neco 2021 economics | Essay

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Question 1 View Details
Consider a small rural community that relies on farming and fishing for its livelihood. The community has a fixed amount of land, labour and capital each week.
Question Parts
(a)
Define the term "economic problem" and explain how it arises in the given community.
(b)
Identify two scarce resources in the community and discuss the opportunity cost associated with allocating each of them to either farming or fishing.
(c)
The community decides to allocate 60% of its available labour hours to farming and the remaining to fishing. If the total labour hours available per week are 200, calculate the number of labour hours devoted to each activity and discuss one potential economic implication of this allocation choice.
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Question 2 View Details
The table below shows the weekly quantity demanded and quantity supplied of a locally produced mango juice at different price levels in a town market. Price per litre (₦) | Quantity Demanded (litres) | Quantity Supplied (litres) --- | --- | --- 40 | 120 | 40 50 | 100 | 60 60 | 80 | 80 70 | 60 | 100 80 | 40 | 120
Question Parts
(a)
Using the table, determine the equilibrium price and quantity. Show how you arrived at your answer.
(b)
Suppose the government imposes a per‑unit tax of ₦10 on producers. Assuming the tax does not change the shape of the supply curve, calculate the new quantity supplied at each price level (i.e., effective price received by producers is price − tax). Identify the new equilibrium price (price paid by consumers) and quantity.
(c)
Calculate the dead‑weight loss (DWL) resulting from the tax, assuming linear demand and supply between the relevant points. Use the formula for the area of a triangle: ½ × base × height. Show your steps.
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Question 3 View Details
The price of wheat in a local market increased from \u20a4200 per kilogram to \u20a4250 per kilogram over one year. During the same period the quantity of wheat purchased by households fell from 5,000 kg to 4,000 kg.
Question Parts
(a)
Calculate the price elasticity of demand for wheat using the midpoint (arc) method.
(b)
Classify the elasticity obtained and explain what it implies for total revenue when price changes.
(c)
The government is considering imposing a price ceiling of \u20a4220 per kilogram on wheat. Using the elasticity concept, advise whether this policy is likely to increase total revenue for wheat sellers and justify your answer.
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Question 4 View Details
A small manufacturing firm produces two products, A and B, using a common fixed factor (factory space) and variable labour. The total cost functions are: TC_A = 50 + 5q_A + 0.1q_A^2 and TC_B = 30 + 4q_B + 0.2q_B^2, where q_A and q_B are the weekly output levels of A and B respectively. Each unit of A requires 0.5 labour‑hours and each unit of B requires 0.8 labour‑hours. The firm has a maximum of 200 labour‑hours per week. Market prices are ₦20 per unit of A and ₦25 per unit of B. The firm is a price‑taker and wishes to maximise weekly profit.
Question Parts
(a)
Derive the marginal cost (MC) functions for products A and B.
(b)
Determine the profit‑maximising output combination of A and B subject to the labour‑hour constraint. Show the steps you use (you may use the Lagrange multiplier method or logical reasoning).
(c)
Calculate the maximum weekly profit at the optimal output levels found in part (b).
(d)
If the market price of product B rises by 10 % (while all other factors remain unchanged), discuss qualitatively and quantitatively how the optimal output mix and the maximum profit would be affected.
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Question 5 View Details
A shoe manufacturing firm incurs a fixed cost of ₦200,000 per month. The variable cost per pair of shoes is ₦1,200 for the first 500 pairs produced each month and ₦1,000 for each pair produced beyond the first 500 because of economies of scale. Each pair of shoes is sold at a constant price of ₦2,500.
Question Parts
(a)
Write the total cost (TC) function in terms of the quantity Q of shoes produced per month.
(b)
Determine the break‑even quantity, i.e., the smallest whole number of shoes for which total revenue equals total cost.
(c)
Calculate the profit (or loss) the firm would make if it produced and sold 800 pairs of shoes in a month.
(d)
Explain how the reduction in variable cost after the first 500 pairs affects the average cost and the firm’s incentive to increase output.
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Question 6 View Details
A bakery that produces loaves of bread operates in two different market environments. 1. In a perfectly competitive market, the market price of a loaf is ₦500. The bakery’s total cost for producing Q loaves per month is given by TC = 50,000 + 200Q. 2. The bakery is granted an exclusive licence that makes it a monopoly. The market demand for loaves is described by the linear equation P = 800 – 0.2Q, where P is the price per loaf (in naira) and Q is the quantity demanded per month. The bakery’s marginal cost (MC) is constant at ₦300 per loaf. Assume the bakery can produce any whole number of loaves and that there are no other costs besides those captured in the cost functions above.
Question Parts
(a)
Calculate the profit the bakery would earn per month if it produced and sold 1,000 loaves in the perfectly competitive market.
(b)
For the monopoly situation: i. Determine the profit‑maximising quantity of loaves and the corresponding price. ii. Compute the monthly profit at that output. iii. Calculate the consumer surplus under monopoly. iv. Estimate the dead‑weight loss created by the monopoly compared with the competitive outcome.
() Find Q* and P* where MR = MC.
() Calculate profit = (P* – MC) × Q* – fixed cost (if any).
() Determine consumer surplus as the area of the triangle between the demand curve and the monopoly price.
() Find the dead‑weight loss as the loss in total surplus relative to the competitive equilibrium (price = MC).
(c)
Briefly discuss the welfare implications of moving from perfect competition to monopoly for both consumers and the bakery.
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Question 7 View Details
The following data are extracted from the accounts of Country X for the year ended 31 December 2023: - Household consumption expenditure (C): ₦ 2,500 billion - Government expenditure (G): ₦ 1,200 billion - Gross private domestic investment (I): ₦ 800 billion - Exports (X): ₦ 600 billion - Imports (M): ₦ 450 billion - Net factor income from abroad (NFA): -₦ 30 billion (net outflow) - Indirect taxes minus subsidies (T): ₦ 150 billion - Depreciation (consumption of fixed capital) (D): ₦ 200 billion - Statistical discrepancy (SD): ₦ 20 billion (positive) Answer the following questions:
Question Parts
(a)
Calculate the Gross Domestic Product (GDP) at market price using the expenditure approach.
(b)
Using the result from part (a), determine the Gross National Product (GNP) at factor cost.
(c)
Explain two major limitations of using GDP as a measure of the welfare of a nation.
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Question 8 View Details
Consider the monetary system of Country Y. The central bank has set the required reserve ratio at 10 %. The public holds currency equal to 25 % of total bank deposits. The banking system currently has total deposits of ₦ 5,000 billion.
Question Parts
(a)
Calculate the monetary base (M0) for Country Y.
(b)
Using the given reserve ratio and currency‑deposit ratio, compute the money multiplier and the total money supply (M2) that the economy can support.
(c)
If the central bank decides to purchase government securities worth ₦ 200 billion, explain the likely impact on interest rates and inflation in the short run, using the liquidity‑preference framework.
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