Practice Post UTME OSUSTECH economics 2018 Past Questions

Question 1

The Marshall-Lerner condition states that if the sum of the elasticities of demand for exports and imports is greater than 1, then a devaluation of the currency will lead to a

Correct A. increase in the trade balance

B. decrease in the trade balance

C. increase in the current account deficit

D. decrease in the current account deficit

Correct Answer: A

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Question 2

A monopolistically competitive firm faces a demand curve with the equation $ p = 100 - 2q $. If the firm's marginal \cost is $ MC = 20 $, and the firm is currently producing $ q = 20 $ units, what is the firm's profit-maximizing price?

A. ₦80

Correct B. ₦90

C. ₦100

D. ₦110

Correct Answer: B

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Question 3

The following diagram shows the production function of a firm. If the firm's fixed \cost is ₦1000, and the variable \cost is ₦5 per unit, what is the firm's total \cost when it produces 10 units?

A. ₦1050

B. ₦1055

Correct C. ₦1060

D. ₦1065

Correct Answer: C

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Question 4

A country's balance of payments account shows a trade deficit of ₦100 billion. If the country's exchange rate is fixed at ₦200 per US dollar, and the country's foreign exchange reserves are ₦500 billion, what is the country's current account deficit in US dollars?

A. US$250 million

Correct B. US$500 million

C. US$750 million

D. US$1 billion

Correct Answer: B

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Question 5

A firm's production function is given by $ Q = 100K^{\frac{1}{2}}L^{\frac{1}{2}} $. If the firm's output is 100 units, and the firm's labor input is 4 units, what is the firm's capital input?

A. 2 units

B. 4 units

C. 6 units

Correct D. 8 units

Correct Answer: D

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Question 6

Consider a production function given by Q = 100K^$ 1/2 $L^$ 1/2 $, where Q is output, K is capital, and L is labor. If the marginal product of labor is 20, and the wage rate is ₦200 per unit of labor, what is the optimal level of labor?

A. 50 units

Correct B. 100 units

C. 200 units

D. 500 units

Correct Answer: B

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Question 7

A monopolist faces a demand curve given by P = 100 - 2Q, where P is price and Q is quantity. If the marginal \cost is ₦50, what is the optimal quantity produced?

A. 20 units

B. 30 units

Correct C. 40 units

D. 50 units

Correct Answer: C

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Question 8

A consumer has the following utility function: U = 2x + 3y, where x and y are goods. If the prices of x and y are ₦10 and ₦20 respectively, and the consumer has a budget of ₦100, what is the optimal bundle of goods?

A. x = 10, y = 0

Correct B. x = 5, y = 5

C. x = 0, y = 10

D. x = 0, y = 0

Correct Answer: B

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Question 9

A firm has a production function given by Q = 100K^$ 1/2 $L^$ 1/2 $, where Q is output, K is capital, and L is labor. If the marginal product of labor is 20, and the wage rate is ₦200 per unit of labor, what is the optimal level of labor?

A. 50 units

Correct B. 100 units

C. 200 units

D. 500 units

Correct Answer: B

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Question 10

A monopolist faces a demand curve given by P = 100 - 2Q, where P is price and Q is quantity. If the marginal \cost is ₦50, what is the optimal quantity produced?

A. 20 units

B. 30 units

Correct C. 40 units

D. 50 units

Correct Answer: C

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Question 11

A country's government imposes a tax on imports to raise revenue and protect domestic industries. This tax is an example of a(n)

Correct A. Tariff

B. Quota

C. Subsidy

D. Export Tax

Correct Answer: A

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Question 12

A consumer's indifference curve is steeper than another consumer's indifference curve. This implies that the first consumer

Correct A. has a higher marginal rate of substitution

B. has a lower marginal rate of substitution

C. has a higher income

D. has a lower income

Correct Answer: A

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Question 13

A country's GDP is calculated as the sum of the value of all final goods and services produced within its borders. This includes

Correct A. consumption, investment, government sp\ending, and net exports

B. consumption, investment, and government sp\ending

C. consumption, investment, and net exports

D. government sp\ending, and net exports

Correct Answer: A

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Question 14

A firm's production function is given by Q = 2L^0.5 K^0.5. If the firm's labor and capital inputs are increased by 10% and 20% respectively, the new output level will be

A. 1.2 times the original output

Correct B. 1.4 times the original output

C. 1.6 times the original output

D. 2 times the original output

Correct Answer: B

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Question 15

A country's balance of payments accounts are in equilibrium when the current account and capital account are equal. This implies that the country's

A. current account is in surplus

B. current account is in deficit

C. capital account is in surplus

Correct D. capital account is in deficit

Correct Answer: D

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Question 16

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 increase, and equilibrium quantity will decrease

Correct B. Equilibrium price will decrease, and equilibrium quantity will increase

C. Equilibrium price will remain the same, and equilibrium quantity will increase

D. Equilibrium price will increase, and equilibrium quantity will increase

Correct Answer: B

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Question 17

A monopolist faces a market demand curve given by Q = 100 - 2P. The monopolist's marginal \cost is MC = 10. 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 18

A government imposes a tax of ₦10 on a commodity. The pre-tax price is ₦100, and the demand for the commodity is given by Q = 100 - 2P. What is the new equilibrium price and quantity?

Correct A. P = 110, Q = 45

B. P = 120, Q = 40

C. P = 130, Q = 35

D. P = 140, Q = 30

Correct Answer: A

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Question 19

A firm has a total revenue function given by TR = 100Q - 2Q^2. The firm's total \cost function is TC = 50Q + 10Q^2. What is the firm's profit function?

Correct A. Profit = 50Q - 12Q^2

B. Profit = 60Q - 15Q^2

C. Profit = 70Q - 18Q^2

D. Profit = 80Q - 20Q^2

Correct Answer: A

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Question 20

A central bank increases the money supply by 10%. What will happen to the price level?

Correct A. Price level will increase by 10%

B. Price level will decrease by 10%

C. Price level will remain the same

D. Price level will increase by 20%

Correct Answer: A

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Question 21

Consider a country with a mixed economy, where the government plays a significant role in the production and distribution of goods and services. U\sing the concept of returns to scale, explain why the government might choose to increase the production of a particular good, even if it is not profitable in the short run.

A. The government wants to increase the production of the good to meet the increa\sing demand from the growing population.

B. The government wants to increase the production of the good to reduce the unemployment rate in the country.

Correct C. The government wants to increase the production of the good to increase the country's GDP.

D. The government wants to increase the production of the good to reduce the country's trade deficit.

Correct Answer: C

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Question 22

A firm is considering increa\sing its production of a good, but it is concerned about the potential increase in its \costs. U\sing the concept of elasticity of demand, explain why the firm might choose to increase production, even if it means increa\sing its \costs.

Correct A. The firm expects the demand for the good to be inelastic, meaning that a small increase in price will not lead to a significant decrease in quantity demanded.

B. The firm expects the demand for the good to be elastic, meaning that a small increase in price will lead to a significant decrease in quantity demanded.

C. The firm expects the demand for the good to be unit elastic, meaning that a small increase in price will lead to a small decrease in quantity demanded.

D. The firm expects the demand for the good to be perfectly inelastic, meaning that a small increase in price will not lead to a change in quantity demanded.

Correct Answer: A

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Question 23

A country is experiencing a trade deficit, which is cau\sing a decrease in its GDP. U\sing the concept of national income accounting, explain why the country's GDP might decrease, even if the country is producing more goods and services.

Correct A. The country's GDP is decrea\sing because the country is importing more goods and services than it is exporting.

B. The country's GDP is decrea\sing because the country is producing more goods and services, but the prices of these goods and services are decrea\sing.

C. The country's GDP is decrea\sing because the country is experiencing a decrease in its investment, which is cau\sing a decrease in its GDP.

D. The country's GDP is decrea\sing because the country is experiencing a decrease in its government sp\ending, which is cau\sing a decrease in its GDP.

Correct Answer: A

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Question 24

A firm is considering increa\sing its production of a good, but it is concerned about the potential increase in its \costs. U\sing the concept of returns to scale, explain why the firm might choose to increase production, even if it means increa\sing its \costs.

Correct A. The firm expects the demand for the good to be inelastic, meaning that a small increase in price will not lead to a significant decrease in quantity demanded.

B. The firm expects the demand for the good to be elastic, meaning that a small increase in price will lead to a significant decrease in quantity demanded.

C. The firm expects the demand for the good to be unit elastic, meaning that a small increase in price will lead to a small decrease in quantity demanded.

D. The firm expects the demand for the good to be perfectly inelastic, meaning that a small increase in price will not lead to a change in quantity demanded.

Correct Answer: A

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Question 25

A country is experiencing a trade deficit, which is cau\sing a decrease in its GDP. U\sing the concept of national income accounting, explain why the country's GDP might decrease, even if the country is producing more goods and services.

Correct A. The country's GDP is decrea\sing because the country is importing more goods and services than it is exporting.

B. The country's GDP is decrea\sing because the country is producing more goods and services, but the prices of these goods and services are decrea\sing.

C. The country's GDP is decrea\sing because the country is experiencing a decrease in its investment, which is cau\sing a decrease in its GDP.

D. The country's GDP is decrea\sing because the country is experiencing a decrease in its government sp\ending, which is cau\sing a decrease in its GDP.

Correct Answer: A

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