29 reviewed questions with answers and explanations.
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The additional revenue obtained by using one more unit of a factor is called its
C: Marginal revenue product
Marginal revenue product is the extra revenue generated by employing one additional unit of an input. It combines the input’s extra physical output with the revenue earned from that output.
AI-reviewed · source checkedLabour productivity is defined as
A: Output per worker-hour
Labour productivity measures output per unit of labour input. Output per worker-hour relates production to the hours worked, enabling comparison across different amounts of labour.
AI-reviewed · source checkedThe residual of production which accrues to the ownership of land after all other expenses have been met is called
B: Rent
The payment accruing to land is rent. In the residual formulation, the return attributable to land remains after payments for the other factors used in production.
AI-reviewed · source checkedIn the history of Economic Thought, the concept of Division of Labour is usually associated with
C: Adam Smith
Adam Smith’s discussion of a pin factory famously explained how dividing work into specialised tasks can raise productivity. Division of labour is therefore closely associated with his economic writing.
AI-reviewed · source checkedThe form of capital which is usually consumed or transformed into finished goods and services in the production process is called
D: Circulating capital
Circulating capital, such as raw materials, is used up or transformed during production. Fixed capital, such as machinery, normally provides services over multiple production cycles.
AI-reviewed · source checkedIn the long run a firm will leave an industry if price
A: Does not cover at least Average Total Cost
In the long run a firm must cover all economic costs to remain viable. If the market price cannot cover average total cost at its best available operating scale, the firm has an incentive to leave the industry.
AI-reviewed · source checkedWhile shopping, Mr X, whose monthly salary does not exceed N200, finds that a commodity formerly costing N200 now costs N230. He decides not to buy it. He is affected by the
B: Income effect of a price change
The higher price reduces what the same income can buy. The commodity is now beyond the statedN200 budget, illustrating the income or purchasing-power effect of the price increase.
AI-reviewed · source checkedUsing the original values as the percentage-change base, rice initially costs N3.50 per kilogram and 10 kg are purchased. The price changes by N1.40 and quantity purchased changes by 5 kg. What is the magnitude of price elasticity of demand?
C: 1.25
Using the original values as the base, the percentage quantity change is5/10=50%, while the percentage price change is1.40/3.50=40%. The elasticity magnitude is0.50/0.40=1.25.
AI-reviewed · source checkedFor normal goods, the income elasticity of demand is
A: Positive
For a normal good, demand increases as income rises, other influences unchanged. The percentage quantity change and percentage income change have the same sign, so income elasticity is positive.
AI-reviewed · source checkedX, Y and Z are the only consumers. At prices N0, N2, N5 and N10, X demands 24, 15, 10 and 0 units; Y demands 15, 10, 5 and 2 units; Z demands 40, 30, 15 and 5 units, respectively. What is market demand when the price is N5?
C: 30 units
Market demand is the sum of individual quantities demanded at the same price. AtN5, consumersX,Y andZ demand10,5 and15 units respectively, giving10+5+15=30 units.
AI-reviewed · source checkedIf a good is an inferior good, then
C: Its income elasticity of demand is negative
An inferior good has negative income elasticity: consumers demand less of it as income rises, other things equal. An inferior good need not be a Giffen good.
AI-reviewed · source checkedWhat market structure has few buyers and many sellers?
D: Oligopsony
Oligopsony describes a market with a small number of buyers facing many sellers. Oligopoly instead refers to a small number of sellers.
AI-reviewed · source checkedTo which of the following sectors do services belong?
C: Tertiary
The tertiary sector supplies services, such as transport, banking and education. Primary activities obtain raw materials, while secondary activities transform materials into goods.
AI-reviewed · source checkedThe liability of a sole trader is
B: Unlimited
A sole trader has unlimited liability: the owner is personally responsible for business debts, rather than limiting responsibility to the capital invested.
AI-reviewed · source checkedWhich of the following is NOT a type of business ownership
A: Debenture holding
A debenture represents lending to a business rather than an ownership interest. A debenture holder is a creditor, while the other choices describe forms of business ownership or joint enterprise.
AI-reviewed · source checkedMoney market differs from capital market in that it
A: Deals with short-term loans while the capital market deals with long-term funds
Money markets provide short-term finance, while capital markets provide longer-term debt and equity funding. Both can involve interest-bearing instruments; maturity is the key distinction here.
AI-reviewed · source checkedThe main reason for charging interest is to
C: Reward investors for present use of capital
Interest compensates a lender for allowing another party to use funds over time. It is a return on supplied capital, distinct from profit earned for entrepreneurial activity.
AI-reviewed · source checkedIn the keynesian model,
A: The demand for money is inversely related to the rate of interest
In the Keynesian liquidity-preference model, higher interest rates raise the opportunity cost of holding money instead of interest-bearing assets. Money demand therefore falls as the interest rate rises, with income and other influences unchanged.
AI-reviewed · source checkedIf inflation is anticipated to continue,
B: Lenders will demand higher interest rates
Expected inflation reduces the future purchasing power of loan repayments. Lenders therefore tend to seek higher nominal interest rates to preserve their expected real return.
AI-reviewed · source checkedIn order to raise more revenue for a certain period, government should impose higher taxes on goods whose demand is
B: Inelastic
Demand for an inelastic good falls relatively little when its price rises. Other conditions unchanged, this makes its tax base less responsive to a tax-induced price increase than that of an elastic good.
AI-reviewed · source checkedThe money which government spends yearly for the maintenance of its schools is
C: Part of the government’s recurrent expenditure
Routine yearly maintenance keeps existing schools operating and belongs to recurrent expenditure. Constructing new school buildings is an example of capital expenditure.
AI-reviewed · source checkedWhich of the following applies to a commodity sold abroad at a price lower than that in the producing country?
A: Dumping
Dumping refers to exporting a product at a price below its normal value, commonly compared with the home-market price. It differs from general trade liberalisation or bilateral exchange agreements.
AI-reviewed · source checkedThe rate of exchange between a domestic and a foreign currency is defined as the
B: Domestic currency price of a unit of foreign currency
A direct exchange-rate quotation expresses how many units of domestic currency buy one unit of foreign currency. It is a currency price, rather than the terms of trade between exported and imported goods.
AI-reviewed · source checkedTransfer payments are
C: Unearned income
Transfer payments are received without supplying a current good or service in return, such as certain benefits or grants. They are therefore unearned receipts in this classification, rather than payments for current production.
AI-reviewed · source checkedCapital consumption allowance refers to
C: Depreciation of capital equipment
Capital consumption allowance measures the depreciation or using-up of fixed capital during production. It is distinct from buying new capital equipment or household consumption.
AI-reviewed · source checkedThe difference between personal income and personal disposable income is
A: Personal income tax
Personal disposable income is personal income after personal income taxes. It is the amount available for consumption and saving after those taxes have been deducted.
AI-reviewed · source checkedFrictional unemployment
D: Occurs when people are changing jobs.
Frictional unemployment occurs during the time needed to search for and move between jobs. It can exist even when suitable vacancies are available because matching workers to jobs takes time.
AI-reviewed · source checkedFor the improvement of the welfare of a people, a high production level is not enough because
B: Equitable distribution is necessary
A high total output does not show how its benefits are shared. The distribution of income and access to goods and services also matter for the welfare of the population.
AI-reviewed · source checkedEconomic development is defined as
A: Positive change plus growth
Economic development includes economic growth alongside improvements in living conditions and economic structure. A rise in output alone does not fully describe these broader changes.
AI-reviewed · source checked