Practice Post UTME BABCOCK UNIVERSITY commerce 2020 Past Questions

Question 1

An insurance company offers a policy with a premium of ₦10,000 per annum. The policy covers a maximum of ₦5 million in case of a loss. If the probability of a loss occurring is 0.05, what is the expected value of the policy?

Correct A. ₦250,000

B. ₦500,000

C. ₦750,000

D. ₦1,000,000

Correct Answer: A

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Question 2

A firm has a capital structure consisting of 60% debt and 40% equity. If the cost of debt is 8% and the cost of equity is 12%, what is the weighted average cost of capital (WACC) for the firm?

A. 6%

Correct B. 7%

C. 8%

D. 9%

Correct Answer: B

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Question 3

A company is considering two different modes of transportation for its goods: road and rail. The cost of transporting goods by road is ₦5,000 per ton, while the cost of transporting goods by rail is ₦3,000 per ton. If the company transports 10,000 tons of goods per month, what is the total cost of transportation if the company uses a combination of road and rail?

A. ₦40,000,000

Correct B. ₦45,000,000

C. ₦50,000,000

D. ₦55,000,000

Correct Answer: B

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Question 4

A firm is considering exporting its products to a foreign country. The firm's export price is 100 per unit, while the foreign country's import price is 120 per unit. If the firm exports 10,000 units per month, what is the firm's export revenue in foreign currency?

Correct A. 1,200,000

B. 1,500,000

C. 1,800,000

D. 2,000,000

Correct Answer: A

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Question 5

A company is considering investing in a new project. The project's initial investment is ₦10 million, while the expected annual cash inflows are ₦5 million. If the company's cost of capital is 10%, what is the project's net present value (NPV)?

A. ₦500,000

Correct B. ₦750,000

C. ₦1,000,000

D. ₦1,250,000

Correct Answer: B

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Question 6

A company is considering two different marketing strategies for its new product. Strategy A involves a high initial investment in advertising, but the company expects a high return on investment. Strategy B involves a lower initial investment in advertising, but the company expects a lower return on investment. Which strategy is more likely to be successful?

Correct A. High-risk, high-reward strategy

B. Low-risk, low-reward strategy

C. High-risk, low-reward strategy

D. Low-risk, high-reward strategy

Correct Answer: A

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Question 7

A firm is considering exporting its product to a foreign market. The firm has conducted market research and determined that the demand for the product is elastic. What does this mean for the firm?

A. The firm can increase its price and still sell the product

Correct B. The firm can decrease its price and still sell the product

C. The firm cannot increase its price or decrease its price

D. The firm can increase its price, but only slightly

Correct Answer: B

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Question 8

A company is considering implementing a just-in-time inventory system. What are the benefits of this system?

Correct A. Reduced inventory costs, improved customer satisfaction

B. Increased inventory costs, reduced customer satisfaction

C. No change in inventory costs or customer satisfaction

D. Reduced inventory costs, reduced customer satisfaction

Correct Answer: A

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Question 9

A firm is considering purchasing insurance to protect against business risks. What type of insurance would be most beneficial?

A. Liability insurance

B. Property insurance

Correct C. Business interruption insurance

D. Workers' compensation insurance

Correct Answer: C

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Question 10

A company is considering forming a partnership with another company. What are the benefits of a partnership?

Correct A. Shared risk, shared profit

B. Increased market share, increased competition

C. Reduced costs, increased efficiency

D. Improved reputation, increased customer loyalty

Correct Answer: A

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Question 11

In a perfectly competitive market, the supply curve is upward-sloping because of the law of increasing opportunity costs. What is the opportunity cost of producing one more unit of a good?

Correct A. The opportunity cost is the value of the next best alternative use of the resources.

B. The opportunity cost is the value of the next best alternative use of the resources, plus the cost of producing the good.

C. The opportunity cost is the value of the next best alternative use of the resources, minus the cost of producing the good.

D. The opportunity cost is the value of the next best alternative use of the resources, plus the cost of producing the good, plus the cost of transportation.

Correct Answer: A

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Question 12

A company is considering two different marketing strategies for its new product. The first strategy involves a high level of advertising and promotion, while the second strategy involves a low level of advertising and promotion. Which strategy is more likely to result in a higher level of sales?

Correct A. The high level of advertising and promotion will result in a higher level of sales.

B. The low level of advertising and promotion will result in a higher level of sales.

C. The level of sales will be the same regardless of the marketing strategy.

D. There is not enough information to determine which strategy will result in a higher level of sales.

Correct Answer: A

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Question 13

A firm is producing a good using two inputs, labor and capital. The production function is given by Q = 2L^0.5K^0.5, where Q is the quantity of the good produced, L is the amount of labor used, and K is the amount of capital used. If the price of labor is 10 per hour and the price of capital is 20 per hour, and if the firm is currently using 10 hours of labor and 5 hours of capital, what is the marginal product of labor?

Correct A. The marginal product of labor is 0.5.

B. The marginal product of labor is 1.

C. The marginal product of labor is 2.

D. The marginal product of labor is 5.

Correct Answer: A

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Question 14

A company is considering two different production processes for its new product. The first process involves a high level of automation, while the second process involves a low level of automation. Which process is more likely to result in a higher level of quality?

Correct A. The high level of automation will result in a higher level of quality.

B. The low level of automation will result in a higher level of quality.

C. The level of quality will be the same regardless of the production process.

D. There is not enough information to determine which process will result in a higher level of quality.

Correct Answer: A

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Question 15

A firm is producing a good using two inputs, labor and capital. The production function is given by Q = 2L^0.5K^0.5, where Q is the quantity of the good produced, L is the amount of labor used, and K is the amount of capital used. If the price of labor is 10 per hour and the price of capital is 20 per hour, and if the firm is currently using 10 hours of labor and 5 hours of capital, what is the total cost of production?

A. The total cost of production is 100.

Correct B. The total cost of production is 150.

C. The total cost of production is 200.

D. The total cost of production is 250.

Correct Answer: B

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Question 16

A company is considering two different transportation modes for its new product. The first mode involves a high level of fuel efficiency, while the second mode involves a low level of fuel efficiency. Which mode is more likely to result in a lower level of transportation cost?

Correct A. The high level of fuel efficiency will result in a lower level of transportation cost.

B. The low level of fuel efficiency will result in a lower level of transportation cost.

C. The level of transportation cost will be the same regardless of the transportation mode.

D. There is not enough information to determine which mode will result in a lower level of transportation cost.

Correct Answer: A

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Question 17

A firm is producing a good using two inputs, labor and capital. The production function is given by Q = 2L^0.5K^0.5, where Q is the quantity of the good produced, L is the amount of labor used, and K is the amount of capital used. If the price of labor is 10 per hour and the price of capital is 20 per hour, and if the firm is currently using 10 hours of labor and 5 hours of capital, what is the marginal product of capital?

Correct A. The marginal product of capital is 0.5.

B. The marginal product of capital is 1.

C. The marginal product of capital is 2.

D. The marginal product of capital is 5.

Correct Answer: A

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Question 18

The concept of 'transportation infrastructure' is closely related to which of the following?

Correct A. Economic growth

B. Environmental sustainability

C. Social equity

D. Technological innovation

Correct Answer: A

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Question 19

A company's marketing strategy involves creating a brand identity that is consistent across all channels. This approach is an example of?

A. Segmentation

B. Targeting

C. Positioning

Correct D. Branding

Correct Answer: D

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Question 20

A bank's risk management strategy involves diversifying its investments to minimize potential losses. This approach is an example of?

Correct A. Diversification

B. Hedging

C. Speculation

D. Arbitrage

Correct Answer: A

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Question 21

A company's insurance policy covers losses due to natural disasters. This type of insurance is an example of?

Correct A. Property insurance

B. Liability insurance

C. Casualty insurance

D. Disability insurance

Correct Answer: A

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Question 22

A bank's financial statement shows a decrease in cash reserves. This could be due to?

A. Increase in deposits

B. Decrease in loans

C. Increase in investments

Correct D. Decrease in cash reserves

Correct Answer: D

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Question 23

In a perfectly competitive market, the law of diminishing marginal utility is most relevant to the production of which of the following goods?

A. Giffen goods

B. Normal goods

Correct C. Inferior goods

D. Luxury goods

Correct Answer: C

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Question 24

A firm's production function is given by Q = 2L^(1/2)K^(1/2). If the price of labor is ₦100 per unit and the price of capital is ₦200 per unit, what is the optimal combination of labor and capital that minimizes the cost of production?

A. L = 4, K = 16

B. L = 16, K = 4

Correct C. L = 8, K = 8

D. L = 2, K = 32

Correct Answer: C

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Question 25

A company is considering two marketing strategies: one that involves a high level of advertising and another that involves a low level of advertising. The demand function for the product is given by Q = 100 - 2P. If the price elasticity of demand is 2, what is the optimal level of advertising that maximizes revenue?

A. ₦50

Correct B. ₦100

C. ₦200

D. ₦500

Correct Answer: B

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