Practice gce model questions vol1 economics 2023 Past Questions

Question 1 View Details

Country X had a population of $12$ million in 2020. The annual growth rate was $2\%$ per year for the first five years and then fell to $1.2\%$ per year thereafter. From 2025 onward, net migration added $30{,}000$ people each year. What is the population at the end of 2030 (in millions, rounded to the nearest whole number)?

A. 15

B. 13

Correct C. 14

D. 12

Correct Answer: C

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Question 2 View Details

In a certain market the demand function is $Q_{d}=500-4P$ and the supply function is $Q_{s}=100+2P$, where $P$ is the price in $\text{₦}$ and $Q$ is quantity. The government introduces a per‑unit tax of $\text{₦}20$ on producers. Determine the price paid by consumers, the price received by producers, and the dead‑weight loss caused by the tax (express the dead‑weight loss in $\text{₦}$, rounded to the nearest whole number).

A. Consumer price ₦71.00, producer price ₦51.00, dead‑weight loss ₦250

B. Consumer price ₦75.00, producer price ₦55.00, dead‑weight loss ₦300

Correct C. Consumer price ₦73.33, producer price ₦53.33, dead‑weight loss ₦267

D. Consumer price ₦73.33, producer price ₦53.33, dead‑weight loss ₦300

Correct Answer: C

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Question 3 View Details

The wheat market has an equilibrium price of $\$50$ per kg and an equilibrium quantity of $2000$ tonnes. The government imposes a price ceiling of $\$40$ per kg. At this ceiling, quantity supplied falls to $1500$ tonnes and quantity demanded rises to $2500$ tonnes. What is the size of the shortage created, and what percentage of the original equilibrium quantity does this shortage represent (rounded to the nearest whole percent)?

A. 1500 tonnes shortage, which is 75% of the equilibrium quantity

B. 1000 tonnes shortage, which is 40% of the equilibrium quantity

C. 500 tonnes shortage, which is 25% of the equilibrium quantity

Correct D. 1000 tonnes shortage, which is 50% of the equilibrium quantity

Correct Answer: D

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Question 4 View Details

A farmer can allocate all resources to produce either $40$ tonnes of rice or $20$ tonnes of beans per year. Assuming constant opportunity cost, if the farmer decides to produce $25$ tonnes of rice, how many tonnes of beans can be produced in the same year?

Correct A. 7.5

B. 5

C. 10

D. 12.5

Correct Answer: A

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Question 5 View Details

Country Y imports cars and exports coffee. The world price of coffee is $\$2$ per kg and the world price of a car is $\$20{,}000$. Country Y exports $500{,}000$ kg of coffee and imports $100$ cars. The government introduces a 10 % tariff on imported cars, assuming quantities imported remain unchanged. Calculate (a) the price paid by consumers for a car after the tariff, (b) the total expenditure on cars after the tariff, and (c) the tariff revenue collected (in $\$$).

Correct A. $200,000

B. $2,200,000

C. $220,000

D. $180,000

Correct Answer: A

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Question 6 View Details

A good's price falls from $\$12$ to $\$9$ and the quantity demanded rises from 150 units to 210 units. Using the midpoint method, calculate the price elasticity of demand and state whether demand is elastic, inelastic or unit‑elastic.

A. Elasticity \$\\approx -2.00\$ (elastic demand)

B. Elasticity \$\\approx -0.85\$ (inelastic demand)

Correct C. Elasticity $\approx -1.17$ (elastic demand)

D. Elasticity \$\\approx -1.00\$ (unit‑elastic demand)

Correct Answer: C

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Question 7 View Details

At the start of 2020 the banking system holds $\$500$ bn in deposits. The required reserve ratio is 5 %. The central bank raises the required reserve ratio to 8 % and at the same time injects $\$40$ bn of new reserves through an open‑market purchase. Assuming banks lend out all excess reserves, what is the increase in total deposits after these actions?

A. Approximately \$\\$30.0\$ bn increase in deposits

B. Approximately \$\\$18.5\$ bn increase in deposits

Correct C. Approximately $\$23.1$ bn increase in deposits

D. Approximately \$\\$21.0\$ bn increase in deposits

Correct Answer: C

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Question 8 View Details

Country A had a population of 20 million in the year 2000. From 2000 to 2010 the population grew at a constant annual rate of 2.5 %. From 2010 to 2020 the annual growth rate fell linearly from 2.5 % to 1.5 %. During the whole period the proportion of the population aged 0‑14 fell linearly from 30 % to 25 %. The proportion aged 65 + remained constant at 8 %. Estimate the total population in 2020 and compute the dependency ratio (dependents = 0‑14 + 65 +, working‑age = 15‑64) expressed as the number of dependents per 100 working‑age persons.

Correct A. Population ≈ 31.2 million; dependency ratio ≈ 49 dependents per 100 working‑age persons

B. Population ≈ 33.0 million; dependency ratio ≈ 42 dependents per 100 working‑age persons

C. Population ≈ 30.1 million; dependency ratio ≈ 48 dependents per 100 working‑age persons

D. Population ≈ 29.5 million; dependency ratio ≈ 55 dependents per 100 working‑age persons

Correct Answer: A

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Question 9 View Details

Country X's export price index is 120 (base 100) and its import price index is 150. The government imposes a 10 % ad valorem tariff on all imports, and quantities are assumed unchanged. (a) Calculate the new terms of trade after the tariff. (b) By what percentage does the terms of trade change? (c) Briefly state whether the tariff improves or worsens the country's welfare.

A. New TOT ≈ 0.66; terms of trade fall by about 12.5 %; welfare improves

Correct B. New TOT ≈ 0.73; terms of trade fall by about 9.1 %; welfare worsens

C. New TOT ≈ 0.80; terms of trade fall by about 6.7 %; welfare worsens

D. New TOT ≈ 0.73; terms of trade rise by about 4.2 %; welfare worsens

Correct Answer: B

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Question 10 View Details

In the wheat market the demand curve is $Q_d = 500 - 2P$ and the original supply curve is $Q_s = 100 + P$, where $P$ is the price in dollars per ton and $Q$ is quantity in million tons. The government introduces a subsidy of $\$20$ per ton paid to producers. (i) Determine the new equilibrium consumer price, producer price and quantity. (ii) Calculate the change in consumer surplus, producer surplus and the government's total outlay. (iii) Estimate the dead‑weight loss resulting from the subsidy.

A. Consumer price ≈ $130.5, producer price ≈ $150.5, quantity ≈ 255 million tons; CS ↑ ≈ $1.8 bn, PS ↑ ≈ $3.5 bn; government outlay ≈ $5.10 bn; dead‑weight loss ≈ $0.15 bn

Correct B. Consumer price ≈ $126.7, producer price ≈ $146.7, quantity ≈ 247 million tons; CS ↑ ≈ $1.6 bn, PS ↑ ≈ $3.2 bn; government outlay ≈ $4.93 bn; dead‑weight loss ≈ $0.13 bn

C. Consumer price ≈ $125.0, producer price ≈ $145.0, quantity ≈ 250 million tons; CS ↑ ≈ $1.5 bn, PS ↑ ≈ $3.1 bn; government outlay ≈ $5.00 bn; dead‑weight loss ≈ $0.14 bn

D. Consumer price ≈ $120.0, producer price ≈ $140.0, quantity ≈ 240 million tons; CS ↑ ≈ $1.4 bn, PS ↑ ≈ $3.0 bn; government outlay ≈ $4.80 bn; dead‑weight loss ≈ $0.12 bn

Correct Answer: B

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Question 11 View Details

A firm's total product (TP) from labour L (in units) is given by $ TP = 2L^{2} - 0.1L^{3} $. $AP$ is average product and $MP$ is marginal product of labour.\n(a) Find the labour input at which $AP$ is maximised.\n(b) Calculate the $MP$ at that labour level.\n(c) State whether the firm is experiencing increasing, constant or diminishing marginal returns at that point.

A. Labour = 8 units; MP = 12; increasing marginal returns

B. Labour = 10 units; MP = 12; increasing marginal returns

Correct C. Labour = 10 units; MP = 10; diminishing marginal returns

D. Labour = 12 units; MP = 8; constant marginal returns

Correct Answer: C

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Question 12 View Details

A firm in a monopolistic market faces the demand curve $ P = 120 - 2Q $. Its marginal cost is constant at $ MC = 20 $ and fixed costs are $ FC = 200 $. The market price of the product is $ \£30 $ per unit.\n(a) Determine the profit‑maximising output and price for the monopoly.\n(b) Compute the monopoly's profit.\n(c) Calculate the total surplus under monopoly and under perfect competition (where price equals marginal cost).\n(d) Find the dead‑weight loss caused by the monopoly.

Correct A. Profit‑maximising output = 25 units, price = £70; profit = £1,050; total surplus monopoly = £1,875; total surplus perfect competition = £2,500; dead‑weight loss = £625

B. Profit‑maximising output = 20 units, price = £80; profit = £1,200; total surplus monopoly = £1,600; total surplus perfect competition = £2,400; dead‑weight loss = £800

C. Profit‑maximising output = 25 units, price = £65; profit = £950; total surplus monopoly = £1,800; total surplus perfect competition = £2,450; dead‑weight loss = £650

D. Profit‑maximising output = 30 units, price = £60; profit = £900; total surplus monopoly = £2,000; total surplus perfect competition = £2,600; dead‑weight loss = £600

Correct Answer: A

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Question 13 View Details

A firm's total cost (TC) function in thousands of naira is $ TC = 0.05Q^{3} - 0.6Q^{2} + 30Q + 500 $, where $Q$ is output in units.\n(a) Find the level of output that minimises average total cost (ATC).\n(b) Calculate this minimum ATC value.\n(c) If the market price is $P = 40$ per unit, determine the firm's profit (or loss) at the output found in part (a).

A. Output ≈ 20.10 units; minimum ATC ≈ ₦64,300 per unit; loss ≈ ₦460,200

Correct B. Output ≈ 19.35 units; minimum ATC ≈ ₦62,950 per unit; loss ≈ ₦444,120

C. Output ≈ 18.20 units; minimum ATC ≈ ₦60,800 per unit; loss ≈ ₦410,500

D. Output ≈ 19.35 units; minimum ATC ≈ ₦65,000 per unit; loss ≈ ₦450,000

Correct Answer: B

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Question 14 View Details

A crop's yield per hectare (in tons) depends on the amount of fertilizer applied ($F$ kg per hectare) according to $ Y = 50 + 8F - 0.1F^{2} $. The market price of the crop is $\text{₦}30$ per ton, the cost of fertilizer is $\text{₦}20$ per kg, and other fixed costs are $\text{₦}500$ per hectare.\n(a) Determine the quantity of fertilizer that maximises profit per hectare.\n(b) Compute the maximum profit per hectare.\n(c) At this optimal fertilizer level, calculate the marginal product (MP) and average product (AP) of fertilizer.\n(d) State whether the farm is operating in the region of increasing or diminishing returns to fertilizer at the optimum.

A. Optimal fertilizer ≈ 30.0 kg/ha; maximum profit ≈ ₦4,200 per ha; MP ≈ 0.80 t/kg, AP ≈ 6.00 t/kg; increasing returns

B. Optimal fertilizer ≈ 36.7 kg/ha; maximum profit ≈ ₦4,800 per ha; MP ≈ 0.60 t/kg, AP ≈ 5.70 t/kg; diminishing returns

C. Optimal fertilizer ≈ 42.5 kg/ha; maximum profit ≈ ₦5,500 per ha; MP ≈ 0.55 t/kg, AP ≈ 5.20 t/kg; diminishing returns

Correct D. Optimal fertilizer ≈ 36.7 kg/ha; maximum profit ≈ ₦5,033 per ha; MP ≈ 0.67 t/kg, AP ≈ 5.70 t/kg; diminishing returns

Correct Answer: D

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Question 15 View Details

Country X has a capital‑output ratio $K/Y = 3$ and a depreciation rate $\delta = 5\%$ per year. Its current saving rate is 15 % of GDP. Using the Harrod‑Domar model, the required saving rate $s$ to achieve a target real GDP per‑capita growth rate $g$ satisfies $g = s/(K/Y) - \delta$.\n(a) If the government wishes to raise the real GDP per‑capita growth rate to 4 % per year, calculate the required saving (investment) rate.\n(b) How many additional percentage points of the saving rate are needed beyond the current 15 %?\n(c) Briefly suggest two policy measures that could help the economy achieve the higher saving rate.

Correct A. Required saving rate = 27 %; additional needed = 12 percentage points; policies: tax incentives for savings and reforms to improve the investment climate

B. Required saving rate = 30 %; additional needed = 15 percentage points; policies: government subsidies for investment and reforms to improve the investment climate

C. Required saving rate = 22 %; additional needed = 7 percentage points; policies: tax incentives for savings and measures to boost export competitiveness

D. Required saving rate = 24 %; additional needed = 9 percentage points; policies: tax incentives for savings and reforms to improve the investment climate

Correct Answer: A

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Question 16 View Details

In a market the linear demand curve is $ P = 120 - 2Q $ and the marginal cost is constant at $ MC = 30 $.\n\n(a) Determine the monopoly's profit‑maximising quantity and price.\n(b) Under perfect competition the price equals marginal cost. Find the competitive equilibrium quantity.\n(c) Calculate the dead‑weight loss (DWL) caused by the monopoly. Express your answer to two decimal places.

A. 562.50

B. 400.00

C. 450.00

Correct D. 506.25

Correct Answer: D

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Question 17 View Details

The price of a good rises from $£10$ to $£12$ and the quantity demanded falls from 200 units to 150 units. Using the midpoint (arc) formula, calculate the price elasticity of demand. State whether demand is elastic, inelastic or unit‑elastic. Give the elasticity value to two decimal places.

A. -1.00 (unit‑elastic)

Correct B. -1.57 (elastic)

C. -0.80 (inelastic)

D. -2.10 (elastic)

Correct Answer: B

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Question 18 View Details

The market for a good is described by the linear demand $ P = 100 - 0.5Q $ and supply $ P = 20 + 0.25Q $. The government imposes a specific tax of $£10$ per unit on sellers.\n\n(a) Find the new equilibrium quantity, the price paid by consumers and the price received by producers after the tax.\n(b) Compute the total tax revenue.\n(c) Determine the dead‑weight loss caused by the tax, rounding your answer to two decimal places.

A. 58.30

B. 80.00

C. 73.45

Correct D. 66.70

Correct Answer: D

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Question 19 View Details

A firm's total cost function (in thousands of dollars) is given by $ TC = 0.02Q^{3} - 0.3Q^{2} + 10Q + 50 $, where $Q$ is output in units. Find the level of output that minimises average total cost (ATC). Give your answer rounded to two decimal places.

A. 12.50

B. 10.75

C. 15.20

Correct D. 13.94

Correct Answer: D

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Question 20 View Details

In an open economy the marginal propensity to consume (MPC) is 0.8, the tax rate is 25 % and the marginal propensity to import (MPM) is 0.15.\n\n(a) Compute the Keynesian multiplier for this economy.\n(b) If the government increases autonomous spending by $£100$ million, what is the expected increase in equilibrium national income? Give the answer in millions of pounds, rounded to the nearest whole number.

A. 180

B. 200

Correct C. 182

D. 190

Correct Answer: C

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Question 21 View Details

Nominal GDP was ₦2 000 billion in Year 1 and ₦2 500 billion in Year 3. The Consumer Price Index (CPI) was 120 in Year 1, 126 in Year 2 and 135 in Year 3. Using Year 1 as the base (CPI = 100), calculate the average annual growth rate of real GDP between Year 1 and Year 3. Express your answer as a percentage to two decimal places.

A. 5.00%

B. 6.78%

Correct C. 5.41%

D. 4.12%

Correct Answer: C

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Question 22 View Details

The economy's Gross Domestic Product (GDP) at market price is ₦1 200 billion. The following factor incomes are recorded:\n- Compensation of employees: ₦500 billion\n- Rent: ₦80 billion\n- Interest: ₦70 billion\n- Indirect taxes: ₦150 billion\n- Subsidies: ₦30 billion\n- Depreciation (capital consumption): ₦100 billion\nUsing the income approach, determine the net operating surplus (profit) included in GDP. Give your answer in billion Naira.

A. 350

Correct B. 330

C. 310

D. 290

Correct Answer: B

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Question 23 View Details

Two observations of the labour market are given:\n- When unemployment was $6\%$, inflation was $8\%$.\n- When unemployment was $4\%$, inflation was $5\%$.\nAssuming a linear Phillips‑curve relationship $\pi = m u + c$ and a target inflation rate of $6\%$, first find the unemployment rate that would achieve the target (the NAIRU). Then, using this curve, calculate the expected inflation if unemployment falls to $5\%$. Give your final answer as a percentage to one decimal place.

A. 7.2%

Correct B. 6.5%

C. 8.0%

D. 5.5%

Correct Answer: B

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Question 24 View Details

The following data show the total product (TP) of a firm for different numbers of workers (L):\n\[\begin{array}{c|c}\nL & TP \\ \hline\n2 & 20\\\n4 & 50\\\n6 & 78\\\n8 & 100\\\n10 & 115\n\end{array}\]\nAssuming that between the recorded points the marginal product (MP) and total product change linearly, determine the approximate number of workers at which marginal product equals average product (i.e., $MP = AP$). Give your answer to two decimal places.

Correct A. 6.83

B. 7.45

C. 8.20

D. 5.91

Correct Answer: A

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Question 25 View Details

A firm faces the following cost and revenue conditions:\n- Fixed cost: ₦200 000\n- Variable cost per unit for the first 150 units: ₦1 800\n- Variable cost per unit for each unit above 150: ₦2 200\n- Selling price per unit for the first 200 units: ₦3 500\n- Selling price per unit for any unit above 200: ₦2 000\nWhat level of output (in units) maximises the firm's profit? Provide the exact integer number of units.

A. 250

B. 150

Correct C. 200

D. 300

Correct Answer: C

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