neco model questions vol1 2020 economics | Essay

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Question 1 View Details
A small rural community has a fixed amount of land, labour and capital. The community can allocate these resources to the production of rice or cassava. If all resources are devoted to rice, the maximum output is 500 tonnes of rice and 0 tonnes of cassava. If all resources are devoted to cassava, the maximum output is 0 tonnes of rice and 300 tonnes of cassava. The following two mixed‑production points are also attainable: • Point A: 200 tonnes of rice and 120 tonnes of cassava • Point B: 350 tonnes of rice and 60 tonnes of cassava Using this information, answer the questions below.
Question Parts
(a)
Define scarcity and explain how the concept of a Production Possibility Frontier (PPF) illustrates scarcity for this community.
(b)
Calculate the opportunity cost of producing an additional 50 tonnes of rice when the community moves from Point A (200 t rice, 120 t cassava) to Point B (350 t rice, 60 t cassava).
(c)
Explain the meaning of economic efficiency and state whether Point B (350 t rice, 60 t cassava) represents an efficient allocation of resources. Justify your answer.
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Question 2 View Details
The market for a locally produced widget is described by the following linear equations: Demand: Qd = 120 – 2P Supply: Qs = 20 + 3P where Q is quantity (in units) and P is price (in ₦). The government introduces a specific tax of ₦10 per unit on sellers. Answer the questions below.
Question Parts
(a)
Determine the initial equilibrium price and quantity before the tax is imposed.
(b)
After the tax, the supply curve shifts. Write the new supply equation, find the new equilibrium price paid by consumers and the equilibrium quantity.
(c)
Calculate the change in consumer surplus resulting from the tax. Show all steps and interpret the economic meaning of the result.
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Question 3 View Details
A certain consumer good has the following linear demand and supply functions: Demand: Qd = 200 – 4P Supply: Qs = 20 + 2P where Q is quantity (units) and P is price (₦ per unit).
Question Parts
(a)
Define price elasticity of demand (PED) and state the formula used for its calculation at a given point on a linear demand curve.
(b)
Determine the equilibrium price and quantity of the good.
(c)
Calculate the price elasticity of demand at the equilibrium using the point‑elasticity formula.
(d)
Interpret the magnitude of the elasticity obtained and discuss two possible policy implications for the government if it intends to impose a specific tax on this good.
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Question 4 View Details
A small manufacturing firm employs labour as its only variable input. The table below shows the total product (TP) obtained from different numbers of workers (L) in the short run. | L (workers) | TP (units) | |-------------|------------| | 0 | 0 | | 1 | 20 | | 2 | 45 | | 3 | 75 | | 4 | 100 | | 5 | 120 | | 6 | 135 | | 7 | 145 | The wage rate per worker is ₦200 per period. Fixed cost is ₦500 per period. The product sells at a constant price of ₦50 per unit.
Question Parts
(a)
Calculate the marginal product (MP) and average product (AP) of labour for each additional worker from L = 1 to L = 7.
(b)
Identify the point at which diminishing marginal returns set in and explain, using the computed MP, why this occurs.
(c)
Using the wage rate, compute the marginal cost (MC) of output for each additional worker (MC = wage/MP). Then, based on the constant price of ₦50, determine the profit‑maximising level of output for the firm in the short run and justify your answer.
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Question 5 View Details
A small manufacturing firm produces wooden chairs. The following data show the total cost (TC) incurred at different levels of output (Q).
Question Parts
(a)
Calculate the average total cost (ATC) at each output level and state the output at which ATC is minimum.
(b)
Using the data, estimate the marginal cost (MC) of producing the 151st to the 200th unit (i.e., between Q = 150 and Q = 200). Explain the method you used.
(c)
The firm can sell each chair at a market price of ₦3,500. Assuming the firm produces the output level that maximises profit, determine the output level it should choose and compute the maximum profit. Show all reasoning steps.
(d)
Discuss two non‑price factors that could influence the firm’s decision to expand production beyond the profit‑maximising output identified in part (c).
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Question 6 View Details
Consider the Nigerian telecommunications sector, which is dominated by three major firms: TeleCo, NetLink and ConnectPlus. The market is characterised by high fixed costs, differentiated services and relatively easy entry for new firms offering niche services.
Question Parts
(a)
Identify the market structure that best describes this sector and justify your choice with at least three characteristic features.
(b)
Assuming the sector operates under monopolistic competition, explain how each firm determines its profit‑maximising output and price. Include the role of marginal revenue and demand elasticity in your answer.
(c)
Suppose the government imposes a per‑unit tax of ₦500 on all telecom services. Using the concepts of tax incidence, discuss qualitatively how the burden of the tax will be shared between the firms and consumers. Indicate which side is likely to bear a larger share and why.
(d)
If a new firm, DigiNet, plans to enter the market offering a price‑cut of 10 % below the average market price, analyse the likely short‑run impact on (i) the market price, (ii) the output of existing firms, and (iii) the economic profit of all firms. Provide reasoning based on demand‑curve shifts and cost considerations.
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Question 7 View Details
The following data describe the Nigerian economy for the year 2022 (values are in ₦ billions): - Consumption (C) = 12,000 - Investment (I) = 3,500 - Government expenditure (G) = 4,200 - Exports (X) = 2,800 - Imports (M) = 3,100 - Net factor income from abroad (NFIA) = –150 The marginal propensity to consume (MPC) is 0.75. Answer the questions that follow.
Question Parts
(a)
Calculate the equilibrium level of aggregate demand (AD) using the expenditure approach and briefly explain the economic role of each component.
(b)
If autonomous investment rises by ₦500 billion, estimate the resulting change in equilibrium national income using the Keynesian multiplier. Show all steps.
(c)
Discuss two major limitations of the expenditure approach when measuring national income in a developing economy such as Nigeria.
(d)
The government proposes to increase G by ₦200 billion while keeping taxes unchanged. Using the multiplier, estimate the expected rise in national income and comment on possible inflationary pressures that may arise.
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Question 8 View Details
The following information describes the Nigerian monetary system in 2023: - Policy rate set by the Central Bank of Nigeria (CBN) = 12% per annum - Reserve requirement ratio (RRR) for commercial banks = 20% - Total bank deposits = ₦8,000 billion - The public holds cash equal to 30% of the total money supply (M1) - Velocity of money (V) = 3.5 Answer the questions that follow.
Question Parts
(a)
Calculate the monetary base (M0) and the money multiplier under the given reserve requirement and cash‑holding ratios. Show your calculations.
(b)
Determine the theoretical maximum money supply that could be generated if there were no cash holdings and no excess reserves. Compare this figure with the actual M1 derived above and explain why the two figures differ.
(c)
The CBN decides to lower the policy rate to 9% and reduce the reserve requirement to 15%. Discuss qualitatively how each of these policy changes is expected to affect (i) credit availability, (ii) inflation, and (iii) the exchange rate.
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