neco 2023 economics | Essay

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Question 1 View Details
Answer the following questions on basic economic concepts as they apply to a developing economy such as Nigeria.
Question Parts
(a)
Define scarcity and explain why it is regarded as the fundamental problem of economics.
(b)
Define opportunity cost and illustrate the concept with an example of a farmer who must decide between planting cassava or maize.
(c)
Discuss how scarcity and opportunity cost influence the government’s decision to allocate the national budget between education and healthcare. In your discussion, refer to marginal benefit and marginal cost.
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Question 2 View Details
The market for bottled drinking water in Lagos has been observed over six months. The table shows the average monthly price (₦ per litre) together with the corresponding quantity demanded and quantity supplied (in thousands of litres).
Question Parts
(a)
From the data given, estimate the equilibrium price and equilibrium quantity (in thousands of litres) that would exist if the market were perfectly competitive. Show the method you use.
(b)
The government introduces a specific tax of ₦20 per litre on bottled water. Explain qualitatively how this tax will affect (i) the price paid by consumers and (ii) the price received by producers. Indicate the direction of the shift in the supply curve and the likely change in equilibrium quantity.
(c)
If the price of a close substitute – soft drink – falls, describe the expected impact on the demand for bottled water and the resulting equilibrium in the bottled‑water market.
(d)
Using the midpoint method, calculate the price elasticity of demand between the price points ₦30 and ₦40. Use the quantities demanded from the table.
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Question 3 View Details
The table below shows the quantity of wheat demanded at various prices in a competitive market. | Price (₦ per kg) | Quantity demanded (thousand kg) | |------------------|---------------------------------| | 150 | 80 | | 200 | 65 | | 250 | 55 | | 300 | 48 | Using the data above, answer the following questions:
Question Parts
(a)
Calculate the price elasticity of demand between the price of ₦200 and ₦250 per kg using the midpoint (arc) method.
(b)
Classify the elasticity obtained in part (a) and explain what it implies for the firm’s total revenue when price rises from ₦200 to ₦250 per kg.
(c)
The government imposes a specific tax of ₦20 per kg on wheat. Discuss qualitatively how this tax is likely to affect the equilibrium price paid by consumers, the equilibrium quantity, and the total revenue of wheat sellers, using the elasticity concept derived earlier.
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Question 4 View Details
A firm operates in the short run with a fixed amount of capital and labour as the only variable input. The table below shows the total product (TP) obtained from different numbers of workers employed. | Labour (workers) | Total Product (units) | |-------------------|-----------------------| | 0 | 0 | | 1 | 20 | | 2 | 45 | | 3 | 65 | | 4 | 80 | | 5 | 90 | | 6 | 95 | | 7 | 97 | Answer the following questions:
Question Parts
(a)
Calculate the marginal product (MP) and average product (AP) of labour for each additional worker up to the seventh worker.
(b)
Identify the range of labour input over which the law of diminishing marginal returns sets in and explain your conclusion using the values obtained in part (a).
(c)
Assume the firm can sell each unit of output at a constant price of ₦50 and each worker is paid a wage of ₦400 per period. Determine the level of labour that maximizes the firm’s profit in the short run, showing all calculations.
(d)
Discuss two possible reasons why the firm might still incur a loss even at the profit‑maximising level of output.
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Question 5 View Details
A small manufacturing firm produces a single product. Its monthly fixed cost is ₦120,000. The variable cost per unit is given by \(VC = 20Q + 0.05Q^{2}\) where \(Q\) is the quantity produced per month. The market demand for the product is described by the price‑quantity relationship \(P = 500 - 0.2Q\).
Question Parts
(a)
Derive the profit function \(\pi(Q)\) in terms of \(Q\).
(b)
Determine the profit‑maximising output level and the corresponding profit.
(c)
Calculate the quantity (or quantities) at which the firm breaks even (i.e. makes zero profit).
(d)
If the fixed cost rises by 10 %, state the new profit that the firm would earn if it continues to produce at the output level found in part (b). Comment briefly on the effect of the increase in fixed cost on the firm’s profitability.
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Question 6 View Details
The Nigerian telecommunications sector is dominated by a few large firms, yet a growing number of smaller providers are entering the market. Consider the following statements about this market: (i) The market exhibits product differentiation through service bundles. (ii) There are significant barriers to entry because of high spectrum‑licensing costs. (iii) Firms engage in non‑price competition such as advertising and network quality. (iv) In the long run, firms can earn economic profit. Based on the above, answer the following questions.
Question Parts
(a)
Identify which market structure best describes the sector (perfect competition, monopolistic competition, oligopoly, monopoly) and justify your choice using at least three of the statements provided.
(b)
Explain how the price elasticity of demand is likely to differ for a large incumbent firm compared with a new entrant.
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Question 7 View Details
The Central Statistical Office released the following macro‑economic data for Country X for the year 2022 (all figures in billions of Naira): - Consumption expenditure (C): 4,800 - Gross fixed capital formation (I): 1,200 - Government expenditure (G): 1,500 - Exports of goods and services (X): 900 - Imports of goods and services (M): 1,100 - Indirect taxes (IT): 300 - Subsidies (S): 80 - Depreciation (D): 250 - Net factor income from abroad (NFIA): 120 - Population: 20 million Using the above information, answer the following: a) Compute the Gross Domestic Product (GDP) at market price. b) Derive the following sequentially: i) GDP at factor cost, ii) Gross National Product (GNP), iii) Net Domestic Product (NDP), iv) National Income (NI) at factor cost. c) Calculate the per‑capita National Income and comment briefly on the likely standard of living implication.
Question Parts
(a)
Compute the Gross Domestic Product (GDP) at market price.
(b)
Derive the following sequentially:
() GDP at factor cost.
() Gross National Product (GNP).
() Net Domestic Product (NDP).
() National Income (NI) at factor cost.
(c)
Calculate the per‑capita National Income and comment briefly on the likely standard of living implication.
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Question 8 View Details
The Central Bank of Nigeria is reviewing its monetary stance. The following data are given for the current quarter: - Required reserve ratio (RRR) = 10% of demand deposits. - Currency‑to‑deposit ratio (c) = 0.25 (i.e., the public holds 25% of total money as cash). - The Central Bank injects a cash injection of ₦500 million into the banking system through open‑market purchase of government securities. - Commercial banks decide to hold excess reserves equal to 2% of total deposits. Answer the following: a) Calculate the theoretical money multiplier (m) for this economy. b) Determine the maximum possible increase in the money supply (ΔM) resulting from the cash injection, assuming the excess‑reserve behaviour described. c) Discuss briefly how the change in money supply is likely to affect (i) the prevailing interest rate and (ii) inflation, using the liquidity‑preference framework and the quantity‑theory of money respectively.
Question Parts
(a)
Calculate the theoretical money multiplier (m) for this economy.
(b)
Determine the maximum possible increase in the money supply (ΔM) resulting from the cash injection, assuming the excess‑reserve behaviour described.
(c)
Discuss briefly how the change in money supply is likely to affect (i) the prevailing interest rate and (ii) inflation, using the liquidity‑preference framework and the quantity‑theory of money respectively.
() Effect on interest rate.
() Effect on inflation.
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