neco model questions vol1 2018 economics | Essay

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Question 1 View Details
A small island economy can produce only two goods: fish and coconuts. If all resources are devoted to fish, the maximum output is 800 tonnes of fish per year. If all resources are devoted to coconuts, the maximum output is 400 tonnes of coconuts per year.
Question Parts
(a)
Explain the concepts of scarcity and choice using the information above.
(b)
Assuming the island operates on its production‑possibility frontier, calculate the opportunity cost of producing one (1) tonne of fish in terms of coconuts.
(c)
If the island decides to produce 500 tonnes of fish, determine the maximum amount of coconuts that can be produced. Then discuss how this decision illustrates the principle of opportunity cost.
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Question 2 View Details
The market for a locally produced textile in Nigeria is described by the following linear equations (quantities in thousands of units, price in ₦ per unit): Quantity demanded: Qd = 200 – 2P Quantity supplied: Qs = 20 + 3P
Question Parts
(a)
Determine the equilibrium price and quantity. Show all steps.
(b)
Suppose consumers’ income rises, shifting the demand curve rightward so that at each price the quantity demanded increases by 20 %. Write the new demand equation, find the new equilibrium price and quantity, and calculate the percentage change in price and quantity relative to the original equilibrium.
(c)
The government imposes a specific tax of ₦10 per unit on producers. Assuming the tax is fully borne by producers, adjust the supply equation, find the new equilibrium price paid by consumers and the price received by producers, and comment on the likely effect on the quantity traded.
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Question 3 View Details
The table below shows the quantity demanded of a locally produced rice brand at different prices in a competitive market. | Price (₦ per kg) | Quantity demanded (thousands of kg) | |------------------|--------------------------------------| | 200 | 30 | | 150 | 45 | | 120 | 55 | | 100 | 65 | Using this information, answer the following:
Question Parts
(a)
Using the midpoint (arc) method, calculate the price elasticity of demand between the price of ₦200 and ₦150.
(b)
Based on the elasticity obtained in part (a), explain the likely effect on total revenue if the price is reduced from ₦200 to ₦150.
(c)
Discuss two non‑price factors that could shift the demand curve for this rice and explain how each factor would affect the price elasticity of demand.
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Question 4 View Details
A small‑scale bakery produces loaves of bread using labour (L) and capital (K). Capital is fixed at two ovens. The table shows the total product (TP) of labour measured in loaves per day. | Labour (L) – number of workers | Total Product (TP) – loaves per day | |-------------------------------|---------------------------------------| | 0 | 0 | | 1 | 40 | | 2 | 85 | | 3 | 120 | | 4 | 140 | | 5 | 150 | | 6 | 155 | Answer the following questions:
Question Parts
(a)
Calculate the marginal product of labour (MPL) for each additional worker from L = 1 to L = 6.
(b)
Identify the range of labour input where the law of diminishing marginal returns sets in, and explain why this occurs.
(c)
Calculate the average product of labour (APL) when 4 workers are employed and compare it with the MPL at that point. State what this indicates about the efficiency of labour utilisation.
(d)
If the bakery wishes to maximise total product in the short run, what is the optimal number of workers? Justify your answer with reference to MPL and APL.
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Question 5 View Details
A small manufacturing firm produces a single product. The firm incurs a fixed cost of ₦5,000 per month. For the first 100 units produced each month, the variable cost per unit is ₦200. Any production beyond 100 units requires overtime, raising the variable cost to ₦250 per unit for each additional unit. The firm sells each unit at a constant price of ₦350.
Question Parts
(a)
Write the expression for the total cost (TC) function for any level of output Q (in units).
(b)
Write the expression for total revenue (TR) as a function of Q and state the profit (π) function for the two output ranges identified in part (a).
(c)
Determine the break‑even output level (the smallest integer Q at which profit is zero or positive).
(d)
The firm wishes to earn a profit of ₦30,000 in a month. Calculate the output level required to achieve this target.
(e)
Briefly discuss two non‑price factors that could cause the firm’s cost structure to change in the future.
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Question 6 View Details
The market for mobile‑phone accessories in a Nigerian city is dominated by four major firms. Each firm sells a slightly differentiated product and faces the same constant marginal cost of ₦80 per unit. The market demand for the product is given by the inverse demand function P = 500 – 2Q (where P is price in Naira per unit and Q is total market output in thousands of units). The regulator is considering imposing a price ceiling of ₦120 per unit to protect consumers.
Question Parts
(a)
Identify the most appropriate market structure for this industry and justify your choice with at least three characteristic features.
(b)
Assuming the firms behave as Cournot oligopolists, derive the symmetric reaction function for one firm and calculate the Cournot‑Nash equilibrium price and output per firm.
(c)
If the regulator imposes a price ceiling of ₦120 per unit, determine the new total market output and the output per firm, assuming firms continue to act as Cournot competitors and the ceiling is binding.
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Question 7 View Details
The Central Bank of Nigeria released the following macro‑economic data for the year 2023 (all figures in ₦ billions): - Consumption expenditure (C) = 3 200 - Gross private domestic investment (I) = 800 - Government expenditure on goods and services (G) = 1 200 - Exports of goods and services (X) = 500 - Imports of goods and services (M) = 700 - Net factor income from abroad (NFIA) = –50 - Net taxes (T) = 300 - Net transfers received by households (TR) = 120 Additionally, the marginal propensity to consume (MPC) is estimated at 0.75. Answer the following: (a) Using the data above, compute the following national‑income aggregates: i. Gross Domestic Product (GDP) by the expenditure approach. ii. Gross National Product (GNP). iii. Net National Product (NNP) at market prices. (b) Suppose the government decides to increase net taxes (T) by ₦100 billion while keeping other components unchanged. Using the Keynesian consumption function C = C₀ + MPC·(Y – T + TR), estimate the new equilibrium level of national income (Y) and the change in equilibrium output resulting from the tax increase. Show all steps. (c) Briefly discuss two possible macro‑economic consequences of the change in equilibrium output you obtained in part (b) for the Nigerian economy.
Question Parts
(a)
Using the data above, compute the following national‑income aggregates:
(b)
Suppose the government decides to increase net taxes (T) by ₦100 billion while keeping other components unchanged. Using the Keynesian consumption function C = C₀ + MPC·(Y – T + TR), estimate the new equilibrium level of national income (Y) and the change in equilibrium output resulting from the tax increase. Show all steps.
(c)
Briefly discuss two possible macro‑economic consequences of the change in equilibrium output you obtained in part (b) for the Nigerian economy.
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Question 8 View Details
Consider the following information about the Nigerian banking system in 2023: - Required reserve ratio (RRR) = 15 % - Currency‑to‑deposits ratio (c) = 0.30 (i.e., public holds ₦0.30 in cash for every ₦1 deposited) - Excess reserves held by banks = ₦200 billion - The Central Bank conducts an open‑market purchase of government securities worth ₦500 billion, paying for them by crediting the reserve accounts of commercial banks. Answer the following: (a) Calculate the money multiplier (k) for the Nigerian economy using the given ratios. (b) Determine the change in the overall money supply (M) resulting from the open‑market purchase, assuming banks do not change their excess‑reserve holdings. (c) If, after the purchase, banks decide to increase their excess reserves by an additional ₦100 billion, recalculate the change in the money supply. (d) Discuss briefly how the change in the money supply could affect the short‑run equilibrium interest rate in the loanable‑funds market.
Question Parts
(a)
Calculate the money multiplier (k) for the Nigerian economy using the given ratios.
(b)
Determine the change in the overall money supply (M) resulting from the open‑market purchase, assuming banks do not change their excess‑reserve holdings.
(c)
If, after the purchase, banks decide to increase their excess reserves by an additional ₦100 billion, recalculate the change in the money supply.
(d)
Discuss briefly how the change in the money supply could affect the short‑run equilibrium interest rate in the loanable‑funds market.
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