POST UTME BABCOCK UNIVERSITY 2022 Economics | Objective

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Question 1
A firm is operating on a long-run average \cost curve. If it increases its output from 100 units to 200 units, what happens to its average \cost per unit?
A. Increases
Correct B. Decreases
C. Remains the same
D. First increases then decreases

Correct Answer: B

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Question 2
A central bank increases the reserve requirement for commercial banks. What is the likely effect on the money supply?
A. Increases
Correct B. Decreases
C. Remains the same
D. No effect

Correct Answer: B

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Question 3
A monopolist faces a demand curve with the following equation: Q = 100 - 2P. If the firm's marginal \cost is 10, what is the profit-maximizing price?
A. ₦20
Correct B. ₦30
C. ₦40
D. ₦50

Correct Answer: B

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Question 4
A country's GDP is ₦100 billion, its imports are ₦20 billion, and its exports are ₦15 billion. What is its net foreign income?
A. ₦5 billion
B. ₦10 billion
Correct C. ₦15 billion
D. ₦20 billion

Correct Answer: C

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Question 5
A firm is operating on a production function with the following equation: Q = 2L^0.5K^0.5. If the firm increases its labor from 4 units to 6 units, what happens to its output?
Correct A. Increases
B. Decreases
C. Remains the same
D. First increases then decreases

Correct Answer: A

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Question 6
The government of Nigeria has introduced a new policy to encourage agricultural production. The policy includes providing subsidies to farmers, improving irrigation systems, and increa\sing access to credit. However, the policy also includes a provision that requires farmers to sell their produce to the government at a fixed price. Which of the following is a potential consequence of this policy?
Correct A. Increased production \costs for farmers
B. Reduced prices for consumers
C. Increased government revenue
D. Improved food security

Correct Answer: A

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Question 7
A firm produces two goods, X and Y, u\sing two inputs, labor (L) and capital (K). The production function for good X is given by Q_X = 2L^0.5K^0.5, while the production function for good Y is given by Q_Y = 3L^0.7K^0.3. If the firm has 100 units of labor and 50 units of capital, how many units of good X will it produce?
A. 50
B. 75
Correct C. 100
D. 125

Correct Answer: C

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Question 8
The Nigerian government has implemented a policy to reduce inflation by increa\sing interest rates. However, this policy has also led to a decrease in aggregate demand, resulting in a recession. Which of the following is a potential consequence of this policy?
Correct A. Increased unemployment
B. Reduced inflation
C. Increased government revenue
D. Improved economic growth

Correct Answer: A

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Question 9
A firm has the following \cost function: TC = 100 + 2Q + 0.5Q^2. If the firm produces 50 units of output, what is its total \cost?
A. 150
B. 200
Correct C. 250
D. 300

Correct Answer: C

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Question 10
The Nigerian economy has experienced a period of rapid growth, resulting in an increase in the s\tandard of living for many citizens. However, this growth has also led to an increase in income inequality. Which of the following is a potential consequence of this growth?
A. Increased poverty
B. Reduced income inequality
C. Improved economic growth
Correct D. Increased s\tandard of living

Correct Answer: D

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Question 11
A firm is operating in a perfectly competitive market with a cons\tant returns to scale production function. If the market price of its product increases by 10%, what will be the percentage change in the firm's total revenue?
A. 10%
B. 20%
C. 5%
Correct D. 0%

Correct Answer: D

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Question 12
A monopolist faces a demand curve given by Q = 100 - 2P and a \cost function C(Q) = 10Q + 100. What is the profit-maximizing price and quantity?
A. P = 40, Q = 30
Correct B. P = 50, Q = 25
C. P = 60, Q = 20
D. P = 70, Q = 15

Correct Answer: B

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Question 13
A bank has a reserve requirement of 20% and a cash reserve of ₦100 million. If it wants to increase its l\ending by ₦50 million, what will be the new cash reserve?
A. ₦150 million
B. ₦120 million
C. ₦110 million
Correct D. ₦130 million

Correct Answer: D

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Question 14
A firm has a \cost function C(Q) = 2Q^2 + 10Q + 100. What is the marginal \cost when Q = 5?
A. ₦20
Correct B. ₦30
C. ₦40
D. ₦50

Correct Answer: B

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Question 15
A country has a production function Y = 2L^0.5K^0.5. If the price of labor is ₦10 and the price of capital is ₦20, what is the optimal combination of labor and capital?
Correct A. L = 100, K = 50
B. L = 50, K = 100
C. L = 200, K = 100
D. L = 100, K = 200

Correct Answer: A

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Question 16
An increase in the price of a commodity leads to a decrease in its demand. Which of the following is a possible explanation for this phenomenon?
A. Income effect
Correct B. Substitution effect
C. Cross-price effect
D. Income elasticity of demand

Correct Answer: B

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Question 17
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 value of MP_L when L = 4 and K = 9?
A. 20
B. 25
Correct C. 30
D. 35

Correct Answer: C

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Question 18
A country's GDP at market price is ₦1,500 billion, and its GDP at factor \cost is ₦1,400 billion. What is the value of indirect taxes?
A. ₦50 billion
B. ₦75 billion
C. ₦100 billion
Correct D. ₦125 billion

Correct Answer: D

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Question 19
A firm's budget constraint is given by 2L + 3K = ₦1,200. If the price of labor is ₦100 per unit and the price of capital is ₦200 per unit, what is the value of L when K = 3?
A. 6
B. 8
Correct C. 10
D. 12

Correct Answer: C

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Question 20
A country's GNP at market price is ₦1,800 billion, and its GNP at factor \cost is ₦1,700 billion. What is the value of net factor income from abroad?
A. ₦50 billion
B. ₦75 billion
C. ₦100 billion
Correct D. ₦125 billion

Correct Answer: D

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Question 21
The government of a country decides to implement a policy to reduce the price of a commodity by 20% to increase its consumption. However, the demand for the commodity is inelastic. What will be the effect on the government's revenue?
A. The government's revenue will increase
Correct B. The government's revenue will decrease
C. The government's revenue will remain the same
D. The effect on the government's revenue is uncertain

Correct Answer: B

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Question 22
A country's GDP is calculated as the sum of the value of all final goods and services produced within its borders. If a country imports goods worth ₦100 billion and exports goods worth ₦120 billion, what will be the balance of trade?
Correct A. ₦20 billion surplus
B. ₦20 billion deficit
C. ₦40 billion surplus
D. ₦40 billion deficit

Correct Answer: A

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Question 23
A firm is considering two different production processes to produce a commodity. Process A requires an initial investment of ₦100 million and has a variable \cost of ₦50 per unit. Process B requires an initial investment of ₦150 million and has a variable \cost of ₦30 per unit. If the firm produces 10,000 units of the commodity, what will be the total \cost of production for each process?
A. Process A: ₦500 million, Process B: ₦450 million
Correct B. Process A: ₦450 million, Process B: ₦500 million
C. Process A: ₦550 million, Process B: ₦450 million
D. Process A: ₦450 million, Process B: ₦550 million

Correct Answer: B

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Question 24
A country's inflation rate is 5% per annum. If the price of a commodity is ₦100 today, what will be the price of the commodity after 2 years?
Correct A. ₦121
B. ₦110
C. ₦105
D. ₦100

Correct Answer: A

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Question 25
A firm is considering two different pricing strategies for a commodity. Strategy A involves charging a price of ₦100 per unit, while Strategy B involves charging a price of ₦120 per unit. If the demand for the commodity is elastic, which strategy will result in a higher revenue?
A. Strategy A
Correct B. Strategy B
C. Both strategies will result in the same revenue
D. The revenue from both strategies is uncertain

Correct Answer: B

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