Practice Post UTME PAN-ATLANTIC UNIVERSITY economics 2018 Past Questions

Question 1

The Central Bank of Nigeria (CBN) uses monetary policy tools to control inflation. Which of the following is a correct description of the effect of an increase in the reserve requirement on commercial banks?

Correct A. The increase in reserve requirement will lead to a decrease in the money supply.

B. The increase in reserve requirement will lead to an increase in the money supply.

C. The increase in reserve requirement will have no effect on the money supply.

D. The increase in reserve requirement will lead to a decrease in the interest rate.

Correct Answer: A

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Question 2

A firm's demand for labor is given by the equation Q = 100L^0.5, where Q is the quantity of labor demanded and L is the wage rate. If the wage rate increases from ₦100 to ₦150, what is the new quantity of labor demanded?

A. 50

Correct B. 75

C. 100

D. 125

Correct Answer: B

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Question 3

The government of Nigeria has implemented a policy to increase the production of rice. The policy includes providing subsidies to farmers and increa\sing the import duty on rice. What is the likely effect of this policy on the domestic price of rice?

A. The domestic price of rice will decrease.

Correct B. The domestic price of rice will increase.

C. The domestic price of rice will remain the same.

D. The domestic price of rice will fluctuate.

Correct Answer: B

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Question 4

A firm's production function is given by the equation Q = 2L^0.5K^0.5, where Q is the quantity produced, L is the labor input, and K is the capital input. If the firm increases its labor input from 100 to 200 and its capital input from 100 to 200, what is the new quantity produced?

A. 20

B. 40

C. 60

Correct D. 80

Correct Answer: D

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Question 5

The Nigerian government has implemented a policy to increase the production of textiles. The policy includes providing subsidies to textile manufacturers and increa\sing the import duty on textiles. What is the likely effect of this policy on the domestic price of textiles?

A. The domestic price of textiles will decrease.

Correct B. The domestic price of textiles will increase.

C. The domestic price of textiles will remain the same.

D. The domestic price of textiles will fluctuate.

Correct Answer: B

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Question 6

U\sing the Marshall-Lerner condition, derive the condition for the balance of payments to improve in the short run.

Correct A. The Marshall-Lerner condition states that the balance of payments will improve if the sum of the price and income elasticities of demand is greater than 1.

B. The Marshall-Lerner condition states that the balance of payments will improve if the sum of the price and income elasticities of demand is less than 1.

C. The Marshall-Lerner condition states that the balance of payments will improve if the sum of the price and income elasticities of demand is equal to 1.

D. The Marshall-Lerner condition states that the balance of payments will improve if the sum of the price and income elasticities of demand is greater than or equal to 1.

Correct Answer: A

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Question 7

A firm is considering two production techno\logies: one that uses 2 units of labor and 3 units of capital to produce 10 units of output, and another that uses 3 units of labor and 2 units of capital to produce 10 units of output. Which techno\logy is more efficient?

A. The first techno\logy is more efficient because it uses less labor and capital to produce the same output.

Correct B. The second techno\logy is more efficient because it uses less labor and capital to produce the same output.

C. Both techno\logies are equally efficient because they produce the same output u\sing the same amount of labor and capital.

D. Neither techno\logy is more efficient because they produce the same output u\sing different amounts of labor and capital.

Correct Answer: B

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Question 8

U\sing the concept of returns to scale, explain why a firm's average \cost of production will decrease as it increases its production level.

Correct A. The firm's average \cost of production will decrease as it increases its production level because the firm is experiencing increa\sing returns to scale.

B. The firm's average \cost of production will decrease as it increases its production level because the firm is experiencing decrea\sing returns to scale.

C. The firm's average \cost of production will decrease as it increases its production level because the firm is experiencing cons\tant returns to scale.

D. The firm's average \cost of production will not change as it increases its production level because the firm is experiencing cons\tant returns to scale.

Correct Answer: A

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Question 9

A country's money supply is increa\sing at a rate of 10% per annum, while its velocity of money is decrea\sing at a rate of 5% per annum. What is the expected rate of inflation?

A. The expected rate of inflation is 5% per annum.

Correct B. The expected rate of inflation is 10% per annum.

C. The expected rate of inflation is 15% per annum.

D. The expected rate of inflation is 20% per annum.

Correct Answer: B

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Question 10

U\sing the concept of elasticity of demand, explain why a firm's revenue will increase as it increases the price of its product.

A. The firm's revenue will increase as it increases the price of its product because the firm is experiencing elastic demand.

Correct B. The firm's revenue will increase as it increases the price of its product because the firm is experiencing inelastic demand.

C. The firm's revenue will not change as it increases the price of its product because the firm is experiencing unit elastic demand.

D. The firm's revenue will decrease as it increases the price of its product because the firm is experiencing elastic demand.

Correct Answer: B

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Question 11

A firm's production function is given by Q = 2L^0.5K^0.5. If the price of labor (L) is ₦100 per unit and the price of capital (K) is ₦200 per unit, calculate the elasticity of labor with respect to output.

Correct A. 0.5

B. 1

C. 2

D. 3

Correct Answer: A

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Question 12

A government imposes a tax of ₦50 per unit on a firm's output. If the firm's demand function is Q = 100 - 2P and the supply function is Q = 2P - 10, calculate the deadweight loss of the tax.

A. ₦100

B. ₦200

Correct C. ₦300

D. ₦400

Correct Answer: C

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Question 13

A firm's production function is given by Q = 3L^0.5K^0.5. If the price of labor (L) is ₦150 per unit and the price of capital (K) is ₦300 per unit, calculate the returns to scale.

Correct A. Increa\sing

B. Decrea\sing

C. Cons\tant

D. Variable

Correct Answer: A

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Question 14

A government imposes a tax of ₦75 per unit on a firm's output. If the firm's demand function is Q = 120 - 3P and the supply function is Q = 3P - 20, calculate the tax revenue.

A. ₦1500

B. ₦2000

Correct C. ₦2500

D. ₦3000

Correct Answer: C

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Question 15

A firm's production function is given by Q = 2L^0.5K^0.5. If the price of labor (L) is ₦100 per unit and the price of capital (K) is ₦200 per unit, calculate the opportunity \cost of labor.

A. ₦50

Correct B. ₦100

C. ₦150

D. ₦200

Correct Answer: B

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Question 16

A firm's production function is given by Q = 2L^0.5K^0.5. If the firm's output is 16 units when labor (L) is 4 units and capital (K) is 4 units, what is the marginal product of labor?

Correct A. 2

B. 4

C. 8

D. 16

Correct Answer: A

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Question 17

If the demand for a commodity is given by Qd = 100 - 2P and the supply is given by Qs = 2P - 10, what is the equilibrium price?

A. 10

Correct B. 15

C. 20

D. 25

Correct Answer: B

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Question 18

A country's balance of payments is given by the following equation: BOP = X - M - \( I - S \). If the country's exports (X) are ₦100 billion, imports (M) are ₦80 billion, investment (I) is ₦60 billion, and savings (S) are ₦40 billion, what is the balance of payments?

Correct A. -20

B. -10

C. 10

D. 20

Correct Answer: A

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Question 19

A firm's production function is given by Q = 3L^0.5K^0.5. If the firm's output is 9 units when labor (L) is 1 unit and capital (K) is 1 unit, what is the marginal product of capital?

Correct A. 3

B. 6

C. 9

D. 12

Correct Answer: A

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Question 20

A country's money supply is given by the equation: M = 1000 + 0.5Y. If the country's money supply is ₦1200 billion, what is the country's GDP?

A. 1000

Correct B. 2000

C. 3000

D. 4000

Correct Answer: B

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Question 21

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 price at which the quantity demanded is 60?

A. ₦20

Correct B. ₦30

C. ₦40

D. ₦50

Correct Answer: B

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Question 22

A firm is producing a product at a level where its marginal revenue (MR) is equal to its marginal \cost (MC). If the price elasticity of demand is 0.5, what is the firm's profit-maximizing output?

A. ₦20

B. ₦30

Correct C. ₦40

D. ₦50

Correct Answer: C

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Question 23

The supply curve for a product is given by the equation Qs = 100 + 2P, where Qs is the quantity supplied and P is the price. If the price elasticity of supply is 2, what is the price at which the quantity supplied is 120?

A. ₦20

B. ₦30

C. ₦40

Correct D. ₦50

Correct Answer: D

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Question 24

A country's balance of payments is given by the equation BOP = X - M, where BOP is the balance of payments, X is the value of exports, and M is the value of imports. If the value of exports is ₦100 billion and the value of imports is ₦120 billion, what is the balance of payments?

Correct A. ₦20 billion

B. ₦30 billion

C. ₦40 billion

D. ₦50 billion

Correct Answer: A

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Question 25

A firm is producing a product at a level where its marginal revenue (MR) is equal to its marginal \cost (MC). If the price elasticity of demand is 0.5, what is the firm's profit-maximizing output?

A. ₦20

B. ₦30

Correct C. ₦40

D. ₦50

Correct Answer: C

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