POST UTME LEAD CITY UNIVERSITY 2024 Economics | Objective

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Question 1
U\sing the Marshall-Lerner condition, determine the effect of a 10% depreciation in the value of the Nigerian Naira on the balance of payments when the country's import price elasticity is 0.5 and export price elasticity is 1.2.
A. The depreciation will lead to an improvement in the balance of payments.
Correct B. The depreciation will lead to a deterioration in the balance of payments.
C. The depreciation will have no effect on the balance of payments.
D. The depreciation will lead to a decrease in the trade deficit.

Correct Answer: B

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Question 2
A firm's production function is given by Q = 100K^\( 1/2 \)L^\( 1/2 \), where Q is output, K is capital, and L is labor. If the firm's capital and labor inputs are increased by 20% and 15% respectively, calculate the percentage change in output.
A. 10%
Correct B. 12%
C. 15%
D. 20%

Correct Answer: B

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Question 3
U\sing the concept of consumer surplus, calculate the maximum amount a consumer is willing to pay for a product that \costs ₦100 and has a demand function given by Q = 100 - 2P.
Correct A. ₦80
B. ₦90
C. ₦100
D. ₦110

Correct Answer: A

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Question 4
A country's GDP is given by the equation Y = C + I + G + \( X - M \). If the country's consumption is ₦500 billion, investment is ₦200 billion, government sp\ending is ₦300 billion, exports are ₦400 billion, and imports are ₦300 billion, calculate the country's GDP.
A. ₦1.5 trillion
Correct B. ₦1.6 trillion
C. ₦1.7 trillion
D. ₦1.8 trillion

Correct Answer: B

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Question 5
A firm's demand function is given by Q = 100 - 2P. If the firm's price is increased by 20%, calculate the percentage change in quantity demanded.
A. 10%
Correct B. 12%
C. 15%
D. 20%

Correct Answer: B

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Question 6
A country's balance of payments is in equilibrium when its current account is equal to its capital account. What is the name of this equilibrium?
A. Current Account Equilibrium
B. Capital Account Equilibrium
Correct C. Balance of Payments Equilibrium
D. Exchange Rate Equilibrium

Correct Answer: C

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Question 7
A firm's \cost function is given by C(q) = 2q^2 + 5q + 10. If the firm produces 10 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 8
A perfectly competitive market has a demand curve given by D(p) = 100 - 2p and a supply curve given by S(p) = 2p - 10. What is the equilibrium price?
A. ₦20
Correct B. ₦30
C. ₦40
D. ₦50

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. The prices of A and B are 10 and 20 respectively. U\sing the indifference curve approach, what is the consumer's optimal bundle?
Correct A. A = 5, B = 5
B. A = 10, B = 0
C. A = 0, B = 5
D. A = 5, B = 10

Correct Answer: A

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Question 10
A monopolist faces a demand curve given by D(p) = 100 - 2p and a \cost function given by C(q) = 2q^2 + 5q + 10. U\sing the marginal revenue and marginal \cost approach, what is the monopolist's optimal output?
A. 10
B. 20
Correct C. 30
D. 40

Correct Answer: C

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Question 11
In a perfectly competitive market, if the demand for a commodity increases, what will happen to the equilibrium price and quantity?
A. Equilibrium price will decrease and quantity will increase
Correct B. Equilibrium price will increase and quantity will decrease
C. Equilibrium price will remain the same and quantity will increase
D. Equilibrium price will decrease and quantity will decrease

Correct Answer: B

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Question 12
A monopolist faces a demand curve given by Q = 100 - 2P. If the marginal \cost is cons\tant at ₦10, what is the optimal price and quantity?
A. ₦50, 50 units
Correct B. ₦60, 40 units
C. ₦70, 30 units
D. ₦80, 20 units

Correct Answer: B

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Question 13
A firm has a total revenue function given by TR = 100Q - Q^2. If the fixed \cost is ₦500, what is the profit-maximizing quantity?
A. 20 units
Correct B. 30 units
C. 40 units
D. 50 units

Correct Answer: B

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Question 14
The demand for a commodity is given by Q = 100 - 2P. If the supply curve is given by Q = 2P - 10, what is the equilibrium price and quantity?
A. ₦20, 60 units
Correct B. ₦30, 50 units
C. ₦40, 40 units
D. ₦50, 30 units

Correct Answer: B

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Question 15
A firm has a total revenue function given by TR = 100Q - Q^2. If the fixed \cost is ₦500, what is the profit-maximizing price?
A. ₦20
Correct B. ₦30
C. ₦40
D. ₦50

Correct Answer: B

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Question 16
The government of Nigeria has introduced a new policy to promote agricultural development in the country. The policy includes providing subsidies to farmers, improving irrigation systems, and increa\sing access to credit. However, the policy also includes a provision to increase the price of fertilizers by 20% to reduce the subsidy burden. Assuming the demand for fertilizers is inelastic, what will be the effect of the price increase on the quantity of fertilizers demanded?
A. The quantity of fertilizers demanded will decrease by 10%
B. The quantity of fertilizers demanded will increase by 10%
Correct C. The quantity of fertilizers demanded will remain the same
D. The quantity of fertilizers demanded will decrease by 20%

Correct Answer: C

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Question 17
A company is considering two different investment projects. Project A has a net present value (NPV) of ₦1,500,000 and a payback period of 5 years. Project B has an NPV of ₦1,200,000 and a payback period of 4 years. Which project should the company choose?
A. Project A
Correct B. Project B
C. Both projects are equally attractive
D. Neither project is attractive

Correct Answer: B

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Question 18
The government of Nigeria has introduced a new tax policy to increase revenue. The policy includes a 10% increase in the value-added tax (VAT) rate. Assuming the demand for goods is elastic, what will be the effect of the tax increase on the revenue collected?
A. The revenue collected will increase by 10%
Correct B. The revenue collected will decrease by 10%
C. The revenue collected will remain the same
D. The revenue collected will increase by 20%

Correct Answer: B

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Question 19
A country has a balance of payments deficit of ₦500,000,000. The central bank has decided to intervene in the foreign exchange market to reduce the deficit. Assuming the exchange rate is fixed, what will be the effect of the intervention on the exchange rate?
A. The exchange rate will appreciate
Correct B. The exchange rate will depreciate
C. The exchange rate will remain the same
D. The exchange rate will fluctuate

Correct Answer: B

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Question 20
A company is considering two different production processes. Process A has a fixed \cost of ₦500,000 and a variable \cost of ₦100 per unit. Process B has a fixed \cost of ₦300,000 and a variable \cost of ₦150 per unit. Assuming the demand for the product is 10,000 units, which process should the company choose?
Correct A. Process A
B. Process B
C. Both processes are equally attractive
D. Neither process is attractive

Correct Answer: A

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Question 21
The Central Bank of Nigeria (CBN) uses monetary policy tools to control inflation. Which of the following is NOT a monetary policy tool?
A. Open Market Operations (OMO)
B. Reserve Requirements
Correct C. Fiscal Policy
D. Capital Controls

Correct Answer: C

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Question 22
The production function is given by Q = 2L^0.5K^0.5. If the price of labor (w) is ₦100 and the price of capital (r) is ₦50, what is the \cost-minimizing level of labor (L)?
A. 10 units
Correct B. 20 units
C. 30 units
D. 40 units

Correct Answer: B

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Question 23
The government of Nigeria is considering a tax reform to reduce the tax burden on low-income households. Which of the following tax reforms would achieve this goal?
A. Increase the tax rate on high-income households
B. Implement a progressive tax system
C. Introduce a flat tax rate
Correct D. Increase the tax exemption threshold

Correct Answer: D

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Question 24
The following diagram shows the demand and supply curves for a commodity. What is the equilibrium price and quantity?
A. Price = ₦100, Quantity = 10 units
Correct B. Price = ₦150, Quantity = 20 units
C. Price = ₦200, Quantity = 30 units
D. Price = ₦250, Quantity = 40 units

Correct Answer: B

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Question 25
The following table shows the production \costs for a firm. What is the marginal \cost (MC) at a level of output of 10 units?
A. ₦50
B. ₦75
Correct C. ₦100
D. ₦125

Correct Answer: C

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