gce model questions vol1 2019 economics | Essay

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Question 1 View Details
The Nigerian economy exhibits features of both a market system and a command system. Using this context, answer the following.
Question Parts
(a)
Define the concept of scarcity and explain why it is the fundamental problem that underlies all economic decision‑making.
(b)
Distinguish between ‘needs’ and ‘wants’ and give one example of each that is relevant to a typical Nigerian household.
(c)
Discuss how the concept of opportunity cost influences the allocation of resources in a mixed economy like Nigeria’s.
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Question 2 View Details
The market for maize in Nigeria is described by the data in the table below (price in ₦ per kilogram, quantity in million tonnes). The government is considering a subsidy on fertilizer that will lower producers’ costs. | Price (₦/kg) | Quantity Demanded (million tonnes) | Quantity Supplied (million tonnes) | |--------------|------------------------------------|------------------------------------| | 100 | 2.0 | 0.5 | | 150 | 1.5 | 1.0 | | 200 | 1.0 | 1.5 | | 250 | 0.5 | 2.0 | Answer the following questions.
Question Parts
(a)
Using the data, sketch (conceptually) the demand and supply curves and state the initial equilibrium price and quantity.
(b)
Explain how the fertilizer subsidy is expected to affect the supply curve and give the economic reasoning behind the shift.
(c)
Assuming the subsidy raises the quantity supplied at every price by 0.6 million tonnes, determine the new equilibrium price and quantity using a linear approximation based on the two points nearest the original equilibrium.
(d)
Discuss two possible macro‑economic consequences of introducing the fertilizer subsidy for the Nigerian economy.
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Question 3 View Details
The table below shows the quantity demanded of a locally produced mobile phone (in thousands of units) at three different price levels, together with the corresponding consumer income (in thousands of Naira).
Question Parts
(a)
Using the midpoint method, calculate the price elasticity of demand between the price of ₦20 000 and ₦25 000.
(b)
Assuming consumer income rises from ₦50 000 to ₦70 000 while the price of the phone remains at ₦25 000, calculate the income elasticity of demand for the phone. Interpret the result in terms of the phone’s nature as a normal or inferior good.
(c)
The government is considering a 10 % increase in the tax on imported components used to manufacture the phone, which is expected to raise the phone’s price by about 5 %. Discuss how the price elasticity you calculated in part (a) should influence the government’s decision, considering both revenue implications and consumer welfare.
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Question 4 View Details
A small manufacturing firm produces wooden chairs. The table below records the weekly output (units) when varying the number of workers employed while keeping other inputs constant.
Question Parts
(a)
Using the data provided, compute the marginal product (MP) and average product (AP) of labour for each additional worker hired.
(b)
Identify the range of labour input over which the law of diminishing marginal returns operates. Explain how you reached this conclusion using your calculations from part (a).
(c)
Assume the firm pays each worker ₦15 000 per week and the fixed cost of the factory is ₦200 000 per week. Using the AP figures from part (a), estimate the average variable cost (AVC) and average total cost (ATC) for the level of output when 5 workers are employed. Comment on whether the firm is likely to be operating at an efficient scale at this point.
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Question 5 View Details
A clothing manufacturer produces shirts. The firm’s fixed cost is ₦500,000 per month. The variable cost per shirt is constant up to 200 shirts but rises after that due to overtime wages. The following data are recorded: - At an output of 0 shirts, total cost = ₦500,000. - At an output of 100 shirts, total cost = ₦1,300,000. - At an output of 200 shirts, total cost = ₦2,100,000. - At an output of 300 shirts, total cost = ₦3,200,000. The market price of a shirt is ₦15,000. Answer the following:
Question Parts
(a)
Derive the total‑cost (TC) function for the range 0 ≤ Q ≤ 200 and for the range 200 < Q ≤ 300, stating any assumptions you make.
(b)
Using the appropriate TC function, calculate the break‑even output (the smallest whole number of shirts at which total revenue equals total cost).
(c)
The government introduces a per‑shirt tax of ₦2,000. Discuss qualitatively how this tax will affect the firm’s break‑even output and profit, and explain the economic reasoning behind your answer.
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Question 6 View Details
In a local market for smartphones, three firms – Alpha, Beta and Gamma – dominate. The market price of a standard smartphone is ₦30,000. The firms have the following marginal costs (MC): - Alpha: ₦18,000 - Beta: ₦20,000 - Gamma: ₦22,000 All three firms sell identical products and there is free entry and exit in the long run. Answer the following:
Question Parts
(a)
Identify the market structure that best describes this industry and justify your choice with reference to at least three characteristic features.
(b)
Calculate the Lerner index for each firm and comment on the relative degree of market power exhibited by the three firms.
(c)
Discuss how a collusive agreement among the three firms could affect consumer surplus and dead‑weight loss in this market.
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Question 7 View Details
The following data relate to the economic activity of Country X for the year 2022 (all values in ₦ billions).\n\n• Consumption (C) = 500\n• Investment (I) = 200\n• Government expenditure (G) = 150\n• Exports (X) = 120\n• Imports (M) = 80\n• Indirect taxes (T) = 60\n• Subsidies (S) = 10\n• Depreciation (D) = 50\n• Net factor income from abroad (NFIA) = 30\n• Transfer payments (TR) = 40\n• Personal taxes (PT) = 70\n\nUsing the above information, answer the following:
Question Parts
(a)
Calculate Gross Domestic Product (GDP) at market price.
(b)
Using the data, compute the following aggregates:
(c)
Assume that indirect taxes increase by 5 % while all other components remain unchanged. Explain how this change would affect (i) National Net Income and (ii) Disposable Income, and comment on the likely impact on consumption.
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Question 8 View Details
The Central Bank of Nigeria is reviewing its monetary‑policy stance. The following information is given for the current quarter (all monetary values in ₦ millions).\n\n• Required reserve ratio (RR) = 10 % of deposits.\n• Banks are holding excess reserves equal to 5 % of deposits.\n• The Central Bank purchases government securities worth 200 million, injecting this amount into the banking system.\n• Initial money supply (M0) = 1,000 million.\n\nAssume that the public holds no cash (i.e., currency drain is zero). Answer the questions below:
Question Parts
(a)
Calculate the theoretical maximum increase in the money supply that could result from the open‑market purchase, assuming no excess reserves and no currency drain.
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Question 9 View Details
The economy of Nigeria has been experiencing varying rates of inflation over the past five years.
Question Parts
(a)
Explain the difference between demand‑pull and cost‑push inflation, giving one real‑life example of each that could be relevant to Nigeria.
(b)
Using the Phillips curve framework, discuss how a persistent rise in inflation expectations can affect the unemployment rate in the short run and the long run. Include in your answer the role of monetary policy.
(c)
The Central Bank of Nigeria (CBN) is considering two policy options to curb inflation: (i) raising the policy interest rate by 2 percentage points, and (ii) implementing a targeted subsidy on staple foods. Evaluate the likely effectiveness of each option in reducing inflation, and discuss possible unintended consequences on output and employment.
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Question 10 View Details
Nigeria's labour market shows a mixture of structural, frictional and cyclical unemployment.
Question Parts
(a)
Define structural unemployment and explain two factors that contribute to it in the Nigerian context.
(b)
The government proposes a vocational training programme aimed at reducing structural unemployment. Using a supply‑and‑demand framework for labour, illustrate and explain how such a programme could shift the labour market. State any assumptions required.
(c)
Critically assess the likely impact of a minimum wage increase from ₦30,000 to ₦45,000 per month on unemployment levels, considering both short‑run and long‑run effects. Include discussion of possible informal‑sector expansion.
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