Practice neco economics 2018 Past Questions | Edcrib

Question 1 View Details

A monopolist faces the demand equation $ P = 120 - 2Q $ and has constant marginal cost of $20$ per unit. The government imposes a specific tax of $10$ per unit on the firm. Determine the new equilibrium price paid by consumers, the equilibrium output, and the change in consumer surplus compared with the situation before the tax.

A. New price = 80, new output = 20 units, consumer surplus falls by 100

B. New price = 85, new output = 18.75 units, consumer surplus falls by 140.625

Correct C. New price = 75, new output = 22.5 units, consumer surplus falls by 118.75

D. New price = 70, new output = 25 units, consumer surplus falls by 125

Correct Answer: C

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Question 2 View Details

A textile firm has the following total‑cost data: $Q=0$ units, $TC=150$; $Q=10$ units, $TC=250$; $Q=20$ units, $TC=380$; $Q=30$ units, $TC=540$; $Q=40$ units, $TC=740$. (a) Compute average total cost (ATC) and marginal cost (MC) for each output level. (b) Identify the range of output where the firm experiences economies of scale. (c) If the market price is $25$ per unit, should the firm increase output beyond $30$ units? Justify your answer.

A. ATC: Q=10 →25, Q=20 →19, Q=30 →18, Q=40 →18.5; MC: Q=10 →9, Q=20 →12, Q=30 →15, Q=40 →19; economies of scale up to 30 units; since price (25) > MC at 30 (15), the firm should increase output beyond 30 units, but only if MC remains below price.

Correct B. ATC: Q=10 →25, Q=20 →19, Q=30 →18, Q=40 →18.5; MC: Q=10 →10, Q=20 →13, Q=30 →16, Q=40 →20; economies of scale up to 30 units; since price (25) > MC at 30 (16), the firm should increase output beyond 30 units.

C. ATC: Q=10 →24, Q=20 →20, Q=30 →19, Q=40 →19.5; MC: Q=10 →11, Q=20 →14, Q=30 →17, Q=40 →21; economies of scale up to 20 units; since price (25) > MC at 30 (17), the firm should not increase output beyond 30 units.

D. ATC: Q=10 →26, Q=20 →21, Q=30 →19, Q=40 →20; MC: Q=10 →13, Q=20 →16, Q=30 →19, Q=40 →23; economies of scale up to 40 units; since price (25) > MC at 30 (19), the firm should increase output beyond 30 units.

Correct Answer: B

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Question 3 View Details

The market for a good is described by demand $ Q_{d}=200-3P $ and supply $ Q_{s}=2P-20 $. The government introduces a specific tax of $15$ per unit on the good. Find the price paid by consumers, the price received by producers, the total tax revenue, and the dead‑weight loss caused by the tax.

A. Consumers pay 55 per unit, producers receive 40 per unit, tax revenue = 825, dead‑weight loss = 150

Correct B. Consumers pay 50 per unit, producers receive 35 per unit, tax revenue = 750, dead‑weight loss = 135

C. Consumers pay 50 per unit, producers receive 30 per unit, tax revenue = 600, dead‑weight loss = 100

D. Consumers pay 45 per unit, producers receive 30 per unit, tax revenue = 675, dead‑weight loss = 120

Correct Answer: B

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Question 4 View Details

Given the following macro‑economic data (in billions of naira): Consumption = 500, Investment = 150, Government spending = 200, Exports = 80, Imports = 120, Indirect taxes = 60, Subsidies = 20, Depreciation = 40, Net factor income from abroad = -10. Compute (a) GDP using the expenditure approach, (b) GNP, (c) Net National Product (NNP) at market prices, and (d) NNP at factor cost.

A. GDP = 820, GNP = 800, NNP (market prices) = 760, NNP at factor cost = 720

B. GDP = 810, GNP = 800, NNP (market prices) = 770, NNP at factor cost = 730

Correct C. GDP = 810, GNP = 800, NNP (market prices) = 760, NNP at factor cost = 720

D. GDP = 810, GNP = 790, NNP (market prices) = 750, NNP at factor cost = 710

Correct Answer: C

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Question 5 View Details

Country A has a current GDP per capita of $\$2{,}500$. It aims to reach $\$5{,}000$ in 10 years. The baseline real growth rate of GDP per capita is 2 % per annum. The government can raise the growth rate by $0.5$% per year for every 2 % increase in the proportion of the population completing secondary education. Currently 30 % complete secondary education, and the government plans to raise this proportion linearly to 38 % over the 10‑year period. Is the target achievable? Show all calculations.

A. Required average annual growth ≈ 6.5 %; achievable average growth ≈ 3 %; therefore the target is not achievable.

B. Required average annual growth ≈ 7.18 %; achievable average growth ≈ 4 %; therefore the target is not achievable.

C. Required average annual growth ≈ 7.18 %; achievable average growth ≈ 3 %; therefore the target is achievable.

Correct D. Required average annual growth ≈ 7.18 %; achievable average growth ≈ 3 %; therefore the target is not achievable.

Correct Answer: D

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Question 6 View Details

Farmer A has 10 hectares of land to allocate between maize (x hectares) and soybeans (y hectares) with $x + y = 10$. The yield of maize per hectare (in tons) is given by $1 + 0.2x$ and the yield of soybeans per hectare (in tons) is $2 - 0.1x$. Market prices are $\text{₦}300$ per ton for maize and $\text{₦}250$ per ton for soybeans. The farm incurs a fixed cost of $\text{₦}2{,}000$ and a variable cost of $\text{₦}600$ per hectare of maize and $\text{₦}1{,}000$ per hectare of soybeans. Determine the allocation (x and y) that maximizes profit. Give your answer to two decimal places.

A. 5.50 ha of maize and 4.50 ha of soybeans (approx)

Correct B. 7.58 ha of maize and 2.42 ha of soybeans (approx)

C. 6.00 ha of maize and 4.00 ha of soybeans (approx)

D. 8.25 ha of maize and 1.75 ha of soybeans (approx)

Correct Answer: B

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Question 7 View Details

In a competitive market, the equilibrium price of wheat is $\text{₦}150$ per kg and the equilibrium quantity is 500 kg. The government imposes a price ceiling of $\text{₦}120$ per kg. At this ceiling, the quantity demanded rises to 700 kg while the quantity supplied falls to 300 kg. What is the size of the shortage created by the price ceiling (in kg)?

A. 200

Correct B. 400

C. 100

D. 500

Correct Answer: B

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Question 8 View Details

After a price reduction, the price of a product falls from $\text{₦}200$ to $\text{₦}150$. During the same period, the quantity demanded rises from 4,000 units to 5,600 units. (a) Calculate the price elasticity of demand using the midpoint method. (b) Based on the elasticity, should the firm raise or lower the price to increase total revenue? State the elasticity value (to two decimal places) and the appropriate pricing action.

Correct A. -1.17, lower price

B. -1.45, raise price

C. -0.95, lower price

D. -0.85, raise price

Correct Answer: A

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Question 9 View Details

The reserve requirement ratio set by the Central Bank is 5 %. The public holds cash equal to 25 % of the total deposits (currency‑deposit ratio = 0.25). (a) Compute the money multiplier. (b) If the Central Bank purchases $\text{₦}100$ million of government securities, paying cash to the public, and the public's cash‑deposit ratio remains unchanged, by how much will the money supply increase? Give the multiplier to two decimal places and the change in money supply in millions of naira.

Correct A. 4.17, ₦416.7 million

B. 5.00, ₦500.0 million

C. 4.00, ₦400.0 million

D. 3.75, ₦375.0 million

Correct Answer: A

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Question 10 View Details

Using the expenditure approach, calculate the Gross Domestic Product (GDP) for an economy with the following components (in millions of naira): Consumption = 2,500; Investment = 800; Government spending = 1,200; Exports = 500; Imports = 600.

A. 4200

B. 5000

Correct C. 4400

D. 3400

Correct Answer: C

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Question 11 View Details

A firm's total cost function is $TC = 0.1Q^{2} + 20Q + 500$ (where Q is output in units and costs are in Naira). The market demand curve is $P = 120 - 0.5Q$. Determine the output level that maximizes profit and state the maximum profit. Give your answer as a fraction where appropriate.

A. Profit‑maximising output Q = 125 units (≈ 125 units) and maximum profit = 15000/3 Naira (≈ ₦5 000).

Correct B. Profit‑maximising output Q = 250/3 units (≈ 83.33 units) and maximum profit = 11000/3 Naira (≈ ₦3 667).

C. Profit‑maximising output Q = 100 units (≈ 100 units) and maximum profit = 12000/3 Naira (≈ ₦4 000).

D. Profit‑maximising output Q = 200/3 units (≈ 66.67 units) and maximum profit = 9000/3 Naira (≈ ₦3 000).

Correct Answer: B

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Question 12 View Details

Country X imports 2 000 tonnes of wheat at a world price of $0.50 per kg and exports 1 500 tonnes of cocoa at $2.00 per kg. The exchange rate is 360 Naira per US dollar. The government imposes a 5 % tariff on wheat imports, a 10 % export tax on cocoa, and grants a subsidy of $0.05 per kg to wheat producers. (i) Calculate the net trade balance in Naira after the tariff, tax and subsidy. (ii) Express the percentage change in the trade balance relative to the situation with no tariff, tax or subsidy.

A. (i) Net trade surplus = ₦540 000 000. (ii) Trade balance falls by 10 % relative to the no‑policy case.

B. (i) Net trade deficit = ₦150 000 000. (ii) Trade balance falls by 15 % relative to the no‑policy case.

C. (i) Net trade surplus = ₦720 000 000. (ii) Trade balance rises by 5 % relative to the no‑policy case.

Correct D. (i) Net trade surplus = ₦630 000 000. (ii) Trade balance falls by 12.5 % relative to the no‑policy case.

Correct Answer: D

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Question 13 View Details

A savings account offers a nominal interest rate of 12 % per annum. Investors expect inflation of 8 % per annum, but the actual inflation over the next three years turns out to be 10 % per annum. (a) Compute the exact real interest rate using the Fisher equation and the approximate real rate using the simple Fisher approximation. (b) If ₦10 000 is invested at the nominal rate for three years, what is its purchasing power at the end of the period, expressed in Naira to the nearest naira?

Correct A. Exact real rate = 1.818 % (≈ 0.01818); approximate real rate = 2 %. Purchasing power after 3 years ≈ ₦10 560.

B. Exact real rate = 2.0 % (≈ 0.0200); approximate real rate = 2 %; Purchasing power after 3 years ≈ ₦10 400.

C. Exact real rate = 2.2 % (≈ 0.0220); approximate real rate = 3 %; Purchasing power after 3 years ≈ ₦11 200.

D. Exact real rate = 1.5 % (≈ 0.0150); approximate real rate = 1 %; Purchasing power after 3 years ≈ ₦9 800.

Correct Answer: A

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Question 14 View Details

The population of Country Y was 45 million in 2020. It grew at an annual rate of 2.5 % for the first five years and at 1.8 % per annum thereafter because of a new family‑planning policy. (i) In which calendar year will the population first exceed 60 million? (ii) What is the average annual growth rate over the whole period up to that year (expressed to two decimal places)?

A. (i) The population exceeds 60 million in the year 2034. (ii) The average annual growth rate over the 15‑year period is about 2.10 %.

Correct B. (i) The population exceeds 60 million in the year 2035. (ii) The average annual growth rate over the 15‑year period is about 2.03 %.

C. (i) The population exceeds 60 million in the year 2035. (ii) The average annual growth rate over the 15‑year period is about 1.85 %.

D. (i) The population exceeds 60 million in the year 2036. (ii) The average annual growth rate over the 15‑year period is about 1.95 %.

Correct Answer: B

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Question 15 View Details

In a given year the following income‑approach components of a country's economy were recorded (all figures in Naira): wages = 1 200 000, rent = 300 000, interest = 200 000, profits = 500 000, indirect taxes less subsidies = 150 000, depreciation = 250 000. Net factor income from abroad is - 80 000 (a net outflow). The population is 250 000. (a) Compute GDP at market price. (b) Compute GNP. (c) Compute per‑capita GNP (to two decimal places).

A. (a) GDP = ₦2 600 000. (b) GNP = ₦2 520 000. (c) Per‑capita GNP = ₦12.60.

Correct B. (a) GDP = ₦2 600 000. (b) GNP = ₦2 520 000. (c) Per‑capita GNP = ₦10.08.

C. (a) GDP = ₦2 600 000. (b) GNP = ₦2 680 000. (c) Per‑capita GNP = ₦10.72.

D. (a) GDP = ₦2 350 000. (b) GNP = ₦2 270 000. (c) Per‑capita GNP = ₦9.08.

Correct Answer: B

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Question 16 View Details

The total product (TP) of a firm at different labour levels (L) is given by the table: $L: 1,\; TP: 10$; $L: 2,\; TP: 28$; $L: 3,\; TP: 45$; $L: 4,\; TP: 58$; $L: 5,\; TP: 66$.\n(a) Calculate the marginal product (MP) for each additional worker.\n(b) Calculate the average product (AP) at each labour level.\n(c) State the labour level at which MP is maximised and the labour level at which AP is maximised.

A. MP is maximised at L = 3; AP is maximised at L = 2

Correct B. MP is maximised at L = 2; AP is maximised at L = 3

C. MP is maximised at L = 4; AP is maximised at L = 3

D. MP is maximised at L = 2; AP is maximised at L = 4

Correct Answer: B

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Question 17 View Details

Country Y can produce either wheat or cloth with its resources. If it devotes all resources to wheat it can produce 100 units of wheat and 0 cloth; if it devotes all resources to cloth it can produce 0 wheat and 50 units of cloth. Currently it produces 40 wheat and 20 cloth. What is the opportunity cost of producing one additional unit of wheat in terms of cloth?

A. 2 cloth

Correct B. 0.5 cloth

C. 0.25 cloth

D. 1 cloth

Correct Answer: B

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Question 18 View Details

A monopolist can price‑discriminate between two separate markets. In market A the demand is $P = 120 - 2Q_{A}$. In market B the demand is $P = 100 - Q_{B}$. The firm's marginal cost is constant at $MC = 20$.\n(a) Determine the profit‑maximising output and price in each market.\n(b) Compute the firm's total profit from both markets combined.

Correct A. Q_A=25, P_A=70; Q_B=40, P_B=60; Total profit = 2850

B. Q_A=25, P_A=65; Q_B=40, P_B=55; Total profit = 2525

C. Q_A=20, P_A=80; Q_B=30, P_B=70; Total profit = 2700

D. Q_A=30, P_A=70; Q_B=35, P_B=60; Total profit = 2900

Correct Answer: A

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Question 19 View Details

Country X can produce either coffee or wheat. If it uses all its resources for coffee it can produce 120 units of coffee and 0 wheat; if it uses all resources for wheat it can produce 0 coffee and 360 units of wheat. The autarky relative price of coffee in terms of wheat is therefore 3 wheat per coffee. After opening to trade the world price of coffee falls to 2 wheat per coffee (the world price of wheat remains unchanged).\nIf Country X decides to specialize completely in coffee, how many units of wheat can it import by trading all its coffee at the world price?

A. 360 wheat

B. 180 wheat

Correct C. 240 wheat

D. 120 wheat

Correct Answer: C

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Question 20 View Details

A firm must transport 500 tonnes of raw material from a mine to its factory. Two transport options are available:\n- Rail: can carry up to 300 tonnes, cost $\text{₦}150$ per tonne, plus a fixed handling fee of $\text{₦}20,000$ if any rail shipment is used.\n- Road: can carry any amount up to 500 tonnes, cost $\text{₦}200$ per tonne, plus a loading fee of $\text{₦}5,000$ for each road shipment (any positive amount).\nDetermine the optimal tonnage to be shipped by rail and by road that minimises total transport cost, and state the minimum total cost.

A. Rail: 300 tonnes, Road: 200 tonnes, Minimum cost = 110000

Correct B. Rail: 0 tonnes, Road: 500 tonnes, Minimum cost = 105000

C. Rail: 250 tonnes, Road: 250 tonnes, Minimum cost = 112500

D. Rail: 100 tonnes, Road: 400 tonnes, Minimum cost = 120000

Correct Answer: B

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Question 21 View Details

A farmer cultivates 1 hectare of maize. The fixed cost is ₦150,000 and the variable cost is ₦45,000 per hectare. The expected yield is 5 tonnes per hectare. The farmer wants a profit that is at least $0.20$ of total cost. The government offers a subsidy that reduces the variable cost by 10\% if the market price per tonne exceeds $12{,}000$ naira. What is the minimum market price per tonne (in naira) the farmer must obtain to meet the profit target?

A. 45200

B. 48000

Correct C. 45720

D. 46000

Correct Answer: C

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Question 22 View Details

The government imposes a specific tax of $200$ naira per unit on a good. The market demand is $Q_{d}=5000-5P$ and the supply is $Q_{s}=2P$, where $P$ is the price in naira. After the tax, consumers pay price $P_{c}$ and producers receive $P_{p}=P_{c}-200$. Determine the total tax revenue collected (in naira) after the market reaches a new equilibrium.

A. 200000

B. 285714

Correct C. 228571

D. 228600

Correct Answer: C

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Question 23 View Details

A student can either work part‑time earning $5{,}000$ naira per week or attend a tutoring course that costs $2{,}000$ naira per week and raises her exam score by 5 points. Each additional exam point is expected to increase her future earnings by $800$ naira. Should she take the course? State the net monetary benefit (in naira) of attending the course.

Correct A. -3000

B. -1000

C. 1000

D. -5000

Correct Answer: A

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Question 24 View Details

A factory produces output according to the Cobb‑Douglas function $Q = 10 L^{0.5} K^{0.5}$. The wage rate is $w = 200$ naira per unit of labor and the rental rate of capital is $r = 500$ naira per unit of capital. To produce $Q = 1000$ units at minimum cost, find the cost‑minimising quantities of labor $L$ and capital $K$ (to the nearest whole unit) and the minimum total cost (in naira).

A. L = 150, K = 70, minimum cost = 63500

B. L = 158, K = 63, minimum cost = 64000

Correct C. L = 158, K = 63, minimum cost = 63246

D. L = 160, K = 60, minimum cost = 63000

Correct Answer: C

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Question 25 View Details

The population of a country was $150$ million in 2010. From 2010 to 2015 the annual growth rate was $2.5\%$. From 2015 to 2020 the growth rate fell linearly each year from $2.5\%$ to $1.5\%$, and from 2020 onward it remained constant at $1.5\%$. Estimate the population in 2025 (to one decimal place) and compute the average annual growth rate over the whole 2010‑2025 period (to two decimal places).

A. Population 2025 = 200.5 million; average annual growth = 2.10%

B. Population 2025 = 198.7 million; average annual growth = 2.00%

Correct C. Population 2025 = 202.9 million; average annual growth = 2.03%

D. Population 2025 = 205.3 million; average annual growth = 1.95%

Correct Answer: C

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