Practice Post UTME BABCOCK UNIVERSITY economics 2025 Past Questions

Question 1

The money multiplier is the ratio of the change in the money supply to the change in the reserve requirement. If the reserve requirement is increased from 10% to 15%, and the money supply is currently ₦100 billion, what is the new money supply if the initial excess reserves are ₦5 billion?

Correct A. ₦85 billion

B. ₦90 billion

C. ₦95 billion

D. ₦100 billion

Correct Answer: A

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Question 2

A country's balance of payments is in equilibrium when the current account and capital account are equal. If the current account is a deficit of ₦100 billion and the capital account is a surplus of ₦150 billion, what is the balance of payments?

A. ₦50 billion surplus

B. ₦100 billion deficit

Correct C. ₦150 billion surplus

D. ₦200 billion deficit

Correct Answer: C

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Question 3

A firm's production function is given by Q = 2L^0.5K^0.5, where Q is output, L is labor, and K is capital. If labor increases from 100 units to 120 units and capital increases from 100 units to 120 units, what is the new output?

A. 120 units

B. 140 units

Correct C. 160 units

D. 180 units

Correct Answer: C

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Question 4

A country's GDP is ₦1 trillion, and its GNP is ₦1.1 trillion. What is the net factor income from abroad?

A. ₦100 billion

Correct B. ₦200 billion

C. ₦300 billion

D. ₦400 billion

Correct Answer: B

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Question 5

A firm's demand function is given by Q = 100 - 2P, where Q is quantity demanded and P is price. If the price is ₦50, what is the quantity demanded?

A. 50 units

Correct B. 75 units

C. 100 units

D. 125 units

Correct Answer: B

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Question 6

A government imposes a tax on a particular good, leading to a decrease in its demand. Which of the following is a possible consequence of this tax?

A. The tax revenue increases

Correct B. The tax revenue decreases

C. The tax revenue remains the same

D. The tax revenue increases, but the demand for the good decreases

Correct Answer: B

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Question 7

A firm is operating in a perfectly competitive market. If the firm's marginal revenue (MR) is greater than its marginal \cost (MC), what will happen to the firm's output?

Correct A. The firm will increase its output

B. The firm will decrease its output

C. The firm will keep its output cons\tant

D. The firm will exit the market

Correct Answer: A

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Question 8

A country is experiencing a trade deficit. Which of the following is a possible consequence of this trade deficit?

A. The country's currency will appreciate

Correct B. The country's currency will depreciate

C. The country's trade deficit will increase

D. The country's trade deficit will decrease

Correct Answer: B

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Question 9

A consumer has a budget constraint of $100 and a preference for two goods, A and B. If the price of good A is $20 and the price of good B is $30, what is the consumer's optimal bundle?

Correct A. 1 unit of good A and 1 unit of good B

B. 2 units of good A and 1 unit of good B

C. 1 unit of good A and 2 units of good B

D. 2 units of good A and 2 units of good B

Correct Answer: A

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Question 10

A firm is operating in a monopoly market. If the firm's marginal revenue (MR) is less than its marginal \cost (MC), what will happen to the firm's output?

A. The firm will increase its output

Correct B. The firm will decrease its output

C. The firm will keep its output cons\tant

D. The firm will exit the market

Correct Answer: B

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Question 11

The demand for a product is given by the equation Qd = 100 - 2P, where Qd is the quantity demanded and P is the price. If the price elasticity of demand is 0.5, what is the percentage change in quantity demanded when the price increases by 10%?

Correct A. 5%

B. 10%

C. 15%

D. 20%

Correct Answer: A

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Question 12

A firm produces two goods, A and B. The production function for good A is given by Q_A = 10L^0.5K^0.5, where L is labor and K is capital. If the firm has 100 units of labor and 50 units of capital, what is the maximum output of good A?

A. 50

B. 75

Correct C. 100

D. 125

Correct Answer: C

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Question 13

A country's balance of payments is given by the equation BOP = X - M, where X is exports and M is imports. If the country's exports are 100 and imports are 80, what is the balance of payments?

Correct A. 10

B. 20

C. 30

D. 40

Correct Answer: A

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Question 14

A firm's \cost function is given by the equation C = 100 + 2Q + 0.5Q^2, where C is \cost and Q is quantity produced. If the firm produces 20 units, what is the total \cost?

A. 150

B. 200

Correct C. 250

D. 300

Correct Answer: C

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Question 15

A country's inflation rate is given by the equation I = $ P_2 - P_1 $ / P_1, where I is inflation rate, P_1 is the previous year's price level, and P_2 is the current year's price level. If the previous year's price level is 100 and the current year's price level is 120, what is the inflation rate?

A. 0.1

Correct B. 0.2

C. 0.3

D. 0.4

Correct Answer: B

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Question 16

Consider a production function $ Q = 2L^0.5K^0.5 $, where ( Q ) is output, ( L ) is labor, and ( K ) is capital. If labor increases by 25% and capital remains cons\tant, what is the percentage change in output?

A. 12.5%

B. 25%

Correct C. 37.5%

D. 50%

Correct Answer: C

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Question 17

A consumer's utility function is given by $ U = 2x^0.5y^0.5 $, where ( x ) is the quantity of good A and ( y ) is the quantity of good B. If the consumer's income is ₦1000 and the prices of good A and good B are ₦5 and ₦10 respectively, what is the optimal bundle of goods?

A. (20, 10)

B. (10, 20)

Correct C. (15, 15)

D. (25, 5)

Correct Answer: C

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Question 18

Consider a firm that produces a \single product u\sing labor and capital. The production function is given by $ Q = 2L^0.5K^0.5 $, where ( Q ) is output, ( L ) is labor, and ( K ) is capital. If the firm's revenue function is $ R = 100Q $ and the \cost function is $ C = 20L + 10K $, what is the firm's profit-maximizing level of labor?

A. 10

Correct B. 20

C. 30

D. 40

Correct Answer: B

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Question 19

A consumer's budget constraint is given by $ 5x + 10y = 100 $, where ( x ) is the quantity of good A and ( y ) is the quantity of good B. The consumer's utility function is given by $ U = 2x^0.5y^0.5 $. What is the consumer's optimal bundle of goods?

A. (10, 10)

Correct B. (15, 5)

C. (20, 0)

D. (0, 20)

Correct Answer: B

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Question 20

Consider a firm that produces a \single product u\sing labor and capital. The production function is given by $ Q = 2L^0.5K^0.5 $, where ( Q ) is output, ( L ) is labor, and ( K ) is capital. If the firm's revenue function is $ R = 100Q $ and the \cost function is $ C = 20L + 10K $, what is the firm's profit-maximizing level of capital?

A. 10

B. 20

Correct C. 30

D. 40

Correct Answer: C

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Question 21

Consider a perfectly competitive market with n firms, each producing a homogeneous product. If the market price is P = 10, and the inverse demand function is given by P = 100 - Q, where Q is the total quantity demanded, what is the marginal revenue (MR) function for a \single firm?

Correct A. 10 - \frac{Q}{n}

B. 100 - 2Q

C. 10 - \frac{Q}{n} + \frac{Q^2}{n^2}

D. 100 - 2Q - \frac{Q^2}{n}

Correct Answer: A

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Question 22

A monopolist faces a demand curve given by Q = 100 - 2P. The monopolist's marginal \cost (MC) is given by MC = 10 + 2Q. What is the monopolist's profit-maximizing price and quantity?

Correct A. P = 40, Q = 30

B. P = 50, Q = 25

C. P = 60, Q = 20

D. P = 70, Q = 15

Correct Answer: A

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Question 23

Consider a production function given by Q = 2L^0.5K^0.5, where Q is output, L is labor, and K is capital. If the price of labor is $10 per unit and the price of capital is $20 per unit, what is the value of the marginal product of labor (MPL) at L = 4 and K = 9?

A. 1.5

Correct B. 2.5

C. 3.5

D. 4.5

Correct Answer: B

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Question 24

A consumer has the following utility function: U = 2x + 3y, where x and y are the quantities of two goods. The prices of the two goods are $5 and $10, respectively. What is the consumer's budget constraint?

Correct A. 5x + 10y = 50

B. 5x + 10y = 60

C. 5x + 10y = 70

D. 5x + 10y = 80

Correct Answer: A

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Question 25

A firm is considering two different production techno\logies: Techno\logy A and Techno\logy B. Techno\logy A has a fixed \cost of $100 and a variable \cost of $10 per unit, while Techno\logy B has a fixed \cost of $200 and a variable \cost of $20 per unit. If the market price is $30 per unit, which techno\logy should the firm choose?

Correct A. Techno\logy A

B. Techno\logy B

C. Either techno\logy is equally profitable

D. Neither techno\logy is profitable

Correct Answer: A

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