Practice neco model questions vol1 economics 2018 Past Questions

Question 1 View Details

The demand function for a product is \(Q_d = 500 - 5P\) and the supply function is \(Q_s = 2P - 20\). The government imposes a specific tax of ₦10 per unit on sellers. Find the equilibrium price paid by consumers, correct to two decimal places.

Correct A. 77.14

B. 65.00

C. 72.86

D. 80.00

Correct Answer: A

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Question 2 View Details

A firm's total cost (in naira) for producing \(Q\) units is given by \(TC = 0.02Q^{3} - 0.3Q^{2} + 10Q + 50\). The market price of the product is constant at ₦20 per unit. Determine the level of output that maximizes profit and state the maximum profit (in naira), rounding the output to two decimal places and the profit to two decimal places.

A. Output: 19.30 units, Profit: 108.75 naira

Correct B. Output: 18.84 units, Profit: 111.15 naira

C. Output: 20.00 units, Profit: 105.00 naira

D. Output: 17.50 units, Profit: 115.20 naira

Correct Answer: B

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Question 3 View Details

In a closed economy, consumption is ₦200 million, investment is ₦80 million, government spending is ₦120 million, and net exports are zero. A statistical discrepancy of ₦5 million must be added to balance the accounts. What is the Gross Domestic Product (GDP) in naira million?

A. 395

Correct B. 405

C. 425

D. 400

Correct Answer: B

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Question 4 View Details

A country's population was 1,200,000 at the start of 2020. For the first five years (2020‑2024) it grew at an annual compound rate of 2.5 %. For the next three years (2025‑2027) the growth rate fell to 1.8 % per annum. In the ninth year (2028) a sudden epidemic reduced the population by 4 % instantly. Assuming no other changes, what was the population at the end of 2028? Give your answer rounded to the nearest whole number.

A. 1376000

B. 1374800

Correct C. 1375154

D. 1370000

Correct Answer: C

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Question 5 View Details

In 2020 a country had a population of 8,000,000. Its crude birth rate (CBR) was 28 per 1,000 population, the crude death rate (CDR) was 12 per 1,000, and net migration was a constant outflow of 5,000 persons each year. Assuming these rates remain unchanged, estimate the population at the end of 2025 and compute the average annual percentage growth rate over the 5‑year period. Round the population to the nearest whole number and the growth rate to two decimal places.

A. Population: 8750000; Growth rate: 1.60%

B. Population: 8400000; Growth rate: 1.30%

C. Population: 8500000; Growth rate: 1.45%

Correct D. Population: 8635000; Growth rate: 1.54%

Correct Answer: D

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Question 6 View Details

The market for a good is described by the demand equation \(Q_d = 120 - 2P\) and the supply equation \(Q_s = 20 + P\). The government imposes a specific tax of \(t\) Naira per unit on sellers. (a) Express the equilibrium price paid by buyers (\(P_b\)) and the price received by sellers (\(P_s\)) in terms of \(t\). (b) Derive the tax‑revenue function \(R(t)\). (c) Determine the value of \(t\) that maximises tax revenue and compute the maximum revenue (to two decimal places). (d) For that optimal tax, calculate the dead‑weight loss (DWL) as the loss in total surplus relative to the no‑tax equilibrium. Give the DWL rounded to the nearest Naira.

A. Optimal tax = 35 Naira; Maximum revenue = 945.00 Naira; Dead‑weight loss = 472 Naira

Correct B. Optimal tax = 40 Naira; Maximum revenue = 1066.67 Naira; Dead‑weight loss = 533 Naira

C. Optimal tax = 40 Naira; Maximum revenue = 950.00 Naira; Dead‑weight loss = 400 Naira

D. Optimal tax = 45 Naira; Maximum revenue = 1125.00 Naira; Dead‑weight loss = 600 Naira

Correct Answer: B

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Question 7 View Details

A farm uses labour \(L\) (hours) and capital \(K\) (units) to produce output according to the Cobb‑Douglas function \(Q = 10 L^{0.5} K^{0.5}\). The market price of the crop is \(\text{₦}20\) per unit. The wage rate is \(\text{₦}5\) per labour hour and the rental rate of capital is \(\text{₦}8\) per unit. (a) To achieve a target output of \(Q = 200\) units, find the cost‑minimising quantities of labour and capital. (b) Compute the total cost of producing 200 units and the profit at the given output price. (c) If a per‑unit output tax of \(\text{₦}4\) is introduced, recalculate the profit. (d) What is the percentage change in profit caused by the tax? Give the percentage to one decimal place.

A. Labour ≈ 25.30 units, Capital ≈ 15.81 units; Total cost ≈ ₦300; Profit without tax ≈ ₦3,500; Profit with tax ≈ ₦2,500; Profit falls by 28.6%

Correct B. Labour ≈ 25.30 units, Capital ≈ 15.81 units; Total cost ≈ ₦253; Profit without tax ≈ ₦3,747; Profit with tax ≈ ₦2,947; Profit falls by 21.4%

C. Labour ≈ 30.00 units, Capital ≈ 12.00 units; Total cost ≈ ₦280; Profit without tax ≈ ₦4,000; Profit with tax ≈ ₦3,200; Profit falls by 20.0%

D. Labour ≈ 22.50 units, Capital ≈ 18.00 units; Total cost ≈ ₦260; Profit without tax ≈ ₦3,600; Profit with tax ≈ ₦2,800; Profit falls by 22.2%

Correct Answer: B

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Question 8 View Details

A company sells two products, A and B. Fixed costs are \(\text{₦}120,000\) per month. The variable cost per unit is \(\text{₦}30\) for A and \(\text{₦}45\) for B. The selling prices are \(\text{₦}80\) for A and \(\text{₦}100\) for B. Market conditions impose that at least 400 units of product A must be sold each month, while there is no upper limit on product B. (a) Calculate the contribution margin per unit of each product. (b) Determine the sales mix (numbers of A and B) that minimises the total number of units required to break even, subject to the constraint in (a). (c) Using that mix, find the break‑even total output (units). (d) If the firm wishes to earn a profit of \(\text{₦}60,000\), how many units of each product must be sold under the same mix? Give the answers rounded to the nearest whole unit.

A. CM_A = ₦45, CM_B = ₦55; Break‑even mix: A = 400, B = 1,800 (total 2,200 units); To earn ₦60,000 profit: A = 400, B = 2,950 (total 3,350 units)

B. CM_A = ₦48, CM_B = ₦55; Break‑even mix: A = 400, B = 1,850 (total 2,250 units); To earn ₦60,000 profit: A = 400, B = 2,850 (total 3,250 units)

C. CM_A = ₦50, CM_B = ₦60; Break‑even mix: A = 400, B = 1,900 (total 2,300 units); To earn ₦60,000 profit: A = 400, B = 2,800 (total 3,200 units)

Correct D. CM_A = ₦50, CM_B = ₦55; Break‑even mix: A = 400, B = 1,819 (total 2,219 units); To earn ₦60,000 profit: A = 400, B = 2,910 (total 3,310 units)

Correct Answer: D

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Question 9 View Details

A firm produces output according to the production function \(Q = L^{0.6} K^{0.4}\). Input prices are wage \(w = \text{₦}4\) per unit of labour and rental rate \(r = \text{₦}10\) per unit of capital. The firm needs to produce \(Q = 100\) units at minimum cost. (a) Find the cost‑minimising ratio \(L/K\). (b) Determine the exact quantities of labour \(L\) and capital \(K\) required. (c) Compute the minimum total cost. (d) If the wage rises to \(w = \text{₦}6\) while the rental rate remains unchanged, recompute the optimal \(L\), \(K\) and the new total cost. (e) Calculate the percentage increase in total cost caused by the wage rise, to one decimal place.

A. Initial ratio L/K = 4.0; L ≈ 180.0, K ≈ 45.0; Cost ≈ ₦1,200.0. After wage rise: L/K = 2.8; L ≈ 150.0, K ≈ 53.6; Cost ≈ ₦1,380.0; Cost increase ≈ 15.0%

B. Initial ratio L/K = 3.5; L ≈ 165.0, K ≈ 47.1; Cost ≈ ₦1,150.0. After wage rise: L/K = 2.2; L ≈ 130.0, K ≈ 59.1; Cost ≈ ₦1,350.0; Cost increase ≈ 17.4%

Correct C. Initial ratio L/K = 3.75; L ≈ 169.7, K ≈ 45.3; Cost ≈ ₦1,131.3. After wage rise: L/K = 2.5; L ≈ 144.3, K ≈ 57.7; Cost ≈ ₦1,442.8; Cost increase ≈ 27.6%

D. Initial ratio L/K = 3.75; L ≈ 170.0, K ≈ 45.3; Cost ≈ ₦1,140.0. After wage rise: L/K = 2.5; L ≈ 145.0, K ≈ 58.0; Cost ≈ ₦1,460.0; Cost increase ≈ 28.5%

Correct Answer: C

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Question 10 View Details

The population of a country in the year 2020 is 20 million. Population growth follows a logistic model with carrying capacity \(K = 50\) million. From 2020 to 2030 the intrinsic growth rate is constant at \(r = 0.03\) per year. Beginning in 2031 the rate declines linearly by 0.001 each year until it reaches 0.015 in 2045, after which it stays at 0.015. (a) Write the logistic solution for the period 2020‑2030 and compute the population at the end of 2030 (to two decimal places). (b) Using the yearly varying rates, set up the discrete recursion \(P_{t+1}=P_t+r_t P_t\left(1-\frac{P_t}{K}\right)\) and compute the population in 2050. Give the 2050 population rounded to the nearest thousand. (c) The proportion of the population that is of working age (15‑64) is given by \(W = 0.6 - 0.001\,(P-20)\), where \(P\) is the population in millions. Compute the dependency ratio (number of dependents per 100 working‑age persons) in 2050, rounded to the nearest whole number.

A. Population 2030 ≈ 24.12 million; Population 2050 ≈ 28.500 million (≈28,500,000); Dependency ratio ≈ 72 per 100 working‑age persons

B. Population 2030 ≈ 23.45 million; Population 2050 ≈ 29.030 million (≈29,030,000); Dependency ratio ≈ 65 per 100 working‑age persons

Correct C. Population 2030 ≈ 23.68 million; Population 2050 ≈ 28.716 million (≈28,716,000); Dependency ratio ≈ 69 per 100 working‑age persons

D. Population 2030 ≈ 23.80 million; Population 2050 ≈ 28.200 million (≈28,200,000); Dependency ratio ≈ 75 per 100 working‑age persons

Correct Answer: C

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Question 11 View Details

In a market, the demand curve is given by ( P = 120 - 2Q \) and the industry faces a constant marginal cost of \( MC = 20 \).\n\n(a) Determine the monopoly equilibrium price and quantity.\n(b) Find the competitive equilibrium price and quantity.\n(c) Calculate the dead‑weight loss caused by monopoly.

A. 500

B. 750

Correct C. 625

D. 900

Correct Answer: C

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Question 12 View Details

The labour force of a country is 5,000,000 persons. The current unemployment rate is 12%. Structural unemployment accounts for 4% of the labour force and frictional unemployment for 2% of the labour force.\n\nIf all cyclical unemployment is eliminated, what will be the new unemployment rate (in %)?

A. 8

Correct B. 6

C. 10

D. 4

Correct Answer: B

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Question 13 View Details

Okun's law states that for every 1% increase in the output gap, the unemployment rate rises by 2%. The economy's potential real GDP growth rate is 5% per year, but the actual growth this year was only 2%. If the initial unemployment rate was 8%, what is the unemployment rate at the end of the year?

A. 10

Correct B. 14

C. 16

D. 12

Correct Answer: B

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Question 14 View Details

Using the income approach, calculate the Gross Domestic Product (GDP) and Gross National Product (GNP) for an economy with the following annual data (in billions of naira):\n\n- Wages: 150\n- Rent: 30\n- Interest: 20\n- Profits: 80\n- Indirect taxes: 40\n- Subsidies: 10\n- Depreciation: 25\n- Net factor income from abroad: -5\n\nWhat is the GNP?

A. 335

B. 345

Correct C. 340

D. 330

Correct Answer: C

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Question 15 View Details

A firm's total cost function is \( TC = 0.5Q^{2} + 30Q + 200 \) and its total revenue function is \( TR = 80Q - Q^{2} \).\n\n(a) Find the profit‑maximising output level and the corresponding profit.\n(b) If the market price falls to \(\text{₦}50\), should the firm continue producing in the short run? Justify your answer.

A. Yes, because price (₦50) > AVC (₦40) at Q=10, so the firm should continue producing.

Correct B. Yes, because price (₦50) > AVC (₦40) at Q=20, so the firm should continue producing.

C. No, because price (₦50) equals AVC (₦50) at Q=20, so the firm is indifferent and should shut down.

D. No, because price (₦50) < AVC (₦55) at Q=20, so the firm should shut down.

Correct Answer: B

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Question 16 View Details

The labour force of a country is 2,000,000 persons and the current unemployment level is 200,000 persons. Structural unemployment accounts for 60% of the total unemployed while frictional unemployment makes up the remaining 40%. A government training programme reduces structural unemployment by 25% of its existing number. What is the new unemployment rate (in percent) after the programme?

A. 9.0

B. 8.0

Correct C. 8.5

D. 7.5

Correct Answer: C

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Question 17 View Details

A city imposes a per‑ride tax of \(\text{₦}50\) on bus rides. The demand for bus rides per day is given by \(Q_d = 5000 - 20P\), where \(P\) is the price paid by passengers (including the tax). Bus operators receive the price net of tax, so the supply function (before tax) is \(Q_s = 30(P - 50)\). Determine the equilibrium price paid by passengers, the equilibrium quantity of rides per day, and the total tax revenue collected per day.

Correct A. Price = ₦130, Quantity = 2400 rides, Tax revenue = ₦120,000

B. Price = ₦120, Quantity = 2600 rides, Tax revenue = ₦130,000

C. Price = ₦125, Quantity = 2500 rides, Tax revenue = ₦125,000

D. Price = ₦140, Quantity = 2000 rides, Tax revenue = ₦100,000

Correct Answer: A

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Question 18 View Details

The Central Bank wants to increase the money supply by \(\text{₦}200\) million. The required reserve ratio is 10% and banks are currently holding excess reserves equal to 20% of the required reserves. How much should the Central Bank purchase of government securities (in millions of naira) to achieve the target increase?

Correct A. 24

B. 30

C. 20

D. 26

Correct Answer: A

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Question 19 View Details

Country A has a current real GDP of \(\text{₦}5\) trillion and a population of 50 million growing at 2% per year. Real GDP is growing at 5% per year. The capital‑output ratio (K/Y) is 3. Using the Harrod‑Domar model where the growth rate \(g = s/k\) (\(s\) = savings rate, \(k\) = K/Y),\n(a) calculate the minimum savings rate required to sustain the 5% GDP growth,\n(b) determine the amount of net investment (in trillion naira) needed each year,\n(c) if the government raises the savings rate by 1 percentage point, what will be the new GDP growth rate (assume K/Y unchanged)?

A. Savings rate = 18%, Net investment = 0.9 trillion, New growth rate ≈ 5.6%

B. Savings rate = 10%, Net investment = 0.5 trillion, New growth rate ≈ 5.0%

C. Savings rate = 12%, Net investment = 0.6 trillion, New growth rate ≈ 5.2%

Correct D. Savings rate = 15%, Net investment = 0.75 trillion, New growth rate ≈ 5.33%

Correct Answer: D

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Question 20 View Details

The following data give the cumulative percentages of population and cumulative percentages of total income for a country: Population % : 0, 20, 40, 60, 80, 100 Income % : 0, 5, 15, 30, 55, 100 Assuming the Lorenz curve is formed by straight line segments joining these points, calculate the Gini coefficient for the country (give the answer to two decimal places).

A. 0.45

Correct B. 0.38

C. 0.30

D. 0.42

Correct Answer: B

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Question 21 View Details

The Consumer Price Index (CPI) was 120 at the start of 2020, rose to 126 at the end of 2020 and to 133.2 at the end of 2021. A loan taken at the start of 2021 carries a nominal interest rate of \(12\%\) per annum. Calculate the real interest rate (to two decimal places) that the borrower effectively pays over 2021.

A. 7.05

B. 4.75

C. 6.2

Correct D. 5.95

Correct Answer: D

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Question 22 View Details

During a year, the export price index increased from 100 to 115 while the import price index rose from 100 to 130. Export quantity was 200 million units and import quantity 150 million units, both unchanged. (i) By what percentage did the terms of trade change? (ii) What is the new trade surplus (in monetary units) after the price changes?

A. Terms of trade fell by 9.87% and the trade surplus is ₦4,200

Correct B. Terms of trade fell by 11.54% and the trade surplus is ₦3,500

C. Terms of trade fell by 13.20% and the trade surplus is ₦2,800

D. Terms of trade fell by 10.05% and the trade surplus is ₦3,900

Correct Answer: B

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Question 23 View Details

The consumption function in an economy is \(C = 50 + 0.75(Y - T)\). The government decides to increase its expenditure by ₦200 million and at the same time reduces taxes by ₦120 million. Assuming no other changes, what is the resulting change in equilibrium national income (in million naira)?

A. 1240

B. 1080

Correct C. 1160

D. 960

Correct Answer: C

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Question 24 View Details

Given the linear demand equation \(Q_d = 500 - 5P\) and supply equation \(Q_s = 100 + 3P\), where \(P\) is price in naira and \(Q\) is quantity, determine the equilibrium price and quantity.

A. Price = ₦45, Quantity = 225 units

B. Price = ₦40, Quantity = 200 units

C. Price = ₦55, Quantity = 265 units

Correct D. Price = ₦50, Quantity = 250 units

Correct Answer: D

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Question 25 View Details

National accounts data for a country are as follows: GDP at market price = ₦2,500 million; indirect taxes = ₦300 million; subsidies = ₦50 million; depreciation = ₦200 million; net factor income from abroad = -₦40 million. Compute the Net National Income at factor cost (in million naira).

A. 2050

B. 2210

Correct C. 2010

D. 1970

Correct Answer: C

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