same resources. Productive efficiency therefore directly influences the volume produced.

A: 18

Set 30 - 3P = 9P - 18, giving P = 4. Substituting into either equation gives equilibrium quantity 30 - 12 = 18.

C: homogeneity

Homogeneity means units of the same denomination are uniform and interchangeable. People can accept one unit as equivalent to another when making payments.

C: an increase in quantity supplied

A move upward along the same supply curve means more is supplied in response to a higher price. It is an increase in quantity supplied, not a shift of supply.

A: payments made for goods and services

Households pay firms for the goods and services they buy. This money flow travels in the opposite direction to the goods and services delivered by firms.

B: the provision of credit facilities

Deposit money banks channel funds to households and firms through credit facilities. This financing supports investment and production; currency issuance and monetary policy belong to the central bank.

C: exploitation

A monopolist may use market power to charge higher prices and restrict output. The possibility of exploiting consumers is therefore an argument against monopoly.

C: difference in their endowment of economic resources

Countries have different resources and production opportunities. These differences create relative cost advantages, allowing countries to gain by specializing and exchanging products.

A: 32

Total utility after four cups equals utility after three cups plus the fourth cup's marginal utility. Thus X = 29 + 3 = 32 units of utility.

C: diminishing marginal utility

The extra satisfaction from successive units falls from 10 to 5, 2, 1 and then 0. This pattern is diminishing marginal utility, even though total utility initially rises.

A: internal economies of scale

Internal economies of scale are cost advantages arising from expansion within the firm itself. External economies instead arise from developments outside an individual firm.

C: obtain short-term funds

Money-market instruments supply short-term funds to firms and other borrowers. Longer-term capital raising is associated with the capital market.

D: MR=MC

For an interior profit maximum, marginal revenue equals marginal cost, with the appropriate rising-cost crossing. Producing another unit then adds as much cost as revenue.

C: economic integration

ECOWAS is a regional arrangement aimed at closer economic cooperation and integration among West African states. It is not a commodity marketing board or global integration itself.

C: 32

The mode is the value occurring most often. In this list, 32 appears twice and every other value appears once, so the mode is 32.

B: 1.67

The mean is (2 + 4 + 6 + 8 + 4 + 6)/6 = 5. Absolute deviations total 3 + 1 + 1 + 3 + 1 + 1 = 10, so their average is 10/6, about 1.67.

D: fall.

Economies of scale mean average cost decreases as the scale of output increases. A firm on that part of its long-run cost curve experiences falling average cost.

A: long-term financial instruments

Life insurers channel long-term premiums into long-term assets, helping finance investment over extended periods. This matches the long duration of many insurance obligations.

A: marginal productivity of labour

In the competitive marginal-productivity model, labour demand reflects the value of the additional output from another worker. That marginal productivity helps determine the wage firms are willing to pay.

B: government

A command economy relies on central government planning to choose production methods and allocate inputs. Consumers and firms do not independently make the central planning decision.

B: % change in quantity supplied / % change in price

Supply elasticity compares the percentage change in quantity supplied with the percentage change in the good's price. It measures responsiveness along the supply curve.

C: ordinary shareholders

Ordinary shareholders receive the residual return after prior claims have been met. Their dividends and capital recovery are less protected than creditors' and preference shareholders' claims.

C: stagflation

Stagflation combines a rising general price level with weak economic activity and high unemployment. It is distinguished by inflation and labour-market weakness occurring together.

C: 70.6

Average product is total output divided by the number of input units. At five units of capital, output is 353 kg, so average product is 353/5 = 70.6 kg per unit.

B: N3.75

Equating demand and supply gives 30 - 3P = 9P - 15. Therefore 45 = 12P and P = N3.75; both quantities are 18.75.

A: income

An inferior good has negative income elasticity: its demand tends to fall when income rises and rise when income falls. This classification is defined by the income relationship.

C: 2

A partnership requires at least two partners agreeing to carry on business together. One person alone is a sole proprietor, not a partnership.

A: rise at an increasing rate

With the variable input price constant, diminishing marginal product means progressively more input is needed per extra unit of output. Total variable cost consequently rises at an increasing rate.

A: 80kg

Marginal product is the additional output from one more unit of capital. The seventh unit raises output from 483 kg to 563 kg, giving 563 - 483 = 80 kg.

C: 56

The range is the largest observation minus the smallest. Here the maximum is 71 and the minimum is 15, so the range is 56.

B: 42.0

Multiply P = (Qs + 30)/4 by 4 to obtain Qs = 4P - 30. At P = 18 this gives 72 - 30 = 42 units.

C: ratio of the two prices

At an interior consumer optimum, marginal rate of substitution equals the price ratio of the two goods. This matches the consumer's trade-off to the market trade-off.

D: fall in the inflation rate

At full employment, monetary contraction restrains aggregate demand and price pressure. In the standard model it lowers the inflation rate rather than increasing aggregate demand.

A: a change in the consumption pattern

A lasting change in the goods consumers want can reduce demand for some occupations and increase it for others. This mismatch of skills and vacancies causes structural unemployment.

B: 27 and 13

At three workers, total product is 3 × 9 = 27, which also equals 14 + 13. The fourth worker adds 40 - 27 = 13, so K = 27 and F = 13.

C: total utility

Marginal utility is the additional utility from each successive unit. Adding these increments from zero consumption gives total utility.

D: private sector.

Pure capitalism places ownership and control of productive resources in private hands. A mixed economy combines this with public-sector ownership.

D: desire to hold money in liquid form rather than investing it

Demand for money is the desired holding of liquid monetary balances rather than spending or committing the funds to other assets. It is a stock of desired balances.

D: isoquant is tangent to the isocost curve.

For an interior least-cost input combination, the isoquant is tangent to the isocost line. The technical substitution rate equals the ratio of input prices.

B: total value of visible imports and exports

The balance of trade compares the monetary value of visible goods exports with visible goods imports. Services and other international flows are recorded elsewhere in the balance of payments.

B: debt servicing

Debt servicing consists of paying the interest and principal obligations associated with a loan according to its terms. It differs from debt relief, which reduces or cancels obligations.

A: demand-pull inflation

Higher income taxes reduce disposable income and household spending, other things equal. This contracts aggregate demand and can restrain demand-pull inflation.

D: indifference curves.

An indifference map contains several indifference curves, each representing bundles yielding one level of satisfaction. Different curves represent different ranked utility levels.

D: have a very strong capital base

Recapitalization adds or strengthens a bank's capital. The direct purpose is a stronger capital base; lower lending rates or additional branches are not guaranteed consequences.

D: maintenance of stable exchange rates

Promoting exchange stability and orderly exchange arrangements is among the IMF's purposes. It is not primarily a lender to individual medium-scale firms or an infrastructure project bank.

D: exploration of crude oil.

Exploration searches for crude oil resources and belongs to the upstream petroleum sector. Refining, product marketing and distribution occur later in the chain.

A: higher the price the higher the quantity supplied

The law of supply states that, other things equal, a higher price induces a larger quantity supplied. It describes movement along a normal upward-sloping supply curve.

A: differences in natural resources endowment

Differences in resource endowments can create differences in production costs and comparative advantages. These differences help explain why countries exchange goods rather than producing everything themselves.

C: extension workers

Agricultural extension workers communicate research and practical farming methods to farmers. Training in improved techniques is a central part of this advisory role.

D: the forces of demand and supply.

In a free market, interactions between buyers' demand and sellers' supply establish prices. Neither side alone normally dictates the competitive market price.

D: maximum price.

A maximum price is a legal price ceiling. A binding ceiling can prevent sellers charging above that limit, although it may create shortages and does not guarantee sufficient supply.

D: complements

Complementary goods are used together. A lower price for K encourages its use and raises demand for Y, indicating that the two goods complement each other.

C: technology

Technology affects how much agricultural output can be produced from given inputs and therefore shifts supply. Consumer taste and income primarily affect demand.

A: 11

Ordering the eight observations gives 4, 5, 6, 10, 12, 18, 20, 20. The median is the average of the fourth and fifth values: (10 + 12)/2 = 11.

C: 24

Substitute P = 4 into Qd = 40 - 4P. Quantity demanded is 40 - 16 = 24 units.

B: weather conditions

Weather affects crop growth, yields and harvest availability. Of these choices it is the direct physical influence on farm supply; income, taste and population mainly affect demand.

A: government

In a command economy, central planning authorities decide production methods and resource allocation. The government therefore makes the central choice about how to produce.

A: 15%

The known angles total 72 + 126 + 108 = 306 degrees, leaving 54 degrees for services. Its share is 54/360 × 100 = 15%.

D: 30

Multiplying P = (Qs + 10)/4 by 4 gives 4P = Qs + 10. At P = 10, quantity supplied is 40 - 10 = 30.

B: 0.80

Using initial values, supply rises by 4/20 = 20% while price rises by 2/8 = 25%. Supply elasticity is 20%/25% = 0.8.

C: a decrease in the quantity supplied

On the usual upward-sloping supply curve, a price below equilibrium induces producers to offer a smaller quantity than at equilibrium. This is a decrease in quantity supplied.

A: 27 and 1

With three workers, total product is 3 × 9 = 27, consistent with 20 + 7. The fourth worker adds 28 - 27 = 1, so E = 27 and F = 1.

A: by specialists

Division of labour assigns separate tasks to workers who specialize in them. Specialization, rather than every worker performing the whole process, is its distinguishing feature.

B: ₦40

Total cost is fixed plus variable cost: N500 + N1,500 = N2,000. Dividing by 50 units gives average cost N40 per unit.

C: fixed costs

In the standard short-run cost classification, rent and regular administrative overhead do not vary directly with output. They are fixed costs rather than per-unit average costs.

B: stagflation

Stagflation describes inflation occurring alongside economic stagnation and high unemployment. It combines weak labour-market conditions with a rising general price level.

C: money market

The money market specializes in short-term funds and instruments. Firms seeking short-term financing can use it, whereas capital markets mainly supply longer-term finance.

B: curbing inflation

A wage freeze limits wage increases as an incomes-policy measure intended to restrain wage-cost and demand pressures on prices. Its stated aim is to curb inflation, though effectiveness depends on conditions.

D: provision of employment

Agriculture directly employs people in crop and livestock production and related activities. Providing employment is a direct economic contribution of the sector.

C: an increase in the cost of labour

Labour used in production is normally a variable input in the short run. A higher labour cost at unchanged productivity raises variable cost per unit; buildings and regular directors' salaries are usually fixed costs.

C: quotas

An import quota sets a numerical limit on the quantity of a product that may enter a country. Duties and tariffs instead impose charges on imports.

B: provide a mechanism for tariff reduction

The WTO provides a framework for negotiations on trade rules and barriers, including tariffs. Balance-of-payments lending and development-project finance belong to other institutions.

D: mixed economy

A mixed economy combines private enterprise with public-sector participation. Both sectors therefore contribute to production and economic activity.

B: 2,809

Variance is the square of the standard deviation. Squaring 53 gives 53 × 53 = 2,809, expressed in squared units of the original variable.

D: 22

Putting the nine observations in order gives 10, 14, 15, 18, 22, 28, 30, 35, 38. The fifth observation is the middle value, so the median is 22.

B: an increase in equilibrium price and quantity

With the usual upward-sloping supply curve unchanged, an outward demand shift moves the market intersection to a higher price and larger traded quantity.

A: a decrease in the quantity demanded

For a normal downward-sloping demand curve, a higher own price reduces the quantity consumers are willing to buy. This is a change in quantity demanded, not a shift of demand.

D: 2.0

Using initial values, quantity rises by 200/300 while price falls by 40/120. Dividing the percentage changes gives elasticity magnitude (200/300)/(40/120) = 2.

C: perfectly inelastic

A vertical demand curve keeps quantity fixed at Q while price changes. The quantity response is zero, so price elasticity of demand is zero, or perfectly inelastic.

B: use of goods and services

Utility means the satisfaction obtained by consuming or using goods and services. Producing or distributing them makes consumption possible but is not the definition of consumer utility.

C: 46

Substitute P = 14 into P = (Qs + 10)/4. Multiplying by 4 gives 56 = Qs + 10, so Qs = 46.

B: reduce the quantity supplied

Along an upward-sloping elastic supply curve, reducing price reduces quantity supplied. Elasticity means the percentage quantity response exceeds the percentage price change.

A: excess demand

A binding price ceiling below equilibrium raises quantity demanded and lowers quantity supplied relative to equilibrium. The resulting shortage is excess demand.

C: it widens the inequitable gap

Market demand reflects purchasing power as well as need. A price mechanism can therefore allocate more goods to those with higher incomes and preserve or widen unequal outcomes.

D: below the equilibrium price

A rent ceiling below the equilibrium rent lowers the permitted rent for covered accommodation. Such a binding ceiling may also create shortages, so lower legal rent does not guarantee availability.

A: economies of scale

Buying and transporting larger quantities can spread costs and obtain bulk savings. A fall in average cost as operations expand is an economy of scale.

A: a higher output level

Under the standard productive-input assumption, an isoquant farther from the origin represents combinations producing more output. Higher isoquants therefore correspond to higher output levels.

A: interest rate

In the standard liquidity-preference model, a higher interest rate increases the return forgone by holding money instead of bonds. Speculative demand for money therefore falls as the interest rate rises.

A: transactionary

Money held to meet ordinary household purchases serves the transactions motive. Speculative balances are instead held in response to expected changes in financial-asset prices.

B: rise

In the standard money-market model with money demand unchanged, a reduction in money supply makes liquidity scarcer. The interest rate rises to bring money demand into line with the lower supply.

A: decrease in the corporate profit tax rates

Reducing corporate profit taxes leaves firms with more after-tax funds and can stimulate expenditure and investment. It is a fiscal expansion; changing bank rates or buying securities is monetary policy.

A: long-term financial instruments

Life insurers can place long-term savings into bonds and other long-term instruments. This channels funds toward investment projects whose benefits arise over several years.

D: raw materials

Bricks require bulky clay or similar mineral inputs. Access to suitable raw materials reduces the cost of bringing these inputs to the production site, making it a key location consideration.

A: decrease in the population

Emigration means residents leave a country to live elsewhere. Other population flows unchanged, it subtracts people from that country's population.

C: the risk associated with the loan

Lenders normally charge a risk premium when repayment is less certain. Greater default risk therefore tends to raise the rate charged, other loan terms and market conditions equal.

B: frictionally unemployed

Frictional unemployment occurs while a worker searches and is matched with another job. Seeking a similar clerical position describes this job-search process without evidence of a skills mismatch.

D: positive reasoning

This statement makes a claim about the consequences of privatization that could be tested against evidence. It is positive reasoning even if the claim later turns out to be false; it does not state what ought to happen.

B: shows the relationship between variables

The sign of a slope shows the direction of the relationship: a positive slope means the variables move together, while a negative slope means they move in opposite directions.

B: N13.3 billion

Manufacturing occupies 360 - 160 - 90 - 30 = 80 degrees. Oil exceeds it by 80 degrees, so the contribution difference is 80/360 × N60 billion = N13.33 billion, approximately N13.3 billion.

D: quantity demanded

A change in the good's own price causes a movement along its demand curve, described as a change in quantity demanded. A change in demand instead means a shift of the whole curve.

D: 0.5

Using the initial values, quantity falls by 100/500 = 20% and price rises by 20/50 = 40%. The magnitude of price elasticity is 20%/40% = 0.5.

B: inelastic

Quantity falls by 8 out of 1,500 units, about 0.533%. Dividing this by the 8% price rise gives an elasticity magnitude of about 0.067, below one, so demand is inelastic.

C: utility is subjectively determined

Utility reflects each person's subjective satisfaction. Without a common interpersonal scale, one person's level of satisfaction cannot be directly compared numerically with another's.

B: reduces the quantity consumed

Marginal utility is the slope of the total utility curve. If that slope declines as consumption rises, moving back to a smaller consumed quantity gives a higher marginal utility.

D: perfectly inelastic

If quantity supplied never changes when price changes, the percentage quantity response is zero. Supply elasticity is therefore zero, which is called perfectly inelastic supply.

B: society

The invisible-hand idea describes how self-interested decisions can, under suitable competitive conditions, promote wider social interests. It is a claim about benefits to society rather than one group alone.

B: an increase in quantity supplied

With an upward-sloping supply curve, setting a price above equilibrium encourages producers to offer a larger quantity. This is movement along the supply curve, not an outward shift in supply.

C: allocate resources to most productive uses

Relative prices signal scarcity and the value of alternative uses. These signals guide resources toward uses where they are more highly valued, without guaranteeing full employment or high profits for every producer.

C: tangent to the isocost

For the standard interior least-cost choice, an isoquant is tangent to an isocost line. The marginal rate of technical substitution then equals the input-price ratio.

D: decreasing returns to scale

Returns to scale compare the percentage change in output with the percentage change in all inputs. If all inputs double but output grows by less than 100%, returns to scale are decreasing.

D: restrict entry of new firms

Exclusive rights can prevent rival firms from legally copying the protected invention or work without permission. This creates an entry barrier for the protected product rather than directly setting product quality.

D: depreciation from GNP

Net National Product is Gross National Product after allowing for consumption of fixed capital, commonly called depreciation. Subtracting depreciation turns a gross measure into a net measure.

D: N8.0m

The simple expenditure multiplier is 1/(1 - 0.75) = 4. An investment increase of N2 million therefore raises equilibrium income by 4 × N2 million = N8 million.

B: 4

With marginal propensity to consume 0.75, marginal propensity to save is 0.25. The simple multiplier equals 1/0.25 = 4.

B: 200

The price index is current basket cost divided by base-year basket cost, multiplied by 100. Here 240/120 × 100 = 200, showing that the basket now costs twice as much.

B: cash reserve ratio

The cash reserve ratio specifies the proportion of banks' deposit liabilities that must be held as cash balances with the central bank. It is distinct from the broader liquidity-asset requirement.

B: provide funds for short-term financing

The money market provides short-term borrowing and lending through instruments such as treasury bills and commercial paper. Long-term finance is principally provided through the capital market.

D: the value of a commodity

An ad valorem tax is calculated as a percentage of the value of the taxable item. A specific tax instead charges a fixed amount per physical unit.

D: capital market

The capital market supplies long-term finance through instruments such as shares and long-term bonds. This makes it the appropriate market for funding long-lived investment projects.

C: population growth rate and natural resources

Malthus compared population growth with the capacity of resources, especially food production, to support it. His concern was that unchecked population could grow faster than subsistence.

C: 30

Starting from 50 people, add 10 immigrants and subtract 25 deaths and 5 emigrants. With no births stated, the resulting total is 50 + 10 - 25 - 5 = 30 people.

A: provide funds for infrastructural development

ECOWAS supports regional development, including infrastructure finance through its development bank, EBID. Transport, energy and telecommunications projects are among the activities it finances.

B: interest

In the standard classification of factor rewards, machinery and equipment are capital, whose return is interest. Wages reward labour, rent rewards land and profit rewards entrepreneurship.

B: competitive demand

Competitive demand describes substitute goods serving a similar purpose. Choosing one can replace demand for the other, unlike complements that are used together.

C: an abnormal demand curve

The schedule shows quantity increasing as price rises. Interpreted as a demand schedule, this is an upward-sloping or abnormal demand relationship, rather than the usual downward-sloping pattern.

A: middle value in the ordered set

After an odd number of observations has been put in numerical order, one observation occupies the central position. That middle ordered value is the median.

D: rise

With the usual upward-sloping supply curve unchanged, an increase in demand shifts the demand curve outward. The new intersection occurs at both a higher price and a larger quantity.

A: MP=0

Marginal product is the change in total product from another unit of the variable input. At the interior maximum of total product, its slope is zero, so marginal product is zero.

C: 1

Price doubles from N1 to N2 and quantity supplied doubles from 60 to 120 bags. Both rise by 100%, giving supply elasticity 100%/100% = 1.

C: ratio of the two prices

At an interior consumer optimum, the marginal rate of substitution equals the price ratio Px/Py. The consumer's willingness to exchange the goods matches the trade-off imposed by the budget.

B: ordinal utility

Ordinal utility expresses an ordering of preferences rather than a numerical amount of satisfaction. Ranking consumption bundles is therefore the ordinal approach.

D: in the short-run period

The law of variable proportions studies adding a variable input while at least one other input is fixed. That fixed-input condition characterizes the short run.

B: General prices have fallen

Real income equals nominal income divided by a price index. If nominal income is unchanged but real income rises, the relevant general price level must have fallen.

A: few sellers

An oligopoly has a small number of significant sellers whose decisions can affect one another. It differs from monopoly with one seller and highly competitive markets with many small sellers.

C: AC

Economic profit equals (price - average total cost) multiplied by output. When price equals average total cost, the firm covers all economic costs and earns zero economic profit.

A: salaries and wages

Government wages pay for current labour services and form part of government purchases in national-income accounting. Pensions and other transfer payments do not pay for newly produced output.

D: fall

When planned expenditure is below current output, firms accumulate unwanted inventories. They tend to reduce production, lowering income until spending and output are brought back into balance.

A: domestic production

Import substitution encourages producing domestically goods that were previously imported. Its direct purpose is to replace foreign supply with local production.

C: exploration of crude oil

Upstream petroleum activities find and extract crude oil and natural gas. Refining and marketing processed petroleum products are downstream activities.

D: privatization

Privatization transfers ownership or control of a publicly owned enterprise to private owners. Commercialization changes how an enterprise operates without necessarily changing its ownership.

B: income per head

Optimum population is the population size that maximizes output or income per person, given resources and technology. It is defined by average material output rather than the largest total population.

A: efficient allocation of resources

Economics examines choices about scarce resources and their competing uses. Efficient allocation is the broad concern encompassing production, consumption and exchange.

D: a measure of dispersion

Standard deviation describes how widely observations are dispersed around their mean. It is a measure of spread, not a measure of central location such as the mean or median.

C: mode

The mode is the most frequently occurring value. For dress or shoe sizes, the modal size identifies the size purchased or observed most often.

B: more by producers

The less elastic side of a market bears more of a tax burden. Supply is less elastic than demand here, so producers have less ability to adjust and bear the larger share.

D: decrease

With elastic demand, the percentage reduction in quantity demanded exceeds the percentage increase in price. Total revenue, price multiplied by quantity sold, therefore falls.

B: utility can be ranked

Ordinal utility assumes consumers can rank bundles by preference. It does not require satisfaction to be measured in numerical utility units or permit inconsistent preferences.

A: the slope of a normal demand curve is negative

As consumption rises, the additional satisfaction from another unit normally falls. In the standard utility model, a lower price is then needed to induce purchase of additional units.

D: fairly elastic

A supply elasticity greater than one means quantity supplied changes by a larger percentage than price. Supply is relatively or fairly elastic, without necessarily being perfectly elastic.

C: jointly supplied

A by-product is produced alongside the main product in the same process. Increasing production of the main product also makes more of the by-product available, so the goods are jointly supplied.

D: market

In perfect competition, the interaction of total market demand and supply establishes price. Each individual firm accepts that price because it is too small to control the market.

C: diseconomies of scale

A rising long-run average cost curve means that expanding the scale of production raises average cost. This is the definition of diseconomies of scale.

C: slopes downwards

In the standard factor-demand model, firms demand more of an input when its price falls, other things equal. The resulting factor-demand curve slopes downward.

C: medium of exchange

Money as a medium of exchange lets people specialize and then trade their output for what others produce. It removes the need to find a barter partner with exactly matching wants.

A: increase money supply in the economy

A central bank purchase of treasury bills pays money to the sellers and adds liquidity to the banking system. This is an expansionary open-market operation that supports an increase in money supply.

C: Nominal GDP / Money supply

Income velocity measures nominal spending per unit of money. It is nominal GDP divided by the money supply, consistent with the identity MV = PY.

C: granting loans to customers

Commercial banks provide credit to customers and businesses. Issuing currency and setting monetary policy are central-bank functions rather than ordinary commercial-bank functions.

C: concentration of firms of an industry

Localization means firms in the same industry are concentrated geographically. It differs from merely locating a single firm near its customers.

D: 80%

In 2002 the working population is 32 thousand out of 40 thousand people. The proportion is 32/40 × 100 = 80%.

B: credit on Japan's balance of payments

Selling vehicles to Nigeria is an export for Japan. Export receipts enter as a credit in Japan's goods account within the balance of payments; Nigeria records the corresponding import debit.

C: promote economic and social development of member countries

The African Development Bank supports economic and social development in its member countries. Its development remit is broader than short-term lending or assistance only to the poorest members.

B: demand curve to the right

Advertising aims to persuade more consumers to buy the firm's differentiated product at each price. Successful advertising therefore shifts the firm's demand curve to the right.

A: 5

Substituting C = 0.8Y into Y = C + I gives 0.2Y = I, so Y = 5I. A one-unit increase in autonomous investment therefore produces a five-unit increase in equilibrium income.

D: maintain a stable price system

A central bank supports economic activity by pursuing monetary and price stability. Lending directly to ordinary customers and processing their routine cheques are commercial-banking activities.

B: mobilize saving for investment

Non-bank financial intermediaries collect savings and channel them into investments. Their role links savers with users of funds without requiring them to operate as deposit-taking commercial banks.

B: obtain long-term funds

The capital market channels long-term finance to businesses through instruments such as shares and long-term bonds. Short-term borrowing belongs to the money market.

A: The Central Bank of Nigeria

The Central Bank of Nigeria formulates and implements monetary policy. Deposit insurance and stock-market operations serve different functions from setting monetary policy.

C: measures production within the country during a particular period

GDP measures production within a country's territory during a period. GNP adds net primary income from abroad to GDP, so the domestic location of production is the relevant distinction.

C: product differentiation

Monopolistic competition involves differentiated products, giving each seller some influence over its own price. Perfect competition assumes homogeneous products, despite both models having many buyers and sellers.

A: refining and distribution

Downstream petroleum activities process crude oil into usable products and move those products to users. Refining and distribution belong downstream; exploration and drilling are upstream activities.

B: the distribution chain

Distribution is the process of moving goods and services from producers to final consumers. The distribution chain includes the intermediaries and channels through which those products pass.

D: plan her growth and development

A census supplies population counts and characteristics needed to plan schools, health services, housing and other development. Counting the population supports broader planning, not merely a single financial flow.

D: ensure an upper limit to the wages payable

Maximum-wage legislation sets a ceiling on permitted wages. The defining feature is an upper limit, whether or not that limit is below the market wage and therefore binding.

D: manufacturers

Manufacturers use imported industrial inputs in production. A concession on import duties lowers their direct input costs; any later benefit to consumers depends on how firms adjust prices.

C: natural growth rate

Natural population growth is births minus deaths, excluding migration. When birth and death rates use the same population base, their difference gives the rate of natural increase.

B: revenue and expenditure

Fiscal policy uses government taxation and spending to influence aggregate demand. Changing money supply is monetary policy; government revenue and expenditure are the fiscal instruments.

B: savings

Government borrowing can compete with private borrowers for available funds. More saving expands the supply of loanable funds, reducing the upward pressure on interest rates and the resulting crowding out.

D: quotas

An import quota places a numerical or quantity limit on how much of a commodity may be imported. It controls volume directly, unlike a tariff that adds a charge to imports.

C: Inflationary gap

An inflationary gap exists when planned aggregate expenditure exceeds the value of output at full employment. With limited spare capacity, excess spending puts upward pressure on prices.

B: VAT

Value added tax is collected through successive stages of production and distribution, with credit for eligible tax already paid on inputs. This makes it the multi-stage consumption tax described here.

D: balance of trade

The balance of trade is the difference between the value of merchandise exports and imports. It covers visible goods trade, whereas the balance of payments also records services, income and financial transactions.

C: retailer to the consumer

The distribution process finishes when the retailer delivers the commodity to the final consumer. Transfers between producers, wholesalers and retailers are earlier stages in bringing it to the user.

C: reduce price

With elastic demand, a percentage reduction in price causes a larger percentage increase in quantity demanded. Over the elastic portion of the demand curve, lowering price therefore increases total revenue.

B: mid-position when the values are arranged in ascending or descending order

The median is the central value after the observations have been ordered. For an even number of numerical observations, it is the average of the two central values.

A: 2 units of rice

Moving from K to L increases beans from 15 to 20 units but reduces rice from 19 to 17 units. The sacrifice, and therefore the opportunity cost of the move, is 2 units of rice.

D: utility can only be ranked

Ordinal utility describes preferences by ranking alternatives, without assigning measurable amounts of satisfaction. A consumer may prefer one bundle to another without saying how many units of utility it provides.

C: N44.00

At Q = 20, total cost is 160 + 36 × 20 = N880. Average cost is total cost divided by output: 880/20 = N44 per unit.

A: jointly supplied

Jointly supplied goods are produced together. A higher price for X encourages more production of X and, as part of the same production process, also increases the supply of Y.

B: a variable cost

Cotton is a raw material consumed as textiles are produced. Producing more textiles normally requires more cotton, so its total cost varies with output rather than remaining fixed.

A: fairly inelastic

Using initial values, quantity falls by 10/200 = 5%, while price rises by 3/5 = 60%. Elasticity magnitude is 0.05/0.60, about 0.083, below one. Demand changes but is relatively inelastic.

B: relates to value judgment

A normative statement expresses a value judgement about what ought to happen. A positive statement instead describes a claim that can, in principle, be tested against evidence.

C: consumption

Utility means the satisfaction a consumer obtains from consuming a good or service. Production and distribution make goods available, but consumption is the activity from which this satisfaction is derived.

B: a rise in price

An outward shift of demand with an unchanged upward-sloping supply curve creates excess demand at the old price. Buyers' competition raises the equilibrium price.

C: is an upward-sloping curve

A positive relationship means that higher values of one variable are associated with higher values of the other. Its graph slopes upward; it need not be a straight line.

A: an outward shift of the demand curve

An inferior good has negative income elasticity: demand increases when real income falls, other things equal. This is an outward shift of the demand curve rather than a movement caused by its own price.

B: public ownership and control

In a centrally planned economy, public authorities direct resource allocation and production. Public ownership and control therefore provide the defining emphasis among these choices.

C: different sizes of plants are built

The long-run average cost curve compares the lowest average costs achievable at different output levels when plant size can change. It helps a firm choose among different scales of production.

D: value of its output and inputs purchased from other firms

Value added is the value of a firm's output minus the value of intermediate goods and services bought from other firms. Subtracting all production costs instead would give a profit measure.

D: Traded on a recognized stock market

A listed security has been admitted to a recognized stock exchange under that market's listing rules. Listing concerns eligibility for exchange trading, not whether the instrument is short-term debt.

B: a financial instrument that is readily convertible to cash

Near money consists of liquid financial assets that can be converted into money readily but are not themselves the ordinary means of payment. Ready convertibility distinguishes the best definition here.

C: debt instruments provided are long-term or short-term

Money markets deal primarily in short-term financial instruments, while capital markets provide longer-term finance. The maturity of the instruments is the relevant distinction.

C: share revenue between the different tiers of government

A revenue allocation formula distributes public revenue among levels of government, such as federal, state and local authorities. It determines their shares rather than dividing revenue between private firms and government.

A: relative elasticities of demand

The trade-balance response to devaluation depends on how strongly export and import quantities respond to price changes. Demand elasticities determine whether those volume changes outweigh the price effects.

C: development of infrastucture in member nations

IBRD finances development through loans and other support to member-country governments, including infrastructure projects. Short-term balance-of-payments support is principally associated with the IMF.

D: the possibility of conflict in management is virtually non-existent

A sole proprietor makes the ownership decisions alone, avoiding disagreements between partners over management. This does not remove business risk or give the proprietor limited liability.

C: nature of the goods and services to be provided

Capital expenditure acquires or improves assets that provide benefits over time; recurrent expenditure funds ongoing operations. The nature of what is purchased is the key distinction.

D: real per capita income

Real income per person adjusts national income for both population size and price changes. It is therefore more useful than total or nominal income for comparing average material living standards.

B: public corporations

A public corporation is a statutory body created by legislation to carry out specified public or commercial functions. The founding Act defines its powers and responsibilities.

C: opportunity cost is least

Comparative advantage means producing a good at a lower opportunity cost: fewer units of other output must be sacrificed. It differs from absolute advantage, which concerns input productivity.

D: reduce the disposable income

Disposable income is income remaining after direct personal taxes. Holding gross income constant, an increase in personal income tax leaves households with less income available to spend or save.

B: derived demand

Firms hire workers because labour helps produce goods and services demanded by customers. Demand for labour is therefore derived from demand for the output it helps create.

C: a craft union

A craft union organizes workers who share a particular trade or skill, potentially across different employers. An industrial union instead groups workers across occupations within an industry.

A: rotate outwards away from the origin

The maximum affordable amount of P rises because income buys more P, while the intercept for Q is unchanged. The budget line therefore pivots outward around the Q intercept instead of shifting outward in parallel.

D: Expectation of a future change in price

If people interpret a current price rise as a signal of further increases, they may buy more now to avoid higher future prices. These changing expectations can produce an observed exceptional price-demand pattern; they alter the usual other-things-equal setting.

B: 144°

A complete circle contains 360°. Children's 40% share therefore occupies 40/100 × 360° = 144°. The remaining shares account for 126° and 90°, and all three angles add to 360°.

A: state command

A centrally planned economy assigns major production decisions to the state planning authority. The plan specifies output priorities and resources, whereas relative market prices principally guide decentralised choices in a market economy.

B: derived demand

Factors such as labour and machinery are demanded because they help produce goods or services that buyers want. Their demand is therefore derived from demand for the output rather than being final consumer demand.

A: Poverty, low literacy and low income

Low income, widespread poverty and limited literacy are commonly used indicators of low development. They concern material resources and human capabilities. Development assessment uses several indicators because no single measure captures every aspect of wellbeing.

B: public finance

Public finance studies government revenue, expenditure and financing, including taxation and borrowing. Public revenue and public expenditure each cover only one side, while a budget is a particular plan for those finances.

B: structural unemployment

When a locality depends heavily on one industry, a lasting decline in that industry's demand or technology can leave workers with skills unsuited to available jobs. This concentration increases exposure to structural unemployment.

D: decrease steadily

As development proceeds, rising productivity in agriculture and expanding industry and services commonly reduce agriculture's share of total employment. Agricultural output can still grow even while its percentage of the labour force declines.

A: supply curve

A competitive firm chooses output where price equals marginal cost, provided price covers average variable cost. The rising marginal-cost section above minimum average variable cost therefore traces its short-run supply curve.

C: external economies of scale

External economies of scale are benefits a firm receives from improvements outside itself, such as industry-wide training, shared suppliers or infrastructure. Internal economies instead arise from the firm's own expansion and organisation.

A: Tends to decrease continuously

Average fixed cost equals total fixed cost divided by output. With fixed cost unchanged, spreading it over more units continuously lowers cost per unit. For positive fixed cost it approaches zero as output grows but does not become zero at finite output.

A: a competitive market structure

Deregulation removes or relaxes restrictions on market activity, often aiming to facilitate entry and competition. Whether it actually increases competition depends on the industry and remaining market power, but competition is the stated economic objective in this comparison.

B: raise the price of the commodity and affect the quantity in an indeterminate way

An increase in demand pushes equilibrium price upward, and a decrease in supply also pushes price upward. Their quantity effects oppose each other, so the net quantity change depends on the sizes of the two shifts.

D: marginal cost curve

For a competitive firm, the relevant rising section of marginal cost above minimum average variable cost determines short-run supply. At each viable market price the firm chooses the quantity for which marginal cost equals that price.

A: intersection of the marginal cost and marginal revenue curves

A monopolist's interior profit-maximising output is found where marginal revenue equals marginal cost, with marginal cost crossing from below. The price is then read from demand at that output; maximising revenue alone does not generally maximise profit.

A: Supply of and demand for labour

In the competitive labour-market model, equilibrium wage occurs where labour supplied equals labour demanded. Unions and government policies can influence actual wages, but the market equilibrium itself is defined by the intersection of supply and demand.

A: wholesalers and retailers

Wholesalers buy goods in bulk and supply retailers, who sell smaller quantities to final consumers. Both therefore act as intermediaries between producers and consumers.

C: an increase in output-input ratio

Labour productivity is output divided by labour input. More output from each unit of labour raises the output-input ratio, indicating improved efficiency.

D: gentle and persistent increase in the general price level.

Creeping inflation is a slow, continuing rise in the general price level. Its defining features are a modest pace and persistence, rather than a rapid rise or a temporary price movement.

D: 2.5

In the simple closed-economy expenditure model, the multiplier is 1/(1 - MPC). With MPC = 0.6, it equals 1/0.4 = 2.5. Average propensity to consume does not enter this formula.

C: contractionary fiscal policy

Contractionary fiscal policy reduces aggregate demand through lower government spending or higher taxes. This helps restrain inflation caused by spending exceeding the economy's productive capacity.

C: give protection to bank depositors

Deposit insurance protects depositors against loss when an insured institution cannot repay deposits, subject to the scheme's coverage. Protecting bank depositors is therefore the relevant objective.

C: demand to hold money as assets rather than as stocks

Liquidity preference is the desire to hold wealth in money rather than less liquid financial assets. Precautionary needs are one motive, but the broader demand to hold money is the best definition.

A: complementary

For direct barter to work, each trader must want what the other is offering. Their wants must therefore complement each other, creating the double coincidence needed for the exchange.

A: existing shares

The stock exchange provides a secondary market where investors buy and sell already-issued shares. Issuing new shares to raise capital belongs to the primary market.

C: to their best alternative uses

The price system guides resources towards alternative uses according to demand and relative scarcity. The standard efficient-allocation result assumes appropriate competitive conditions; a price system does not automatically eliminate poverty or deliver every welfare objective.

B: equal to the slope of the budget constraint line

At an interior optimum, the highest attainable indifference curve is tangent to the budget line. Their slopes are equal: the consumer's marginal rate of substitution matches the price ratio. Corner solutions require separate consideration.

D: an increase in the quantity supplied.

A rise in the good's own price causes movement along an ordinary upward-sloping supply curve, increasing quantity supplied. A change in supply means a shift of the entire curve due to another determinant, such as costs or technology.

C: Uses the scientific method in the study of human behaviour

Economics studies human choices and interactions and uses systematic models, observation and evidence to investigate them. That combination of social subject matter and scientific inquiry makes it a social science.

B: inductive reasoning

Inductive reasoning moves from particular observations towards a general conclusion or pattern. Deductive reasoning starts from general premises and derives a more specific conclusion that follows from them.

C: A decrease in long-run average cost

Internal economies of scale arise from expanding a firm's own operations, such as greater specialisation or spreading overhead costs. They lower long-run average cost as the firm increases its scale, rather than describing a movement along one fixed short-run plant curve.

B: marginal revenue

At an interior profit maximum, the monopolist chooses output where marginal cost equals marginal revenue, with the appropriate crossing condition. Because a monopolist faces downward-sloping demand, marginal revenue is generally below price.

B: varies all its inputs

The long run is a planning period in which all factors of production can be varied, including plant and equipment. It does not mean the firm must replace every input or source them all internally.

B: there is adequate knowledge of existing prices

Perfect competition assumes buyers and sellers have adequate information about relevant prices and market conditions. Individual firms are price takers, and entry, exit and resource movement are not restricted as part of the basic model.

C: Quantity demanded will increase.

The lower controlled price leads buyers to demand more along the existing demand curve. Sellers generally supply less, creating excess demand or a shortage. The increase in desired purchases is not necessarily an increase in the amount actually sold.

D: N80

Equilibrium occurs where quantity demanded equals quantity supplied. At N80 per dozen, both are 490 dozen, so the market clears at that price. Higher listed prices give excess supply and lower listed prices give excess demand.

C: Rent on a building

Rent on a building is typically fixed over the relevant short-run lease period: it must be paid even when output changes. Fuel and production-related transport generally vary with activity; electricity may include both fixed and variable elements.

D: not limited to the amount invesled.

A sole proprietor bears unlimited liability for business obligations. If business assets are insufficient, personal assets may also be at risk, so the possible financial loss is not limited to the original amount invested in the business.

B: group of firms producing related commodities

An industry is a group of firms producing the same or closely related goods or services. A single firm is one business within that group, while a collection of unrelated producers does not define one industry.

C: Long-term securities

Capital markets provide longer-term finance through instruments such as shares and long-term bonds. Treasury bills, commercial paper and bankers' acceptances are conventionally short-term money-market instruments.

D: Capital consumption

Net national product equals gross national product minus consumption of fixed capital, commonly called depreciation. Subtracting the wearing out or using up of productive capital converts the gross measure into a net measure.

D: a contractionary monetary policy.

A higher discount rate makes borrowing from the central bank more expensive. In the standard policy framework this tends to restrain bank borrowing and credit expansion, signalling contractionary monetary policy.

A: Continued training of workers

Training develops workers' skills and knowledge, helping them use equipment and methods more effectively. It can raise output per worker and improve quality. Nationality or routine retirement alone does not establish greater labour efficiency.

D: Federal, state and local governments

The distribution is among the three tiers of government: federal, state and local. These are territorial levels of government, unlike the executive, legislature and judiciary, which are branches exercising different governmental functions.

D: growth in population more sustainable

Reducing a high fertility rate can slow population growth and help it become more consistent with available resources and services. It does not aim to make one sex outnumber the other or to impose equality between male and female population totals.

A: deficit budget

A budget deficit arises when government spending exceeds its revenue. If the gap is financed by borrowing, it adds to public debt. A surplus provides resources that can instead be used to repay debt or build assets.

A: its value is unstable

A store of value should preserve purchasing power reasonably reliably over time. If money's value is unstable, people may prefer other assets for saving. Transferability and divisibility help its usefulness but do not by themselves undermine its role as a store of value.

B: social costs

National output measures can omit or fail to deduct social costs such as pollution and congestion caused by production. Output may rise while these costs reduce wellbeing, which is one reason GNP alone is an incomplete measure of social welfare.

C: nations are substantially different in their endowments of economic resources

Countries differ in resources, technology and production opportunities, leading to different opportunity costs. Trade allows them to benefit from those differences. Cross-border movement of production factors is not required for goods trade to create gains.

B: allocation of resources to alternative uses

Economics studies how scarce resources are allocated among competing uses. Household and firm behaviour belongs to microeconomics, while aggregates such as inflation belong to macroeconomics; the broader allocation idea encompasses both.

A: I, II and III

Every economic system must decide what to produce, which methods and inputs to use, and who receives the output. These are the basic what, how and for-whom questions represented byI,II andIII.

C: relative prices

Relative market prices communicate which goods are more highly valued relative to their costs and alternatives. Producers respond to these signals when deciding what to make in a capitalist economy. A central planner is the allocation authority in a planned system instead.

B: Labour

Demand for labour is derived from demand for the goods and services workers help produce. Firms hire workers because their work contributes to output that can be sold, rather than because labour itself is usually the final consumer good.

C: −0.6

Demand for Y changes by(20 − 50)/50 = −0.6, while X's price changes by(50 − 25)/25 = 1. Cross elasticity is−0.6/1 = −0.6. The negative sign indicates that a higher price of X reduces demand for Y.

D: complements.

Demand for Y falls when the price of X rises, giving negative cross elasticity. This is the usual relationship between complementary goods used together. Substitutes would normally show an increase in demand for Y when X becomes dearer.

C: MC = AR = P

A price-taking firm has average revenue and marginal revenue equal to market price. At an interior profit maximum, marginal cost equals marginal revenue and crosses it from below. Thus MC = AR = P; total revenue and total cost need not equal these per-unit values.

C: 24

Marginal product is the increase in total output caused by one additional unit of the variable input. Moving from three to four units raises total product from 24 to 48, so X = 48 − 24 = 24.

D: 15.5

Average product is total output divided by the amount of variable input. With six units of input, total product is 93, so Y = 93/6 = 15.5 units of output per unit of input.

C: N40

Total cost is N5,000 + N15,000 = N20,000. Dividing by 500 units gives N40 per unit. Using variable cost alone would omit the fixed costs that also contribute to average total cost.

A: slope of the tangent to the curve at any given output

Marginal cost measures how total cost changes with output. On a smooth total-cost graph, this is the slope of the tangent at the chosen output. A line from the origin instead relates total cost to output and gives average cost.

B: marginal cost and marginal revenue be equal

For an interior profit-maximising competitive output, marginal cost equals marginal revenue, with the appropriate upward crossing. The firm also considers whether price covers average variable cost when deciding to operate in the short run.

D: maximum.

Marginal revenue is the change in total revenue from selling an additional unit. At the usual peak of the total-revenue curve its slope is zero, so marginal revenue is zero. Beyond the peak marginal revenue becomes negative and total revenue falls.

B: inelastic

When a larger harvest expands supply along an inelastic market demand curve, price falls proportionately more than quantity sold rises. The price reduction outweighs the extra sales, so total farmers' revenue can fall despite greater output.

A: Ratio of the dependent to the working-age group

Age distribution identifies the shares in dependent and working-age categories. Those shares are used to calculate an age-dependency ratio. Age counts alone do not establish the sex ratio or marital status of the population.

B: marginal revenue product of labour

Marginal revenue product is the additional revenue generated by one more unit of labour. Hiring is worthwhile while that extra revenue exceeds the wage. At an interior optimum, the wage equals marginal revenue product, with further hiring no longer adding profit.

A: Breaking bulk

Wholesalers buy large quantities from producers and divide them into smaller lots that suit retailers and other business customers. This breaking-bulk service links large-scale production to the quantities needed further down the distribution chain.

C: Income, output and expenditure

National income can be measured through the income earned in production, the value of output produced, or expenditure on final output. Properly defined, these are three ways of measuring the same underlying economic activity.

D: Unpaid household services

Much unpaid household work contributes to wellbeing but is outside conventional national-output measurement. Excluding it limits the usefulness of GNP as a welfare measure. Government purchases and paid wages are generally included in the relevant production accounts.

A: lower interest rates

In the standard liquidity-preference model, an increase in money supply with money demand otherwise unchanged lowers the interest rate needed to balance the money market. This is a model result, not a guarantee that every monetary expansion lowers all interest rates.

C: fairness of the tax

Whether a tax is fair involves a value judgement about how burdens ought to be distributed. That is a normative question. Measuring a tax rate or investigating its effect on work incentives can instead be positive, evidence-based analysis.

C: internal and external debts

Public debt includes domestic or internal borrowing and foreign or external borrowing. Loans from particular international institutions are only part of external debt, so naming those institutions alone does not cover the full composition.

D: £0.12 = N1.00

Equate the two prices: £60 corresponds to N500. Dividing both sides by 500 gives £60/500 = £0.12 for N1. This is the rate implied by the stated prices, not a current market exchange-rate quotation.

C: reap the benefit of a cartel

Producer coordination can give members collective benefits that an individual producer could not obtain alone. OPEC coordinates member petroleum policies and seeks market stability and steady producer income. Membership does not give Nigeria unilateral control of world prices.

C: N4,670

Total pay is 3 × N5,500 + 4 × N3,300 + 2 × N5,000 + N7,000 = N46,700. There are 3 + 4 + 2 + 1 = 10 employees, so the mean is N46,700/10 = N4,670 per employee.

C: the house

Opportunity cost is the next-best alternative forgone. Because Abubakar chooses the car instead of the house, the house is what he gives up. The purchase price and running cost are money costs, which are distinct from identifying the forgone alternative.

A: increasing relative costs

The usual bowed-out production possibility frontier reflects increasing opportunity cost: producing more of one good requires giving up progressively more of the other. This occurs when resources differ in suitability for the two activities; constant opportunity cost would give a straight frontier.

D: value judgements

Normative economics makes value judgements about what ought to happen, such as which policy is fair or desirable. Positive economics instead describes or explains what happens and develops claims that can be tested against evidence.

B: Government decisions

In a planned economy, the central planning authority makes the main decisions about which goods and services to produce. Consumer preferences may inform planning, but they do not allocate resources primarily through decentralised market prices.

D: increasing returns to scale.

When output can increase more than proportionately as all inputs expand, unit costs can fall. This is associated with increasing returns to scale and the downward part of long-run average cost. Diminishing returns to one variable input is a short-run concept.

A: allocate scarce resources among competing uses

Relative prices signal scarcity and help coordinate buyers' and sellers' decisions. They guide resources among competing uses. This allocation role does not guarantee equal incomes or remove every technological and resource constraint.

B: 6,250,000

Tertiary production consists of services. Add transport and communication 2,000,000, distribution 3,000,000 and administration 1,250,000 to obtain 6,250,000 people. Agriculture and mining are primary activities, while manufacturing and construction are secondary.

D: heterogeneity of products.

Product differentiation means sellers offer goods that buyers regard as different, giving firms some influence over their own prices. This is one source of imperfect competition. Perfect competition instead assumes a homogeneous product among sellers.

B: Taker

An individual perfectly competitive firm is too small to influence the market price. It accepts that price and chooses its output accordingly, so it is a price taker rather than a price maker.

C: N35

Total cost equals fixed cost plus variable cost: N1,000 + N2,500 = N3,500. Dividing by 100 units gives average total cost of N35 per unit. Both types of cost must be included.

C: It limits opportunities for large-scale agricultural production

Scattered small plots can make mechanisation and coordinated large-scale operations difficult. Fragmentation can therefore limit economies of scale in farming. This explains a possible effect of that tenure arrangement rather than attributing every agricultural difficulty to land ownership.

B: encourage the production and processing of export commodities

An export processing zone is intended to encourage production and processing for external markets, often through infrastructure and special operating arrangements. Being near a port or handling imported inputs can support that purpose but is not its primary objective.

D: Shell-BP

Shell's Nigerian operation drilled the successful Oloibiri well in 1956. Its historical timeline records the name Shell D'Arcy at the January discovery and the change to Shell-BP in April 1956. Shell-BP is therefore the company represented among these options.

A: external economies

External economies arise from an industry's or locality's wider development, such as a shared skilled labour pool, specialised suppliers and transport links. These benefits can reach several nearby firms, unlike internal economies arising from a single firm's own expansion.

C: a situation in which local industries are set up to produce goods formerly imported

Import-substitution industrialisation develops domestic industries to make goods previously imported. Its defining feature is replacing foreign production with local production, not merely banning imports or distributing industry evenly among regions.

A: per capita output is maximized

Optimum population is the population size that maximises output per person for given resources and technology. It is not necessarily the size at which total output is highest, and it does not require zero population growth.

B: an economic rent

Economic rent is the part of a factor's payment above its transfer earnings, the minimum required to keep it in its present employment. The worker's excess above that minimum is therefore economic rent.

B: N19,000 million

Add income earned from current production: wages 9,000 + salaries 7,000 + rent and interest 1,500 + profits 1,500 = N19,000 million. Pensions and unemployment or social benefits are transfers and are excluded from this factor-income total.

C: accept demand deposits

In the standard bank/non-bank distinction, non-bank intermediaries can provide finance or sell investment products but do not operate ordinary demand-deposit current accounts used for payments. Some accept other forms of savings, so excluding all deposits would be too broad.

A: Cost-push inflation

Higher input prices raise firms' production costs and can reduce aggregate supply, putting upward pressure on output prices. Inflation originating from that cost increase is cost-push inflation, rather than inflation initially caused by excessive aggregate demand.

D: inverse.

Money's value in terms of goods and services is its purchasing power. As the general price level rises, a fixed amount of money buys less; when prices fall it buys more. The relationship is therefore inverse.

B: revenue and expenditure of government

Fiscal policy changes government revenue and expenditure, especially taxation and public spending. Open-market operations and changes in money supply are monetary-policy instruments rather than the definition of fiscal policy.

D: demand is perfectly elastic.

Perfectly elastic demand is horizontal: buyers will not pay more than the given price. A tax therefore lowers the net price received by sellers rather than raising the buyers' price, with quantity adjusting. Sellers bear the tax in this limiting case.

A: comparative advantage

Comparative advantage means a lower opportunity cost of producing a good. Countries can gain by specialising according to relative opportunity costs and exchanging, even when one country has an absolute productivity advantage in every good.

C: economic prosperity for the country

More favourable terms of trade mean a country's exports can buy more imports per unit exported. This increases its trading purchasing power and can support national welfare, although overall prosperity also depends on production, trade volumes and distribution of the gains.

C: 230 units

Total utility from three units is the sum of the marginal utilities of those units:100 + 80 + 50 = 230. The fourth unit's marginal utility of 20 is excluded because only three units are consumed.

C: 16 percentage points

In 1990 the dependent groups account for 38% + 20% = 58%, while the active group accounts for 42%. Their difference is 58 − 42 = 16 percentage points. This subtraction compares population shares; a dependency ratio would instead divide the dependent share by the active share.

A: there is at least one fixed factor

In the short run at least one factor of production is fixed, while other inputs can vary. Output may still change by adjusting the variable factors. In the long run the firm can vary all factors, including its scale of plant.

A: Permits exploitation of economies of scale

Specialisation can allow workers and firms to concentrate on particular tasks, develop expertise and use specialised equipment. At sufficient scale this can reduce unit costs, allowing economies of scale and improving economic performance.

C: Average product curve will rise as long as marginal product is greater than average product

Marginal product is the extra output from an additional unit of input. When that addition is above the existing average, it pulls average product upward. Average product falls when marginal product is below it, and the two are equal at the usual maximum of average product.

B: N1.20

At 200 units, total cost is fixed cost plus variable cost: N100 + N140 = N240. Average total cost is total cost divided by output, N240/200 = N1.20 per unit. Variable cost alone would omit the fixed-cost contribution.

B: Long-run average cost

Economies of scale mean that long-run average cost falls as output expands. Total cost may still rise because the firm is producing more units, but the cost per unit decreases over that range of output.

D: 25.00%

Elasticity magnitude equals the percentage change in quantity divided by the percentage change in price. Rearranging gives the quantity-change magnitude as 2.5 × 10% = 25%. For ordinary downward-sloping demand, quantity changes in the opposite direction to price.

C: Infinite

A perfectly competitive firm is a price taker facing a horizontal demand curve at the market price. It can sell its chosen output at that price but loses buyers if it charges more. Its own demand is therefore perfectly elastic, described as infinite elasticity.

C: Co-operative society

A co-operative is organised to meet the common economic or social needs of its members, such as obtaining supplies or marketing produce. It may earn a surplus, but member service is central rather than maximising returns to outside investors.

D: Supporting services that encourage economic activities

Infrastructure provides supporting systems such as roads, electricity, communications and water. Shortages in those services can increase business costs and restrict economic activity even where natural resources and individual industries exist.

D: Encouragement of the production of export commodities

Export promotion aims to increase production and sale of goods or services to foreign markets. Processing raw materials can support that aim, but it is only one possible means rather than the full definition of the policy.

B: Wasting asset

Petroleum is a wasting asset because extraction reduces a finite underground stock. It does not regenerate on the timescale of normal economic activity, unlike a resource that can be replenished through sustainable production.

A: It varies inversely with the price level

The purchasing power of money is inversely related to the price level. If the same basket doubles in price, a fixed sum buys half as much. A fall in the general price level therefore raises, rather than lowers, the purchasing power of money.

D: N2 100

Required reserves are 30% × N3,000 = N900. Subtracting them from the initial deposit leaves N3,000 − N900 = N2,100. This is the amount available from this deposit in the exercise, not the total potential deposit expansion of an entire banking system.

A: Fiduciary issue

A fiduciary issue is the part of a banknote issue backed by securities rather than gold. Seigniorage concerns the income or benefit from issuing money, while legal tender describes a currency's legal payment status rather than the assets backing it.

B: An increase in the level of aggregate demand

Government purchases are a component of aggregate demand, conventionally written C + I + G + net exports. Other things equal, increasing G therefore increases aggregate demand. Any resulting tax-revenue change depends on subsequent economic activity and tax rules.

C: Elasticity of demand and supply of the commodity

Tax incidence depends on the relative responsiveness of buyers and sellers. The less elastic side of the market bears more of the burden because it has less ability to change quantity in response to price. Both demand and supply elasticity therefore matter.

A: Run a budget surplus

A budget surplus means government revenue exceeds expenditure. In the standard demand-management comparison it withdraws more purchasing power than government injects, helping restrain demand-pull inflation. Its actual effect depends on how the surplus is achieved and the state of the economy.

B: Gift to a children's home

A transfer payment is made without receiving a current good or productive service in return. A charitable gift is therefore a transfer. Wages, rent and dividends are associated with labour, property or ownership income rather than an unrequited gift.

D: Increase the real per capita income

Higher real income per person can expand the goods and services available to the average individual and improve material living standards. Growth in total money spending alone may only reflect higher prices, while redistribution is a separate policy objective.

A: Imported and exported goods

Visible trade means trade in physical goods. Its balance is the value of merchandise exports minus merchandise imports. Services belong to invisible trade and do not form part of the visible-trade balance.

D: The aggregate of the balance of trade and the invisible balance must be positive

In the traditional trade-account presentation, the current-account balance combines visible trade with the invisible balance, including services and other current receipts and payments. A surplus means the combined balance is positive; neither goods nor services must individually be in surplus.

A: UNO

The Economic Commission for Africa was established in 1958 by the United Nations Economic and Social Council. It is a UN regional commission supporting economic and social development and cooperation in Africa, rather than an institution created by ECOWAS or the IMF.

C: marginal utility derived per naira spent is the same for all the goods and services

At an interior consumer optimum, the marginal utility obtained from the last naira spent is equal across the goods purchased. If one good offered more extra utility per naira, shifting spending towards it would increase satisfaction without increasing the budget.

A: inconsistent

Transitive preferences would imply that someone who prefers bananas to pawpaw and pawpaw to oranges also prefers bananas to oranges. Preferring oranges to bananas instead creates a cycle, so the stated preferences are inconsistent with transitivity.

A: resources are directed by the price mechanism

In a free market, prices guide buyers' and producers' decisions and help direct resources towards different uses. This is the defining coordination mechanism; central bureaucratic allocation describes a planned system instead.

D: underpopulated

In optimum-population theory, an underpopulated country has too few people to make the best use of its resources and technology. Additional population can then raise output per person, giving increasing returns as the country moves towards its optimum population.

A: Dependency ratio is high

The two dependent age groups total 45% + 30% = 75%, leaving 25% in the intervening age group. The age-dependency ratio is 75/25 × 100 = 300 dependants per 100 working-age people, which is high. This age-based measure does not identify each person's actual employment.

C: Output to worker-hours

Labour productivity measures output produced per unit of labour input. Dividing output by the worker-hours used gives output per worker-hour. Reversing the ratio measures labour input required per unit of output instead.

D: Average variable cost

A firm can continue producing in the short run if its price covers average variable cost at the chosen output. Revenue then covers variable costs and may contribute towards fixed costs, which remain payable even if the firm temporarily shuts down.

A: 20 and 80

At equilibrium quantity demanded equals quantity supplied: 120 − 2 p = 4 p. Hence 6 p = 120 and p = 20. Substituting back gives Q = 4 × 20 = 80, which also equals 120 − 2 × 20.

B: only the price will increase

Perfectly inelastic supply is a vertical supply curve, so the available quantity does not respond to price. A rightward demand shift raises the price at which buyers take that fixed quantity; equilibrium quantity remains unchanged.

C: Greater than one

Income elasticity equals the percentage change in quantity demanded divided by the percentage change in income. When both increase and the quantity percentage is larger, this ratio exceeds one: demand is income-elastic.

A: preference shares

Among the share classes listed, preference shares have priority over ordinary shares in distributions of capital on liquidation, subject to their terms. Debentures represent debt rather than shares; creditors' claims are considered before distributions to shareholders.

B: decrease their output

On a backward-bending portion of supply, a higher price is associated with a smaller quantity supplied. This describes the assumed curve in the question; it is not a claim that every farmer or every agricultural market behaves that way.

B: a price fall results in its fall

With inelastic demand, quantity demanded increases by a smaller percentage than price falls. The extra sales do not offset the lower price, so total sales revenue falls. This is a revenue result; net profit additionally depends on costs.

D: raw materials

Plywood production needs timber, which is bulky to transport. Locating near timber supplies can reduce inbound transport and handling costs. This makes access to raw materials an important location factor for such industries.

D: general acceptability

Money must be generally accepted in payment if it is to function as a medium of exchange. Divisibility and uniformity help money work well, but an object with those qualities still fails as money if people will not accept it.

D: an increase in government expenditure

An increase in government expenditure raises aggregate demand, other things equal. If spending presses against available productive capacity, it can raise prices. Higher saving, monetary contraction and demand-reducing taxation generally work in the opposite direction in this demand-side comparison.

B: avoidance

In the standard distinction, tax avoidance uses legally permitted arrangements to reduce tax liability, whereas tax evasion involves unlawful concealment or non-payment. A relief or exemption is a specific provision rather than the general term for this behaviour.

C: N20 billion

The simple expenditure multiplier is 1/(1 − 0.75) = 4. The net change in autonomous spending is N10 billion − N15 billion = −N5 billion. Multiplying by 4 gives a GDP change of −N20 billion, a decrease of N20 billion.

D: N1,200 million

Substitute consumption and investment into the identity: Y = 200 + 0.75 Y + 100, in millions of naira. Therefore 0.25 Y = 300 and Y = 1,200 million. Checking: consumption is 1,100 million, which plus investment of 100 million gives 1,200 million.

C: Output method

The output method measures production by adding the value added by producers, or equivalently the value of final goods and services. Intermediate inputs must not be counted again, because their value is already contained in final output.

A: relinquishing of government’s equity participation to private individuals

Privatisation transfers government ownership or equity participation to private owners. Making an enterprise commercially oriented while keeping government ownership is commercialisation, and adding new finance alone is recapitalisation.

A: goods and services are exchanged in a manner similar to barter

Countertrade links an international purchase to a reciprocal commitment to take goods or services in return. It resembles barter, although arrangements can include money and more complex linked transactions. It is not simply selling goods over a retail counter.

B: International Monetary Fund

The IMF provides financing to help member countries address balance-of-payments difficulties while they implement economic adjustment. Development banks primarily support development financing, so the IMF is the organisation identified by this balance-of-payments role.

D: Number of work force multiplied by the hours they work

Aggregate labour supply can be measured in labour-hours: the number of workers available multiplied by the hours each is willing to work. A headcount alone omits hours, so it does not fully measure the amount of labour available.

A: Internal economies of scale

Internal economies of scale arise within a firm as its own scale expands, such as specialisation or spreading overhead costs over more output. External economies arise from growth or improvements outside the individual firm, often across an industry.

C: economic rent

Economic rent is the payment a factor receives above its transfer earnings, the minimum needed to keep it in its present employment. For example, payment of N100 above transfer earnings of N70 contains N30 of economic rent.

B: 22 and 19

The second worker adds 46 minus 24 = 22 units to total output. Average product with five workers is total output divided by the number of workers: 95 divided by 5 = 19 units per worker. The required pair is therefore 22 and 19.

C: (AR × Q) − TC

Profit is total revenue minus total cost. Substituting TR = AR × Q gives profit = (AR × Q) − TC. Dividing total cost by output gives average cost, not profit.

B: an implicit cost

Implicit cost is the opportunity cost of using resources owned by the producer when no explicit cash payment is made. An owner using a building in the business gives up the rent that could have been earned by letting it to someone else.

D: shift of the demand curve

A change in a non-price determinant of demand, such as income or tastes, changes the quantity demanded at the same price. The whole demand curve shifts. A movement along a given demand curve instead results from a change in the good's own price.

D: price system

The price system coordinates decentralised decisions in a free market: relative prices signal scarcity and influence buyers and sellers. This identifies the allocation mechanism; efficient outcomes additionally require conditions such as competition and the absence of market failures.

A: 1.25

Quantity rises by 20/80 × 100 = 25%, while price falls by 5/25 × 100 = 20%. The magnitude of elasticity using the initial values is 25/20 = 1.25. Demand is elastic because this value is greater than one.

C: y > 200

Starting with 4 y − 300 > 500, add 300 to both sides to get 4 y > 800. Divide both sides by positive 4, keeping the inequality direction unchanged: y > 200. The boundary value y = 200 does not satisfy the strict inequality.

A: MC = MR

At an interior profit maximum, marginal revenue equals marginal cost, with marginal cost crossing marginal revenue from below. Below that output an extra unit adds more revenue than cost; above it the extra cost exceeds the extra revenue.

C: retailer

Retailers typically hold a variety of goods and sell them to final consumers in small quantities. Wholesalers mainly supply other businesses in larger quantities, while manufacturers make the goods.

B: A fixed rate of dividend and priority over ordinary shareholders in dividend payments

Preference shares ordinarily carry a specified dividend rate and priority over ordinary shares when dividends are distributed. This preference concerns shareholders' distributions; it does not give shareholders priority over the company's creditors.

C: their local services and longer hours of operation

Small shops can compete through convenient local access, personal service and flexible opening hours. These benefits give customers reasons to use them even where larger firms can obtain purchasing or other economies of scale.

B: they are expected to operate with the primary aim of making profits

Commercialisation requires a public enterprise to operate on commercial principles, aiming to cover its costs and earn a return. Ownership may remain public. Selling government ownership to private investors is privatisation, which is a different change.

C: The use of buffer stocks and stabilisation funds

A buffer-stock scheme buys produce during surplus periods and releases stocks during shortages. A stabilisation fund can finance these operations. Buying supports prices when supply is abundant, while selling can moderate sharp price rises during shortages.

B: are too young to compete in the world market

An infant industry is a newly developing industry that has not yet acquired the scale, skills or efficiency needed to compete with established foreign producers. The term describes its stage of development, not the age of its customers or the type of product it makes.

D: Machinery than workers

Capital intensity refers to a relatively high use of capital equipment per worker. A capital-intensive process therefore relies more heavily on machinery relative to labour than a labour-intensive process does; it is a ratio comparison, not a literal comparison of unlike unit counts.

B: Of economic depression accompanied by low capacity utilisation

During a depression with unused productive capacity, expansionary monetary policy can support borrowing, spending and investment. The objective is to help raise output and employment. Expansion during an inflationary boom can instead intensify price pressure.

A: Require increased special deposits

Requiring commercial banks to place more funds in special deposits at the central bank reduces funds available to support credit expansion. The other measures listed generally ease liquidity or borrowing conditions and are expansionary rather than restrictive.

B: Consumer price index

The consumer price index tracks changes in the prices of a representative basket bought by households. It is commonly used to indicate changes in the cost of living, although a fixed basket is not a perfect measure of every household's living costs.

A: totally by the consumer

With perfectly inelastic demand, consumers buy the same quantity even when price rises. The tax shifts supply upward by the tax per unit, and the price paid by consumers rises by that amount. Consumers therefore bear the entire tax burden in this model.

C: increase by N7 000

The student's allowance is a transfer rather than payment for current production, so it is not counted as newly earned national income. The N7,000 wage pays for productive work and is included. On the changes described, national income rises by N7,000, not by the difference between wage and allowance.

A: backward and forward linkages

Backward linkages connect a sector to suppliers of its inputs, while forward linkages connect it to industries using its output. Agriculture supplies raw materials to processing industries and buys industrial inputs such as tools and fertiliser, creating both types of linkage.

C: Demand and supply

In a freely floating foreign-exchange market, the exchange rate is determined by demand for and supply of currencies. Import payments, exports and capital flows affect those market forces. An administratively fixed exchange rate follows a different arrangement.

B: Promote international economic cooperation for the mutual benefit of all members

International economic organisations provide ways for their members to cooperate on shared economic issues. Their individual mandates differ, but the broad common purpose is mutual economic benefit through cooperation, rather than one particular lending programme or one-way trade flow.

A: What to produce, how and for whom

Every economy chooses what to produce, how to produce it and who receives the output. These allocation decisions arise because resources are scarce.

C: Sacrifice made for the satisfaction of a want

Opportunity cost is the next-best alternative sacrificed to satisfy a chosen want. It measures the forgone opportunity rather than merely the money spent.

C: Flow of goods, services and money among economic sectors

Circular flow links real exchanges with corresponding money payments between sectors. It connects production, income and expenditure in the economy.

A: Human wants are insatiable

Human wants are numerous and recurring, while the resources available to satisfy them are limited. People therefore have to choose which wants to satisfy first; choosing one use of a scarce resource means giving up another use.

D: Private individuals, organisations and the government

A mixed economy combines private enterprise with public-sector activity. Private individuals and organisations make production decisions, while government also produces goods or services and influences resource allocation.

B: Providing a sound framework for policy formulation

A census provides information about population size, location and characteristics. Governments use this evidence to plan schools, healthcare, infrastructure and other services. Counting the population does not by itself remove inflation or unemployment.

A: It is desirable to have a large population

With resources and technology held constant, a population below the optimum has fewer people than the number that would maximise output per person. Increasing population towards the optimum can improve the use of those resources; this does not imply unlimited population growth.

A: Zero and decreasing

Marginal product is the slope of the total-product curve, so it is zero at the usual smooth maximum of total product. Average product equals total product divided by the variable input. At that point marginal product is below positive average product, so average product is falling.

C: Variable

The long run is defined as a period in which a firm can vary all its factors of production, including plant size. It is a planning concept rather than a fixed number of months or years; no factor remains fixed by definition.

A: N5

Total revenue is price multiplied by quantity. The four revenue totals are N75, N80, N85 and N90. Each additional unit adds N5, so marginal revenue, the change in total revenue divided by the change in quantity, is N5.

D: Set his price to maximize his profit

Price elasticity indicates how strongly quantity demanded responds to a price change. A producer can use it alongside cost information to evaluate pricing decisions and pursue maximum profit. Elasticity alone does not lower production costs or determine the profit-maximising price.

C: Percentage change in quantity demanded of commodity X divided by percentage change in price of commodity Y

Cross elasticity measures the response of demand for one good to a price change in another good: percentage change in quantity demanded of X divided by percentage change in the price of Y. It is usually positive for substitutes and negative for complements.

A: Pure monopoly

A pure monopolist is the sole supplier in a market protected by barriers to entry. It can choose an output level and charge the corresponding price on the market demand curve. It cannot independently choose any price and any quantity it wishes.

C: Weather variations

Weather variations change rainfall, temperature and growing conditions, which directly affect crop yields and the amount available for sale. This helps explain seasonal and year-to-year fluctuations in agricultural supply. Pests can also affect production, but weather is the broad climatic factor identified here.

D: Subsistence farming

Subsistence production is primarily intended to meet the producer's or household's own consumption needs. The decisive clue is that the food is for family consumption only, rather than principally for sale to a market.

B: Import substitution

Import substitution promotes domestic production of goods that were previously bought from abroad. Its immediate objective is to replace imports with locally produced goods, often through support for domestic industries.

B: Decreasing the quantity of money in circulation

These are contractionary monetary measures in the standard banking model. A higher required reserve ratio restricts deposit expansion, while a higher discount rate makes central-bank borrowing more costly. Together they tend to restrain credit and money growth.

B: Bad money drives out good money

When two forms of money must circulate at the same legal value despite different intrinsic values, people tend to spend the overvalued money and retain, melt or export the undervalued money. In that setting, bad money drives good money out of circulation.

B: Increase in cash reserve ratio of commercial banks and the sales of government securities

Increasing reserve requirements and selling government securities are contractionary monetary instruments. They restrain bank credit or withdraw liquidity, helping to reduce aggregate demand. Changes to taxes and government spending are fiscal measures, while direct price controls are administrative measures.

B: Take more from the income of the rich

Under a progressive tax, the proportion of income paid in tax rises as income rises. Higher-income earners therefore bear a larger percentage burden, not merely a larger cash payment under an otherwise identical flat percentage rate.

D: Fiscal policy

Fiscal policy uses government taxation and expenditure to influence economic activity and resource allocation. Monetary policy instead concerns instruments such as interest rates, money and credit conditions, generally administered by the monetary authority.

C: net income from abroad

Gross national income equals gross domestic product plus net primary income from abroad. Here N17,700 million minus N16,800 million equals N900 million, so net income received from abroad is positive N900 million. This is an income flow, not the stock of investments abroad.

B: Encouragement of savings, investment and equitable distribution of goods and services

Saving can provide resources for productive investment, while investment builds capacity and supports future output. Equitable access to goods and services can broaden improvements in living standards. Population growth or extra consumption alone does not ensure economic development.

D: Promote the free movement of persons, goods and services within the sub-region

ECOWAS pursues regional economic integration. Removing barriers to the movement of people, goods and services is a central part of building a regional market and cooperation among its members; the objective is broader than creating a single specialised institution.

A: Invisible items

Shipping and freight are transport services, rather than physical merchandise. International service receipts and payments are traditionally called invisible trade, so freight charges are invisible items rather than capital transactions or unrequited transfers.

C: Its quota to the Fund

A member's quota is a key basis for measuring its access to IMF financing, with normal access limits commonly expressed as percentages of quota. Actual lending also depends on the facility, financing needs and applicable conditions; quota is not an unconditional promise of a loan.

D: Available resources are limited

Available resources are limited relative to wants, so not every want can be satisfied. Scarcity persists even with fair distribution of existing resources.

D: In providing a sound basis for formulating development policy

A census measures population size, distribution and characteristics. This information supports development-policy design and planning of public services.

B: 5.68 tonnes

Per-person consumption is502.75/88.5=5.68079 tonnes. The million units cancel; rounding to two decimal places gives5.68 tonnes.

A: Lowest point

In the usual smooth cost model, marginal cost intersects average total cost at its minimum. Marginal cost below the average pulls it down; above it, it raises it.

B: Marginal revenue product of labour in the enterprise

A wage-taking firm hires to the point where another worker’s marginal revenue product equals the wage. This balances extra revenue with extra labour cost.

C: Price is always higher than marginal cost

For uniform-price monopoly, marginal revenue is below price. At an interior profit maximumMC=MR, so price exceeds marginal cost.

B: N18.00

Average revenue equals total revenue divided by output. At3 units, it is54/3=N18 per unit.

A: N12.00

The fifth unit raises total revenue fromN68 toN80. Its marginal revenue is80−68=N12.

A: I and II

Breaking bulk and packing smaller quantities let retailers buy manageable lots. Credit and information serve other functions rather than physically dividing stock.

A: Goods and services reach the consumers

In the broad production-and-distribution chain, goods and services must reach users to provide their intended utility. Packaging and wholesaling are intermediate stages.

B: Temperate climate

Wheat is suited to temperate conditions. It also grows in suitable cool tropical highlands or winter seasons, while hot humid conditions are generally unfavourable.

A: Short-term loans and advances

Money markets specialise in short-term funding. Medium- and long-term finance and equity capital primarily belong to capital markets.

C: Also includes efficient distribution of the benefits of economic growth

Development includes growth and broader improvements in living conditions and distribution of benefits. Growth alone concerns increased production.

D: The deregulation of the economy

Allocation, distribution and stabilisation are conventional public-finance objectives. Deregulation is a policy instrument rather than one of these core objectives.

D: I, II and III

Direct taxes can affect work incentives and create assessment and collection difficulties. All three are potential disadvantages depending on design and administration.

C: Per capita income

Income per person adjusts for population size, making it more informative than total income here. Purchasing power and distribution still matter for living-standard comparisons.

D: Deflationary gap

A deflationary gap is insufficient planned spending to sustain full-employment output. It represents demand deficiency in the standard Keynesian model.

D: I, II and III

Integration can support comparative-advantage trade, larger markets for economies of scale and competition against domestic monopolies. All three are potential benefits.

A: Prevent a country from becoming a dumping ground for foreign goods

An import tariff raises the domestic price of affected foreign goods and can protect domestic producers against import competition. Protection is one purpose of tariffs; tariffs may also raise revenue. They do not ordinarily encourage dependence on foreign goods.

C: Offers loans to member countries for socioeconomic activities

IBRD supports development through lending and related services for eligible member countries. Its financing can support infrastructure, public services and other economic and social investments, rather than having defence or luxury projects as its development purpose.

C: List of goods and services in order of priority

A scale of preference ranks goods or wants in order of priority. It helps a household choose which wants to satisfy first when resources are limited.

A: 50

Food output per person is220/50=4.4,210/70=3,225/90=2.5 and275/100=2.75 tonnes. Among the listed populations,50 million gives the highest output per person.

B: VC = TC - FC

Total cost is fixed cost plus variable cost. Subtracting fixed cost from total cost therefore gives variable cost: VC=TC−FC.

A: Labour-intensive

When capital becomes more expensive relative to labour, cost-minimising firms have an incentive to substitute labour for capital where technology permits. Production becomes more labour-intensive.

D: Concepts of economies and diseconomies of scale

Long-run average cost can fall because of economies of scale and later rise because of diseconomies of scale. Together they explain the conventional U-shaped long-run curve.

D: N20

Fixed cost isN1000, the cost at zero output. At20 singlets, variable cost is1400−1000=N400. Dividing by20 gives average variable cost ofN20 per singlet.

B: Fall in the quantity demanded and a rise in total revenue

With inelastic demand, a price increase causes a smaller proportionate fall in quantity demanded. Price times quantity therefore rises, so total revenue increases while quantity demanded falls.

A: Preferred stock

Preference shares commonly specify a dividend rate and receive priority over ordinary shares. Debt securities and bank loans pay interest rather than dividends.

A: Foreign demand is inelastic

If export demand is inelastic, a larger supply can lower the export price proportionately more than quantity sold rises. Total sales revenue can then fall despite greater production.

C: Monetary transactions to total transactions

Monetisation describes the extent to which transactions use money. The share of monetary transactions in total transactions expresses that extent as a ratio.

A: Increase the liquidity ratio

A higher required liquidity ratio can constrain banks’ lending capacity and monetary expansion. Liberalising credit or producing more notes does not provide the same contractionary mechanism.

A: And current-account balances owned by the non-bank public

Narrow money includes currency held by the non-bank public and their transferable current-account deposits. Currency held inside banks is excluded to avoid counting the same money twice.

A: Increase taxes and have a budget surplus

Higher taxes and a budget surplus withdraw spending power from the economy. Other conditions unchanged, this contractionary fiscal stance can reduce demand-driven inflation.

A: Full employment, national income and price stability

Public finance can support employment, national income and price stability through government revenue and spending decisions. Maximising revenue or expenditure for its own sake is not the general objective.

C: Federation Account

The Federation Account receives qualifying revenues for allocation among Nigeria’s federal, state and local governments. It is distinct from the statistical national-income accounts.

D: 35.0%

GNP rises by27000−20000=7000 million naira. Relative to the initial20000 million, the increase is7000/20000×100=35%. These figures measure nominal rather than inflation-adjusted growth.

D: N1000.00; N1125.00

Year1 GNP per person is20000/20=N1000. Year2 is27000/24=N1125. The million units cancel when income is divided by population.

A: All disposable income not spent on con sumption

Saving is disposable income not used for current consumption. It is a flow over the period and is not identical to the stock of deposits held in banks.

D: Low infant mortality and high per capita income and literacy rate

Low infant mortality, higher income per person and high literacy together indicate health, material and educational progress. Population or spending growth alone does not establish improved development.

C: Large-scale export of locally made goods

Additional export sales bring foreign exchange into the country. Importing, investing abroad and repaying foreign debt instead use foreign currency.

A: Nigeria’s invisible export trade

A non-resident buying accommodation and meals purchases Nigerian services. These travel receipts are invisible exports, rather than merchandise exports or capital investment.

B: Trade creation

Lower barriers between regional members can create trade and expand the market available to their producers. This is a potential gain from economic integration.

C: Price mechanism

In a market economy, prices coordinate decisions about production and consumption. Demand and supply influence what is produced, how resources are used and who can purchase the output.

A: Not available in sufficient quantities to satisfy all wants for them

Economic scarcity means available quantities cannot satisfy every want for a good. It is distinct from a temporary market shortage at a particular price and does not depend on the good being high quality.

C: Aggregate or general economy

Macroeconomics studies the economy as a whole, including aggregate output, employment, inflation and total spending. Individual consumers and firms are principally studied in microeconomics.

A: Increasing returns to the variable factor

Increasing marginal physical product means each additional unit of the variable input adds more output than the preceding one. Because another input remains fixed, this concerns returns to the variable factor rather than returns to scale.

C: Average cost multiplied by its output

Average cost is total cost divided by output. Rearranging gives total cost equal to average cost multiplied by the quantity produced.

A: 1.25

Using the original price and quantity as the base, quantity rises100/200=50% and price falls0.40/1.00=40%. The elasticity magnitude is0.50/0.40=1.25.

A: Fully and efficiently utilised

A point on the production possibility frontier uses available resources fully and productively for the stated technology. A point inside the frontier indicates unused resources or productive inefficiency.

D: Negative

When the price of one complementary good rises, demand for the other tends to fall. The price and cross-quantity changes have opposite signs, producing negative cross-price elasticity.

C: Marginal cost

In the standard model without external costs or benefits, allocative efficiency occurs when marginal benefit, represented by price, equals marginal cost. This balances the value of another unit with the resources needed to produce it.

B: Average cost is minimum

Under the usual free-entry competitive model, long-run equilibrium eliminates economic profit and places firms at minimum average total cost. Price equals average cost and marginal cost at that output.

C: Has unlimited liability in case of business failure

An ordinary or general partner has unlimited liability for the partnership’s debts. This differs from a limited partner whose liability is restricted under the applicable partnership form.

B: Products are relatively more expensive to transport than the major raw materials

A firm tends to locate near its customers when finished goods cost more to transport than its raw materials. This reduces the more expensive outward transport leg, other costs unchanged.

B: The person wishing to buy good X may not have good Y which is what the other person wants

Barter requires a double coincidence of wants. Someone seeking goodX may lack the goodY desired by its owner, preventing a direct exchange even when both parties wish to trade.

D: Provide medium and long-term finance for the development of the economy

Development banks provide medium- and long-term finance for productive investment and broader development projects. They do not mint currency, and their role extends beyond financing the banking sector alone.

C: Stable in value

Stability in purchasing power helps money preserve wealth and express future obligations reliably. Large unpredictable changes in value make saving and deferred payment less dependable.

B: Favours debtors at the expense of creditors

Unexpected inflation reduces the real purchasing power of a fixed nominal repayment. Borrowers repay in money worth less than anticipated, benefiting at the expense of lenders.

B: Mobilizing savings for investment lending

Banks connect financial resources with investment opportunities and provide lending services. Financing productive investment can expand output and support economic development.

C: Amount of equipment plant and inventory existing at a time

A capital stock is measured at a point in time and includes productive equipment, plant and inventories then available. Investment is a flow that adds to this stock over a period.

A: Total expenditure exceeds revenue

A budget deficit occurs when total government expenditure exceeds revenue for the period. The gap concerns overall spending and receipts rather than only one expenditure category.

A: The way income is distributed among specific households or spending units

Personal income distribution describes how income is shared among individuals or households. Functional distribution instead classifies income by factor rewards, such as wages, rent and profit.

A: Increases world output

Trade can increase world output by allowing countries to specialise according to comparative advantage. The same resources can then produce a larger combined output than under less efficient allocation.

B: Appreciation of other currencies

If foreign currencies appreciate relative to the domestic currency, the domestic currency depreciates. This can make exports cheaper abroad and imports dearer at home, helping reduce a deficit when trade responds sufficiently.

A: Pattern of expenditures

Different age groups have different needs for education, housing, health care and other goods. Population age structure therefore affects household and public expenditure patterns.

A: It is a major determinant of the standard of living

National income indicates the resources generated by production and is relevant to living standards. It is useful alongside population, distribution and other welfare measures, because the total alone does not capture every aspect of wellbeing.

A: All final goods and services produced in a country during the year

GDP is the value of final goods and services produced within an economy during a stated period. Counting final output avoids repeatedly counting intermediate goods used in production.

C: N20.00

Value added is sale value minus purchased inputs. The stages add10,2,3 and5 naira respectively, for a total ofN20. Adding every sale would count intermediate production more than once.

D: W + P + R + Z

The income approach adds the rewards paid to factors of production. With the given symbols, wages, profit, interest and rent are all added: W+P+R+Z.

A: Only final goods are counted

Counting final goods avoids including the same intermediate production repeatedly. Alternatively, summing value added at each stage reaches the same final-output total.

D: The worker wastes less time between operations

Specialisation reduces the need to switch between different tasks. Saving time between operations is one reason division of labour can improve productivity.

B: Profits

Profit is the conventional reward associated with entrepreneurship. Wages reward labour, rent rewards land and interest rewards the provision of capital.

B: Average cost is falling with output

Economies of scale occur when long-run average cost falls as output expands. The relevant comparison is cost per unit, rather than simply a change in total or marginal cost.

A: Monopsony

Monopsony is a market with a single buyer. Monopoly describes a single seller, while oligopoly and duopoly concern small numbers of sellers.

C: Small scale enterprises

A large number of small tailoring businesses gives customers alternative providers and limits the market power of any one firm. This is one source of competition in tailoring services.

C: Price is above marginal revenue

For a monopolist selling along a downward-sloping demand curve, marginal revenue lies below price. At an interior profit-maximising output whereMC=MR, price therefore remains above marginal revenue.

B: Reward for business entrepreneurship

A middleman’s margin is the difference between selling and purchase prices. It helps cover distribution costs and provides a gross return for organising the business; it is not automatically a measure of exploitation or net profit.

D: Equity capital

Buying a company’s shares supplies equity capital and gives an ownership interest. Debt capital instead involves borrowing with a repayment obligation.

A: Nearness to the source of raw materials

Petrochemical production uses petroleum-related feedstocks in large quantities. Access to those raw materials is a major location consideration, affecting supply reliability and transport requirements.

D: Wage increases

Wage increases can raise production costs and consumer spending, adding inflationary pressure if productivity or output does not keep pace. The other listed changes generally restrain demand.

B: Provide a device through which credit creation by banks can be controlled

Reserve requirements determine the reserves banks must hold against relevant liabilities. They can be used to influence banks’ capacity to expand deposits and credit, rather than to guarantee profitability.

D: N400.00

In the simple reserve-multiplier model, total deposits can reach100/0.20=N500. Required reserves areN100, leavingN400 as total loans or credit created. The original deposit is included in deposits, not counted as a loan.

A: Deposits in the bank

Customer deposits are liabilities because the bank owes those amounts to its depositors. Loans made and bonds purchased are assets that can provide future repayments or income.

B: Its imports to rise

Currency appreciation makes foreign goods cheaper in domestic currency, other conditions unchanged. This tends to increase imports and make domestic exports more expensive to foreign buyers.

D: Exports and imports of goods

The trade balance is the difference between merchandise exports and merchandise imports. Services and capital flows are recorded elsewhere in the wider external accounts.

D: Currency appreciation

Appreciation tends to make exports less competitive and imports cheaper. Other influences unchanged, it can reduce an external surplus by weakening net export receipts.

D: Tax on imported goods

An import tariff is a tax charged on goods entering a country. A quantitative limit is a quota, while a payment supporting exporters is a subsidy.

B: Inelastic

With inelastic import demand, the percentage fall in import quantity is smaller than the percentage rise in the price paid. Total buyer expenditure including the duty therefore rises, with other influences unchanged.

D: Ignorance of job opportunities elsewhere

Workers cannot readily move towards vacancies they do not know about. Lack of information about jobs elsewhere can therefore restrict geographical labour mobility.

A: Is available for consumption and saving

Disposable income is the income remaining after relevant direct taxes, available for consumption and saving. It is a general income measure rather than a payment limited to pensioners or another group.

A: Withdrawals

In circular-flow equilibrium, planned injections equal planned withdrawals or leakages. In the fuller model, investment, government spending and exports balance saving, taxes and imports.

C: The building of infrastructure

Social overhead capital consists of infrastructure that supports wider economic activity, such as transport links, power and water systems. It provides services used by many producers and households.

C: Transactions in goods and services and payments for such transactions between individual firms and households

The simple circular flow connects households and firms through real exchanges and money payments. Households supply factors and buy output, while firms pay factor incomes and receive spending on goods and services.

D: (Land, rent), (capital, interest), (labour, wage).

The conventional factor rewards are rent for land, interest for capital and wages for labour. Profit is associated with entrepreneurship, rather than with the labour input.

A: Interest rate

In a competitive capital market, the interest rate measures the return forgone by committing funds to one use instead of lending them. It therefore represents the opportunity cost of using capital.

D: Perfectly inelastic

Perfectly inelastic demand means quantity demanded does not change when price changes. Its price elasticity is zero, and the demand curve is vertical.

C: Durability of the product

Durability affects whether consumers can postpone replacement purchases when prices rise. Goods that can continue serving their purpose may allow a stronger demand response over time.

B: Productivity

Marginal productivity theory relates a factor’s reward to its contribution at the margin. In the standard competitive formulation, demand for a factor reflects the value of its marginal product.

B: Vertical integration

Vertical integration joins firms at different stages of the same production or distribution chain, such as manufacturing and retailing. Horizontal integration joins firms at the same stage.

C: Shift the demand curve for the product to the right

Advertising can increase consumers’ willingness to buy a product at each price, shifting demand to the right. A price fall causes movement along an existing demand curve, rather than this shift.

D: Involves the provision of direct services

Direct personal services often rely on close contact with customers and the provider’s own skills. Such activities can operate efficiently on a small scale, unlike processes requiring large capital or mass production.

A: Sole proprietorship

In a sole proprietorship the same person normally owns, manages and controls the business. This combines the main decision-making roles directly in the proprietor.

C: Entrenched democratic control in the conduct of business

Democratic member control is a defining cooperative principle, commonly one member, one vote. Partnership control is instead governed by the partners’ agreed arrangements and need not follow that cooperative rule.

A: Preferred stock

Preference shares commonly carry a specified dividend rate and priority over ordinary shares. A dividend is a shareholder payment; debentures and bank loans pay interest instead.

A: Relatively low transport cost for both raw materials and output and factor mobility

Footloose industries face relatively low transport costs and can obtain mobile inputs in different locations. They are less tied to a particular raw-material source or market than transport-intensive industries.

D: Barter exchange mechanism

Direct barter requires each party to want what the other offers. This double coincidence of wants is unnecessary when an accepted medium of exchange is used.

B: Increase in factor prices

An increase in factor prices raises production costs. Firms may respond by reducing supply or raising prices, creating cost-push inflationary pressure.

C: Existing bonds and stocks are traded

A stock exchange principally provides an organised secondary market for trading existing shares and bonds. Trading ownership claims differs from a firm directly borrowing a new bank loan.

A: Controlling credit and money supply

Reserve requirements influence the liquidity banks must retain and can constrain credit expansion. They are therefore connected to monetary and credit control, rather than primarily to fraud prevention.

C: Free markets may not work or produce desired results

Government intervention can address market failures, such as externalities or inadequate provision of public goods. A market outcome need not achieve every social objective simply because private exchange occurs.

A: Investments income, direct tax and indirect tax

Direct taxes, indirect taxes and income from government investments are distinct revenue categories. The other options mainly list individual taxes within the tax categories rather than separate broad sources.

D: Revenue sharing and profit maximization

Public spending can support stability, distribution and social services. Profit maximisation is not its general purpose, so the combined revenue-sharing and profit-maximisation option does not describe the main objectives.

B: Balance on current account

The goods balance is55.54−53.32=2.22 million naira. The services balance is30.56−28.70=1.86 million. Their sum is4.08 million; with no other current-account transactions in this schedule, it is the current-account balance.

B: In which its opportunity cost is lower than that of the trade partner

Comparative advantage is determined by relative opportunity cost. A country gains a specialisation advantage in a good when it sacrifices less alternative output than its trading partner.

B: products flow across national boundaries

International trade crosses national borders, whereas inter-regional trade occurs within a country. Comparative advantage can apply to both, so it is not the defining distinction.

B: Per capita income is at a maximum

Optimum population is the population size that maximises income or output per person for the given resources and technology. It is not simply the largest population or the point where births equal deaths.

C: Tertiary producers

Banking and insurance provide services and belong to the tertiary sector. They do not primarily extract raw materials or manufacture physical goods.

D: Capital depreciation

Net national product is gross national product after subtracting capital depreciation. Depreciation accounts for fixed capital used up during the production period.

D: Gross domestic product

Gross domestic product measures output produced within the domestic economy, regardless of the producers’ nationality. Gross national product instead adjusts for net factor income from abroad.