neco 2020 economics | Essay

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Question 1 View Details
A small island community produces only two goods: fish (Good X) and woven baskets (Good Y). The community has limited resources of labour, capital and fish‑catching equipment.
Question Parts
(a)
Define scarcity and explain why it is regarded as the fundamental problem of economics.
(b)
Draw a simple Production Possibilities Frontier (PPF) for the island showing the maximum combinations of fish and baskets that can be produced. Using the diagram, explain the opportunity cost of moving from point A (20 fish, 0 baskets) to point B (15 fish, 10 baskets).
(c)
Assume a new fishing net is introduced that raises the island’s ability to catch fish without affecting basket production. Describe how the PPF changes and discuss the resulting effect on the opportunity cost of producing baskets.
(d)
Identify and briefly discuss two policy measures a government could adopt to alleviate the problem of scarcity without changing the PPF.
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Question 2 View Details
The following price‑quantity data are observed in the market for a locally produced fruit. Demand data: (Price in ₦, Quantity demanded in units) – (10, 100), (20, 80), (30, 60). Supply data: (Price in ₦, Quantity supplied in units) – (10, 40), (20, 70), (30, 100).
Question Parts
(a)
Using any two points from each table, derive the linear demand equation and the linear supply equation in the form \(Q = a - bP\) and \(Q = c + dP\) respectively.
(b)
Find the equilibrium price and quantity by equating the two equations obtained in part (a).
(c)
Calculate the consumer surplus and producer surplus at the equilibrium found in part (b). Express your answers in ₦.
(d)
The government imposes a per‑unit tax of ₦5 on sellers. (i) Determine the new price paid by buyers, the price received by sellers and the new equilibrium quantity. (ii) Compute the new consumer surplus, producer surplus and the government revenue. (iii) Comment briefly on the efficiency loss (dead‑weight loss) caused by the tax.
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Question 3 View Details
The table below shows the price (in Naira) and the corresponding quantity demanded (in units) of a particular commodity over two consecutive periods. | Period | Price (₦) | Quantity Demanded (units) | |--------|-----------|---------------------------| | 1 | 200 | 500 | | 2 | 250 | 400 | Using the information provided, answer the following questions:
Question Parts
(a)
Calculate the price elasticity of demand between Period 1 and Period 2 using the midpoint (arc) method.
(b)
Interpret the magnitude of the elasticity you obtained. State whether demand is elastic, inelastic or unit‑elastic and explain what this implies for total revenue when price rises from ₦200 to ₦250.
(c)
Discuss at least three factors that could cause the demand for this commodity to be elastic.
(d)
Based on your calculation and interpretation, advise a firm that sells this commodity on how it should respond to a cost‑push increase that would force it to raise its price from ₦200 to ₦250.
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Question 4 View Details
A manufacturing firm produces widgets using labour (L) and a fixed amount of capital (K = 10 units). The total product (TP) obtained from different numbers of workers is shown in the table below. | Workers (L) | Total Product (TP) | |-------------|--------------------| | 1 | 20 | | 2 | 45 | | 3 | 66 | | 4 | 80 | | 5 | 88 | | 6 | 92 | Answer the following questions:
Question Parts
(a)
Calculate the marginal product of labour (MPL) for each additional worker from the second to the sixth worker.
(b)
Identify the point (i.e., the number of workers) at which the law of diminishing marginal returns sets in and explain why this occurs in the short run.
(c)
If the market price of a widget is ₦30 per unit, the wage rate for a worker is ₦200 per period, and capital cost is sunk, determine the optimal number of workers the firm should employ in the short run. Use the concept of marginal revenue product (MRP = Price × MPL). Show your calculations and justify the choice.
(d)
Briefly discuss how the decision on the number of workers might differ in the long run when capital is no longer fixed.
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Question 5 View Details
A small manufacturing firm produces widgets. The total cost (TC) consists of a fixed cost and a variable cost that is constant per unit. The following information is available: - When output (q) is 0 units, TC = ₦120,000. - When output is 200 units, TC = ₦260,000. - When output is 500 units, TC = ₦530,000. Each widget is sold for ₦1,200. Answer the following questions:
Question Parts
(a)
Determine the fixed cost and the variable cost per unit. (i) Show clearly how the two values are obtained.
(b)
Write the cost function TC(q) and the revenue function R(q).
(c)
Find the break‑even output level (the quantity at which profit is zero).
(d)
If the firm wants to earn a profit of ₦300,000, what minimum output should it produce? State the result and comment on its feasibility.
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Question 6 View Details
The table below shows data for three firms (A, B, C) that produce identical smartphones in a particular market. | Firm | Output (units/month) | Price (₦ per unit) | Total Cost (₦) | |------|----------------------|--------------------|----------------| | A | 1,000 | 15,000 | 8,000,000 | | B | 800 | 15,000 | 6,500,000 | | C | 1,200 | 15,000 | 9,200,000 | Assume the market price is fixed at ₦15,000 per unit (price‑taking behaviour). The government is considering imposing a price ceiling of ₦12,000 per unit. Answer the following questions:
Question Parts
(a)
Identify the market structure of this industry and justify your answer with two characteristic features.
(b)
Calculate the profit (or loss) of each firm at the current price of ₦15,000 per unit.
(c)
If a price ceiling of ₦12,000 per unit is imposed, determine which firms, if any, will continue to produce in the short run. (i) Use the shutdown condition (price < average variable cost). (ii) Approximate each firm's average variable cost (AVC) by (TC – Fixed Cost)/Output, where the fixed cost for every firm is the same as the fixed cost you derived for Firm A in Question 5. (iii) State your conclusion for each firm.
(d)
Discuss two possible long‑run outcomes for the industry after the price ceiling is enforced.
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Question 7 View Details
The following data are for Country X for the year 2022 (all figures are in billions of Naira): - Consumption (C) = 4,500 - Investment (I) = 1,200 - Government expenditure (G) = 800 - Exports (X) = 600 - Imports (M) = 500 - Net factor income from abroad (NFIA) = 50 - Indirect taxes less subsidies (T) = 300 - Depreciation (D) = 200 Using this information, answer the questions below.
Question Parts
(a)
Calculate the Gross Domestic Product (GDP) at market price using the expenditure approach.
(b)
Using the data above, determine Net National Product at factor cost (NNPFC).
(c)
The government plans to increase its expenditure (G) by 10 % and will finance the increase by borrowing. Assuming the marginal propensity to consume (MPC) is 0.6, discuss qualitatively how this policy is likely to affect the equilibrium level of national income in the short run, using the Keynesian multiplier concept.
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Question 8 View Details
Country Y’s central bank has recently undertaken an open‑market operation. The following information is available for the current quarter: - Reserve requirement ratio (RRR) = 10 % - Cash ratio (CR) = 5 % - Excess reserves held by commercial banks = ₦150 million - The central bank purchases government securities worth ₦200 million from commercial banks. - The public’s preference for holding cash relative to deposits remains unchanged. Using the data above, answer the questions that follow.
Question Parts
(a)
Determine the money multiplier for this economy.
(b)
Calculate the maximum possible increase in the money supply that could result from the open‑market purchase, assuming banks lend out all excess reserves.
(c)
Discuss two potential limitations that could cause the actual increase in the money supply to be lower than the theoretical maximum calculated in part (b).
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