24 reviewed questions with answers and explanations.
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The marginal utilities of the first, second, third and fourth units of commodity X are 100,80,50 and 20 utility units respectively. What is the total utility from consuming three units?
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.
AI-reviewed · source checkedPopulation shares by age were: ages 60 and above,35% in 1960 and 38% in 1990; ages 18–59,40% and 42%; ages 1–17,25% and 20%. Treat ages 18–59 as active and the other two groups as dependent. In 1990, what is the difference between the dependent and active shares?
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.
AI-reviewed · source checkedThe short run in production is defined as a period when
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.
AI-reviewed · source checkedSpecialization often improves economic performance because it
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.
AI-reviewed · source checkedWhich of the following statements best describes the relationship between average product and marginal product?
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.
AI-reviewed · source checkedA firm's output, fixed cost and variable cost are respectively:100 units,N100,N100;120 units,N100,N110;160 units,N100,N120;200 units,N100,N140;240 units,N100,N160. What is average total cost at 200 units of output?
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.
AI-reviewed · source checkedWhen a firm is reaping economies of large-scale production, it experiences a fall in its
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.
AI-reviewed · source checkedUsing price elasticity of demand as the ratio of percentage changes, an elasticity magnitude of 2.5 and a 10% change in price imply what magnitude of percentage change in quantity demanded?
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.
AI-reviewed · source checkedThe producer in a perfectly competitive market is face with a demand curve whose elasticity is
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.
AI-reviewed · source checkedOne form of business organization which is not motivated solely by the profit objective is the
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.
AI-reviewed · source checkedAn infrastructural shortage in a developing economy is a shortage of
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.
AI-reviewed · source checkedExport-promotion policy is primarily concerned with the
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.
AI-reviewed · source checkedCrude petroleum is a good example of a
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.
AI-reviewed · source checkedWhich of the following is true about the value of money?
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.
AI-reviewed · source checkedIn a simple reserve-requirement exercise, a bank receives a new cash deposit of N3,000 and must retain 30% of it as reserves. How much of that initial deposit remains available for lending?
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.
AI-reviewed · source checkedAn issue of bank-notes not backed by gold but by government securities is known as
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.
AI-reviewed · source checkedAn increase in government expenditure will lead to
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.
AI-reviewed · source checkedWhen an indirect tax is levied on the producer of a good, the burden on the consumer will depend largely on the
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.
AI-reviewed · source checkedIf a government wants to reduce the level of inflation, it will
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.
AI-reviewed · source checkedWhich of the following is a transfer payment?
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.
AI-reviewed · source checkedThe major objective of economic growth is to
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.
AI-reviewed · source checkedThe balance of visible trade is the difference between the value of
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.
AI-reviewed · source checkedIf a country has a balance of payments surplus on current accounts, this means that
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.
AI-reviewed · source checkedThe Economic Commission for Africa was set up by the
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.
AI-reviewed · source checked