Practice neco economics 2023 Past Questions | Edcrib

Question 1 View Details

If the price of smartphones falls from $50{,}000$ naira to $40{,}000$ naira and at the same time consumer income rises, what is the likely effect on the equilibrium quantity of smartphones? Explain the direction of the shifts in the demand and supply curves and the resulting change in equilibrium quantity.

A. The equilibrium quantity becomes indeterminate.

B. The equilibrium quantity remains unchanged.

Correct C. The equilibrium quantity increases.

D. The equilibrium quantity decreases.

Correct Answer: C

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Question 2 View Details

The following data show the quantity demanded of a good at two different income levels: Income (naira) | Quantity demanded (units) $100{,}000$ | 200 $150{,}000$ | 150 Based on this information, what type of good is it? Justify your answer.

A. Luxury good

B. Necessity good

C. Normal good

Correct D. Inferior good

Correct Answer: D

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Question 3 View Details

A progressive income tax is structured as follows: - 10 % on the first $500{,}000$ naira of taxable income, - 20 % on the next $500{,}000$ naira, - 30 % on any amount above $1{,}000{,}000$ naira. The government wants to raise at least $250{,}000$ naira in tax revenue from a single taxpayer. What is the minimum taxable income that will generate this revenue? Show all steps.

A. 1500000

B. 1400000

C. 1250000

Correct D. 1333334

Correct Answer: D

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Question 4 View Details

The market demand for a product is given by $ P = 200 - 2Q $, where $P$ is price (naira) and $Q$ is quantity demanded. The firm's total cost function is $ TC = 50{,}000 + 20Q + Q^{2} $. (a) Derive the profit function $\pi(Q)$. (b) Determine the output level $Q$ that maximizes profit. State the corresponding price and the maximum profit (or loss).

A. Q = 28 units; price = 144 naira; profit = -46,800 naira (loss)

B. Q = 35 units; price = 130 naira; profit = -48,500 naira (loss)

C. Q = 25 units; price = 150 naira; profit = -45,000 naira (loss)

Correct D. Q = 30 units; price = 140 naira; profit = -47,300 naira (loss)

Correct Answer: D

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Question 5 View Details

A firm uses labour (L) while keeping capital fixed. The total product (TP) obtained from different labour inputs is shown: \[\begin{array}{c|c} L & TP \\ \hline 1 & 10 \\ 2 & 25 \\ 3 & 45 \\ 4 & 60 \\ 5 & 70 \\ 6 & 75 \\ 7 & 78 \end{array}\] (a) Compute the marginal product (MP) and average product (AP) of labour for each additional unit of labour. (b) At which labour input does AP equal MP? (c) Explain the economic significance of this point.

A. 6

B. 5

Correct C. 4

D. 3

Correct Answer: C

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Question 6 View Details

If $Q_d = 500 - 20P$ where $P$ is the domestic price per unit, the world price is $P_w = \$10$. The foreign export supply elasticity at $P_w$ is $\varepsilon^{*}=2$ (absolute value). (a) Determine the ad valorem tariff rate that maximizes national welfare. (b) Compute the specific tariff amount, the new import quantity and the tariff revenue after the tariff is imposed.

A. Ad valorem tariff = 0.6 (60%). Specific tariff = $6 per unit. Import quantity = 150 units. Tariff revenue = $900.

B. Ad valorem tariff = 0.5 (50%). Specific tariff = $5 per unit. Import quantity = 180 units. Tariff revenue = $900.

C. Ad valorem tariff = 0.4 (40%). Specific tariff = $4 per unit. Import quantity = 250 units. Tariff revenue = $1000.

Correct D. Ad valorem tariff = 0.5 (50%). Specific tariff = $5 per unit. Import quantity = 200 units. Tariff revenue = $1000.

Correct Answer: D

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Question 7 View Details

A firm's total product function for labour is $TP(L) = 5L - 0.1L^{2}$. The output price is $P = \$50$ per unit and the wage rate is $w = \$20$ per labour unit. Determine the number of labour units that maximises profit and compute the maximum profit.

A. Labour = 22 units; Maximum profit = $2640.

B. Labour = 25 units; Maximum profit = $2625.

Correct C. Labour = 23 units; Maximum profit = $2645.

D. Labour = 20 units; Maximum profit = $2600.

Correct Answer: C

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Question 8 View Details

The central bank wants to increase the money supply by $\Delta M = \$200$ million. The required reserve ratio is $r = 10\%$ and banks hold excess reserves equal to $e = 2\%$ of deposits. Calculate the increase in reserves the banking system must receive and the amount of government securities the central bank must purchase in an open‑market operation to achieve the target.

A. Increase in reserves = $4 million; Open‑market purchase = $4 million.

B. Increase in reserves = $1667 million; Open‑market purchase = $1667 million.

Correct C. Increase in reserves = $24 million; Open‑market purchase = $24 million.

D. Increase in reserves = $20 million; Open‑market purchase = $20 million.

Correct Answer: C

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Question 9 View Details

In an economy, consumption is $C = 200 + 0.75(Y - T)$, investment $I = 150$, government spending $G = 100$, and taxes are proportional $T = 0.2Y$. Net exports are zero. (a) Find the equilibrium level of national income $Y$. (b) Compute the fiscal multiplier.

A. Equilibrium income Y = 1250; Fiscal multiplier = 3.0.

B. Equilibrium income Y = 1000; Fiscal multiplier = 2.0.

Correct C. Equilibrium income Y = 1125; Fiscal multiplier = 2.5.

D. Equilibrium income Y = 1500; Fiscal multiplier = 2.8.

Correct Answer: C

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Question 10 View Details

A student can either study economics for 4 hours and receive a scholarship of $\$200$, or work part‑time earning $\$15$ per hour. If she chooses to study, what is the monetary opportunity cost of the study time?

A. $30

Correct B. $60

C. $75

D. $45

Correct Answer: B

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Question 11 View Details

The market for wheat is described by the demand equation $ Q_d = 500 - 5P $ and the supply equation $ Q_s = 3P $, where $Q$ is quantity in tonnes and $P$ is price per tonne in naira. The government imposes a price ceiling of $\text{₦}50$ per tonne. Assuming the ceiling is binding, determine the resulting shortage (in tonnes).

Correct A. 100

B. 50

C. 250

D. 150

Correct Answer: A

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Question 12 View Details

In 2020 the nominal GDP of Country X was $\text{₦}15$ trillion and the GDP deflator was 120. In 2021 nominal GDP rose to $\text{₦}16.5$ trillion and the deflator increased to 126. Calculate the percentage growth rate of real GDP from 2020 to 2021, giving your answer to one decimal place.

A. 5.2

B. 4.2

Correct C. 4.8

D. 6.0

Correct Answer: C

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Question 13 View Details

A firm's total cost (in thousand naira) is given by $TC = 0.02Q^{3} - 0.3Q^{2} + 10Q + 50$ and its total revenue by $TR = 20Q - 0.1Q^{2}$, where $Q$ is output (in thousand units). Determine the output level that maximises profit and compute the maximum profit (in thousand naira), rounding the profit to the nearest thousand.

A. 90

B. 70

C. 100

Correct D. 80

Correct Answer: D

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Question 14 View Details

Using the UNDP Human Development Index (HDI) method, the following data are given: - Country A: life expectancy 68 years (minimum 20, maximum 85), mean years of schooling 6 (maximum 15, minimum 0), GNI per capita $\text{US}\$4{,}800$. - Country B: life expectancy 72 years (minimum 20, maximum 85), mean years of schooling 8 (maximum 15, minimum 0), GNI per capita $\text{US}\$6{,}200$. The HDI is calculated as the cube‑root of the product of the three dimension indices: \[\text{HDI}=\bigl(I_{life}\times I_{education}\times I_{income}\bigr)^{1/3}\] where \[I_{life}=\frac{LE-20}{85-20},\qquad I_{education}=\frac{MYS}{15},\qquad I_{income}=\frac{\ln(GNI)-\ln(100)}{\ln(75{,}000)-\ln(100)}.\] Additionally, Country B's GNI per capita was $\text{US}\$5{,}800$ in year 1 and $\text{US}\$6{,}200$ in year 5. Answer the following: 1. Which country has the higher HDI? (state the country name only) 2. What is the average annual growth rate of Country B's per‑capita GNI over the five‑year period, expressed to one decimal place in percent? Provide your answer as "Country X; Y%".

A. Country B; 2.3%

B. Country B; 1.5%

C. Country A; 1.7%

Correct D. Country B; 1.7%

Correct Answer: D

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Question 15 View Details

The demand for a product is given by $Q = 200 - 5P$, where $Q$ is quantity demanded and $P$ is price in naira. If the price rises from $\text{₦}30$ to $\text{₦}36$, calculate the price elasticity of demand using the midpoint (arc) method. Give your answer rounded to one decimal place.

A. -5.1

B. -3.9

C. -4.0

Correct D. -4.7

Correct Answer: D

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Question 16 View Details

The TransportCo bus service has a fixed monthly cost of N500,000 and a variable cost of N150 per passenger. The ticket price is currently N500. The demand for tickets is given by $ Q = 2000 - 2P $ where $P$ is the ticket price (in N) and $Q$ is the number of passengers per month. (a) Calculate the profit (or loss) at the current price. (b) The company considers raising the ticket price to N600. Under the new price, 30 % of the passengers travel in groups of five and receive a 10 % discount on the ticket price. Assuming the demand function still applies, determine the profit (or loss) after the price change. (c) Is there any ticket price that would allow the company to break even (profit = 0) under the same demand function and cost structure (ignore the group discount)? Justify your answer.

Correct A. No real ticket price can make the company break even; profit is always negative.

B. A ticket price of N500 will make the company break even; profit equals zero.

C. The company can break even at a price of N600 when the group discount is applied.

D. There exists a ticket price near N750 that yields zero profit.

Correct Answer: A

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Question 17 View Details

In Country X, the Consumer Price Index (CPI) was 120 in 2020 (base year 2010 = 100), rose to 126 in 2021 and to 133 in 2022. A worker earned a nominal salary of N200,000 in 2020 and N220,000 in 2022. (i) Compute the average annual inflation rate over the period 2020‑2022. (ii) Compute the average annual nominal salary growth rate over the same period. (iii) Using the Fisher relation, determine the average annual real salary growth rate and state whether the worker's purchasing power increased or decreased.

A. Average annual inflation ≈ 6.1 %; average annual nominal salary growth ≈ 5.0 %; average annual real salary growth ≈ 1.1 % (purchasing power increased).

B. Average annual inflation ≈ 4.8 %; average annual nominal salary growth ≈ 5.2 %; average annual real salary growth ≈ -0.4 % (purchasing power decreased).

Correct C. Average annual inflation ≈ 5.3 %; average annual nominal salary growth ≈ 4.9 %; average annual real salary growth ≈ -0.4 % (purchasing power decreased).

D. Average annual inflation ≈ 5.3 %; average annual nominal salary growth ≈ 4.9 %; average annual real salary growth ≈ 0.4 % (purchasing power increased).

Correct Answer: C

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Question 18 View Details

The following data are for the period 2015‑2020. Country A: real GDP grew from $150 billion to $210 billion; population grew from 30 million to 33 million. Country B: real GDP grew from $80 billion to $100 billion; population grew from 20 million to 22 million. (i) Calculate the average annual per‑capita real GDP growth rate for each country. (ii) Identify which country had the higher per‑capita growth. (iii) Did either country achieve the UN target of at least 2 % per‑capita real GDP growth per year?

A. Country A: ≈4.9 % per year; Country B: ≈2.6 % per year. Country B has the higher per‑capita growth. Neither country meets the UN target of at least 2 % per‑capita growth.

B. Country A: ≈5.2 % per year; Country B: ≈3.1 % per year. Country B has the higher per‑capita growth. Both countries exceed the UN target of at least 2 % per‑capita growth.

C. Country A: ≈3.5 % per year; Country B: ≈2.0 % per year. Country A has the higher per‑capita growth. Only Country A meets the UN target of at least 2 % per‑capita growth.

Correct D. Country A: ≈4.9 % per year; Country B: ≈2.6 % per year. Country A has the higher per‑capita growth. Both countries meet the UN target of at least 2 % per‑capita growth.

Correct Answer: D

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Question 19 View Details

A commercial bank currently holds deposits of N200 million. The reserve requirement ratio is 10 %. The bank's required reserves are therefore N20 million and it holds excess reserves of N5 million. The central bank conducts an open‑market purchase of N30 million government securities, crediting the banking system's reserves. Assuming the bank lends out all excess reserves after the operation, calculate the maximum possible increase in the total money supply (in N million).

A. N270 million

B. N330 million

C. N150 million

Correct D. N300 million

Correct Answer: D

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Question 20 View Details

A 5‑year government bond pays a nominal interest rate of 8 % per annum, payable annually. The expected average inflation rate over the life of the bond is 3.5 % per annum. (i) Using the Fisher approximation, compute the expected real interest rate. (ii) Using the exact Fisher formula, compute the expected real interest rate. (iii) If an investor requires a real return of at least 4 % per annum, should the bond be purchased? Justify.

A. Approximate real rate = 5.0 %; exact real rate ≈ 4.9 %; since both exceed 4 %; the bond should be purchased.

Correct B. Approximate real rate = 4.5 %; exact real rate ≈ 4.4 %; since both exceed 4 %, the bond should be purchased.

C. Approximate real rate = 4.5 %; exact real rate ≈ 4.4 %; since the approximate exceeds 4 % but the exact does not, the bond should be purchased with caution.

D. Approximate real rate = 4.5 %; exact real rate ≈ 4.4 %; since both are below 4 %; the bond should not be purchased.

Correct Answer: B

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Question 21 View Details

An inter‑city bus company has a fixed monthly cost of ₦500,000 and a variable cost of ₦200 per passenger. When the ticket price is set at ₦800, the company carries 2,000 passengers per month. The price‑elasticity of demand for the service is 1.5, so a percentage change in price leads to a percentage change in quantity given by $\%\Delta Q = -\varepsilon \times \%\Delta P$. The company may reduce the ticket price by a certain percentage $r$ (expressed as a decimal) to increase ridership. Determine the percentage price reduction that maximises monthly profit and compute the corresponding maximum profit (rounded to the nearest naira).

Correct A. Optimal price reduction ≈ 4.17 % and maximum profit ≈ ₦704,167

B. Optimal price reduction ≈ 3.50 % and maximum profit ≈ ₦710,000

C. Optimal price reduction ≈ 5.00 % and maximum profit ≈ ₦690,000

D. Optimal price reduction ≈ 6.25 % and maximum profit ≈ ₦680,000

Correct Answer: A

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Question 22 View Details

Consider a firm operating in a monopolistically competitive market with inverse demand $P = 120 - 0.5Q$ and total cost function $TC = 20Q + 0.02Q^{2} + 5{,}000$. Find the output level that maximises profit, the corresponding price, and state whether the firm makes an economic profit or a loss (give the amount, rounded to the nearest naira).

Correct A. Q ≈ 96 units, P ≈ ₦71.9, economic loss ≈ ₦192

B. Q ≈ 80 units, P ≈ ₦80.0, economic loss ≈ ₦300

C. Q ≈ 90 units, P ≈ ₦75.0, economic profit ≈ ₦200

D. Q ≈ 100 units, P ≈ ₦70.0, economic loss ≈ ₦150

Correct Answer: A

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Question 23 View Details

Government imposes a specific tax of ₦50 per unit on a good. The market demand is $Q_{d}=800-4P_{c}$ where $P_{c}$ is the price paid by consumers, and the supply is $Q_{s}=-200+3P_{p}$ where $P_{p}$ is the price received by producers before tax. Determine the consumer price, producer price, equilibrium quantity, the tax revenue, and the dead‑weight loss (rounded to the nearest naira).

A. Consumer price ≈ ₦166.67, producer price ≈ ₦116.67, quantity ≈ 150 units, tax revenue ≈ ₦7,500, dead‑weight loss ≈ ₦2,500

Correct B. Consumer price ≈ ₦164.29, producer price ≈ ₦114.29, quantity ≈ 143 units, tax revenue ≈ ₦7,143, dead‑weight loss ≈ ₦2,143

C. Consumer price ≈ ₦160.00, producer price ≈ ₦110.00, quantity ≈ 140 units, tax revenue ≈ ₦7,000, dead‑weight loss ≈ ₦2,000

D. Consumer price ≈ ₦170.00, producer price ≈ ₦120.00, quantity ≈ 130 units, tax revenue ≈ ₦6,500, dead‑weight loss ≈ ₦1,800

Correct Answer: B

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Question 24 View Details

A farmer produces wheat using labour $L$ (units) and fertilizer $F$ (units) with the production function $Q = 20\sqrt{L\,F}$. The wage rate is ₦150 per unit of labour and the price of fertilizer is ₦200 per unit. The farmer wishes to produce 800 kg of wheat. (i) Find the cost‑minimising quantities of labour and fertilizer, (ii) compute the total cost, and (iii) determine the marginal cost of an additional kilogram of wheat at this output (rounded to two decimal places).

Correct A. Labour ≈ 46.2 units, Fertiliser ≈ 34.6 units, Total cost ≈ ₦13,856, Marginal cost ≈ ₦17.32 per kg

B. Labour ≈ 50.0 units, Fertiliser ≈ 30.0 units, Total cost ≈ ₦15,000, Marginal cost ≈ ₦16.50 per kg

C. Labour ≈ 45.0 units, Fertiliser ≈ 35.0 units, Total cost ≈ ₦13,500, Marginal cost ≈ ₦17.80 per kg

D. Labour ≈ 40.0 units, Fertiliser ≈ 40.0 units, Total cost ≈ ₦14,000, Marginal cost ≈ ₦18.00 per kg

Correct Answer: A

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Question 25 View Details

In an economy the consumption function is $C = 200 + 0.75(Y - T)$, investment is $I = 150$, government spending is $G = 250$, and taxes are proportional: $T = 0.2Y$. Net exports are zero. (i) Compute the equilibrium national income $Y$. (ii) Calculate the fiscal multiplier. (iii) If government spending rises by ₦100, what is the new equilibrium income? Give all answers rounded to the nearest naira.

A. Equilibrium income Y = ₦1,400; multiplier = 2.0; new equilibrium income = ₦1,600

B. Equilibrium income Y = ₦1,500; multiplier = 2.0; new equilibrium income = ₦1,700

C. Equilibrium income Y = ₦1,600; multiplier = 2.5; new equilibrium income = ₦1,850

Correct D. Equilibrium income Y = ₦1,500; multiplier = 2.5; new equilibrium income = ₦1,750

Correct Answer: D

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