Practice Post UTME SKYLINE UNIVERSITY economics 2017 Past Questions

Question 1

U\sing the concept of elasticity of demand, explain why a price increase of 10% in a perfectly competitive market may lead to a decrease in quantity demanded of 5%.

A. The law of demand states that as price increases, quantity demanded decreases.

B. The elasticity of demand is unit elastic, so a 10% price increase will lead to a 10% decrease in quantity demanded.

Correct C. The demand curve is inelastic, so a 10% price increase will lead to a less than 10% decrease in quantity demanded.

D. The demand curve is perfectly elastic, so a 10% price increase will lead to a greater than 10% decrease in quantity demanded.

Correct Answer: C

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Question 2

A country's GDP is calculated as the sum of all final goods and services produced within its borders. However, if a foreign company produces goods within the country, should these goods be included in the country's GDP?

Correct A. Yes, because the goods are produced within the country's borders.

B. No, because the goods are produced by a foreign company.

C. Yes, because the goods are sold within the country's borders.

D. No, because the goods are not produced by the country's citizens.

Correct Answer: A

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Question 3

U\sing the concept of comparative advantage, explain why a country should specialize in producing goods for which it has a lower opportunity \cost.

A. Because the country will be able to produce more goods at a lower \cost.

Correct B. Because the country will be able to produce goods for which it has a comparative advantage.

C. Because the country will be able to export goods for which it has a comparative advantage.

D. Because the country will be able to import goods for which it has a comparative disadvantage.

Correct Answer: B

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Question 4

A country's balance of payments (BOP) is a statistical statement that summarizes all economic transactions between a country and the rest of the world over a specific period of time. What is the main purpose of the BOP?

A. To measure a country's economic growth.

Correct B. To measure a country's trade deficit or surplus.

C. To measure a country's foreign exchange reserves.

D. To measure a country's overall economic well-being.

Correct Answer: B

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Question 5

U\sing the concept of supply and demand, explain why a price ceiling can lead to a shortage in a perfectly competitive market.

Correct A. Because the price ceiling is set below the equilibrium price.

B. Because the price ceiling is set above the equilibrium price.

C. Because the price ceiling is set equal to the equilibrium price.

D. Because the price ceiling is not set at all.

Correct Answer: A

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Question 6

Consider a firm operating in a perfectly competitive market. If the firm's average \cost curve intersects the demand curve at a point where the quantity supplied is 100 units, and the price is ₦100, what is the firm's profit-maximizing output?

A. 50 units

Correct B. 100 units

C. 150 units

D. 200 units

Correct Answer: B

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Question 7

A country's balance of payments account shows a trade deficit of ₦100 billion and a capital account surplus of ₦50 billion. What is the overall balance of payments position?

A. ₦50 billion surplus

Correct B. ₦0 billion

C. ₦50 billion deficit

D. ₦100 billion deficit

Correct Answer: B

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Question 8

A firm's production function is given by Q = 2L^0.5K^0.5. If the firm's labor and capital inputs are increased by 20% and 15% respectively, what is the percentage change in output?

A. 5% increase

B. 10% increase

Correct C. 15% increase

D. 20% increase

Correct Answer: C

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Question 9

A consumer's budget constraint is given by P1Q1 + P2Q2 = 100. If the prices of good 1 and good 2 are ₦20 and ₦30 respectively, and the consumer sp\ends ₦80 on good 1, how much does the consumer sp\end on good 2?

A. ₦10

B. ₦20

C. ₦30

Correct D. ₦40

Correct Answer: D

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Question 10

A country's agricultural sector is characterized by a high degree of specialization and economies of scale. What is the likely effect of an increase in agricultural productivity on the country's agricultural sector?

A. Increased employment in the agricultural sector

Correct B. Increased output in the agricultural sector

C. Decreased output in the agricultural sector

D. Increased prices of agricultural products

Correct Answer: B

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Question 11

A monopolistically competitive firm faces a demand curve with an elasticity of 2. If the firm's marginal revenue (MR) curve intersects its average revenue (AR) curve at a point where the elasticity of demand is 2, what is the firm's price elasticity of supply (PES)?

A. 0

B. 1

Correct C. 2

D. 3

Correct Answer: C

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Question 12

A country's GDP is ₦100 billion, and its GNP is ₦120 billion. What is the country's net factor income from abroad?

A. ₦20 billion

Correct B. ₦30 billion

C. ₦40 billion

D. ₦50 billion

Correct Answer: B

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Question 13

A consumer's indifference curve is given by the equation ( u(x,y) = 2x + 3y ). If the consumer's income is ₦100, and the prices of x and y are ₦5 and ₦10 respectively, what is the consumer's optimal bundle?

A. (10,20)

B. (20,10)

Correct C. (15,15)

D. (30,0)

Correct Answer: C

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Question 14

A country's balance of payments is given by the following table:\n\n| Item | Value |\n| --- | --- |\n| Exports | ₦100 billion |\n| Imports | ₦120 billion |\n| Net Factor Income | ₦20 billion |\n| Net Transfer | ₦10 billion |\n\nWhat is the country's balance of payments deficit?

A. ₦20 billion

Correct B. ₦30 billion

C. ₦40 billion

D. ₦50 billion

Correct Answer: B

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Question 15

A monopolist faces a demand curve given by \( Q = 100 - 2P \). If the firm's marginal \cost (MC) curve is given by \( MC = 10 + 2Q \), what is the firm's profit-maximizing price?

A. ₦40

B. ₦50

Correct C. ₦60

D. ₦70

Correct Answer: C

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Question 16

The Marshall-Lerner condition states that if the sum of the elasticities of demand for imports and supply of exports is greater than 1, then a devaluation of the currency will lead to an improvement in the balance of payments. Which of the following scenarios would lead to a violation of the Marshall-Lerner condition?

A. A 10% increase in the price of imports leads to a 5% decrease in imports

B. A 5% decrease in the price of exports leads to a 10% increase in exports

Correct C. A 20% increase in the price of imports leads to a 15% decrease in imports

D. A 10% decrease in the price of exports leads to a 5% increase in exports

Correct Answer: C

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Question 17

A monopolistically competitive firm faces a demand curve with an elasticity of -2. If the firm increases its price by 10%, what will be the percentage change in quantity demanded?

Correct A. -20%

B. -15%

C. -10%

D. -5%

Correct Answer: A

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Question 18

A firm is producing at a point on its production function where the marginal product of labor is 4 and the marginal product of capital is 3. If the firm increases its labor input by 1 unit, what will be the change in output?

A. 3

Correct B. 4

C. 5

D. 6

Correct Answer: B

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Question 19

A country is experiencing a trade deficit due to a decrease in exports and an increase in imports. Which of the following policies would help to reduce the trade deficit?

A. Increase government sp\ending

B. Decrease taxes

C. Implement a trade embargo

Correct D. Increase interest rates

Correct Answer: D

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Question 20

A firm is producing a good u\sing a production function with cons\tant returns to scale. If the firm increases its inputs by 20%, what will be the percentage change in output?

A. 10%

Correct B. 20%

C. 30%

D. 40%

Correct Answer: B

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Question 21

A consumer's indifference curve is given by the equation ( U(x,y) = 2x + 3y ). If the consumer's income is ₦1000 and the prices of x and y are ₦5 and ₦10 respectively, find the consumer's optimal bundle of x and y.

Correct A. x = 80, y = 20

B. x = 40, y = 40

C. x = 60, y = 30

D. x = 20, y = 60

Correct Answer: A

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Question 22

A firm is producing a good u\sing two inputs, labor (L) and capital (K). The production function is given by \( Q = 2L^{0.5}K^{0.5} \). If the firm's techno\logy is such that the marginal product of labor is 2 and the marginal product of capital is 3, find the firm's optimal input bundle.

Correct A. L = 4, K = 9

B. L = 9, K = 4

C. L = 16, K = 1

D. L = 1, K = 16

Correct Answer: A

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Question 23

A perfectly competitive market has a demand curve given by \( P = 100 - 2Q \) and a supply curve given by \( P = 20 + 3Q \). Find the equilibrium price and quantity.

Correct A. P = 40, Q = 20

B. P = 30, Q = 15

C. P = 50, Q = 25

D. P = 60, Q = 30

Correct Answer: A

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Question 24

A monopolist has a \cost function given by \( C = 100 + 20Q \) and a revenue function given by \( R = 200Q - 2Q^2 \). Find the monopolist's profit-maximizing output.

Correct A. Q = 10

B. Q = 20

C. Q = 30

D. Q = 40

Correct Answer: A

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Question 25

A firm is producing a good u\sing two inputs, labor (L) and capital (K). The production function is given by \( Q = 2L^{0.5}K^{0.5} \). If the firm's techno\logy is such that the marginal product of labor is 2 and the marginal product of capital is 3, find the firm's optimal input bundle.

Correct A. L = 4, K = 9

B. L = 9, K = 4

C. L = 16, K = 1

D. L = 1, K = 16

Correct Answer: A

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