Practice neco model questions vol1 economics 2020 Past Questions

Question 1 View Details

A farmer grows maize with fixed costs of $\text{₦}120{,}000$ per season. The variable cost per hectare is $\text{₦}30{,}000 + \text{₦}5{,}000 \times (\text{yield per hectare in tonnes})$. The expected yield is 4 tonnes per hectare. The farmer plans to plant $x$ hectares and wants a profit of at least $\text{₦}200{,}000$. The market price is $\text{₦}50{,}000$ per tonne, but a marketing levy of 10% is charged on total revenue. What is the minimum whole number of hectares the farmer must plant to achieve the target profit?

A. 4

Correct B. 3

C. 2

D. 5

Correct Answer: B

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Question 2 View Details

In 2020 the Consumer Price Index (CPI) was 105 (base 100 in 2019) and in 2021 it rose to 110. Real GDP grew by 3% in 2021. Using the Fisher equation, calculate the nominal GDP growth rate for 2021 (express your answer as a percentage to one decimal place).

Correct A. 7.9

B. 6.5

C. 9.2

D. 8.3

Correct Answer: A

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Question 3 View Details

Government tax revenue $R$ (in naira) depends on the tax rate $t$ (as a decimal) according to the Laffer‑curve model $R = A\,t\,(1-t)$, where $A = \text{₦}500{,}000{,}000$. Determine the tax rate that maximises revenue and compute the maximum revenue.

A. Tax rate = 60% and maximum revenue = ₦120,000,000

Correct B. Tax rate = 50% and maximum revenue = ₦125,000,000

C. Tax rate = 50% and maximum revenue = ₦130,000,000

D. Tax rate = 40% and maximum revenue = ₦120,000,000

Correct Answer: B

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Question 4 View Details

Country X's export price index (EPI) was 120 in 2019 and rose to 138 in 2020. Its import price index (IPI) was 110 in 2019 and rose to 121 in 2020. The nominal exchange rate (foreign currency per domestic currency) was 0.80 in 2019 and depreciated by 5% in 2020. The real exchange rate (RER) is defined as $\text{RER}=\frac{\text{EPI}}{\text{IPI}}\times \text{nominal\;exchange\;rate}$. Calculate the percentage change in the real exchange rate from 2019 to 2020, giving your answer to one decimal place.

A. 7.9

Correct B. 9.8

C. 8.5

D. 10.2

Correct Answer: B

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Question 5 View Details

A farmer can use one hectare of land to produce either 3 tonnes of wheat or 2 tonnes of beans. If the farmer chooses to produce wheat, what is the opportunity cost of producing one tonne of wheat in terms of beans?

A. 1/2

B. 4/3

C. 3/2

Correct D. 2/3

Correct Answer: D

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Question 6 View Details

The Central Bank purchases $200$ million naira of government securities. If the required reserve ratio is $0.10$ and the public holds a currency‑deposit ratio of $0.25$, calculate the total increase in the money supply.

Correct A. ≈₦714.3 million (approx)

B. ≈₦600.0 million (approx)

C. ≈₦800.0 million (approx)

D. ≈₦650.0 million (approx)

Correct Answer: A

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Question 7 View Details

When the price of a good rises from $20$ naira to $24$ naira, quantity demanded falls from 500 units to 425 units. Compute the price elasticity of demand and state whether demand is elastic, inelastic or unitary.

A. Elastic (|E| = 1.25)

B. Inelastic (|E| = 0.60)

C. Unitary (|E| = 1.00)

Correct D. Inelastic (|E| = 0.75)

Correct Answer: D

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Question 8 View Details

A country's export price index rises from 100 to 112 while its import price index rises from 100 to 108. Determine the percentage change in the terms of trade and indicate whether the terms of trade have improved or deteriorated.

A. Terms of trade improve by about 2.9%

Correct B. Terms of trade improve by about 3.7%

C. Terms of trade improve by about 5.1%

D. Terms of trade deteriorate by about 3.7%

Correct Answer: B

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Question 9 View Details

The total product of labour (TP) is given by $TP = 4L^{3} - 30L^{2} + 80L$, where $L$ is the number of labour units employed. Find the level of labour at which average product of labour is maximised.

Correct A. L = 3.75 labour units

B. L = 2.5 labour units

C. L = 5 labour units

D. L = 4.2 labour units

Correct Answer: A

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Question 10 View Details

Given the demand function $Q_d = 500 - 5P$ and supply function $Q_s = 100 + 3P$, where $P$ is price in naira, determine the equilibrium price and quantity.

A. Equilibrium price = ₦45, quantity = 275 units

Correct B. Equilibrium price = ₦50, quantity = 250 units

C. Equilibrium price = ₦40, quantity = 300 units

D. Equilibrium price = ₦60, quantity = 200 units

Correct Answer: B

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Question 11 View Details

The following aggregate data for a year are given (in billions of Naira): Consumption = 4500, Investment = 1200, Government spending = 800, Exports = 600, Imports = 900, Indirect taxes = 300, Subsidies = 100, Depreciation = 500, Net factor income from abroad = 150. Compute the Net National Income at factor cost ($\text{NNI}_{FC}$).

A. 5500 billion Naira

Correct B. 5650 billion Naira

C. 6000 billion Naira

D. 5800 billion Naira

Correct Answer: B

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Question 12 View Details

A firm's total cost (TC) in thousand Naira is given by $TC = 0.5Q^{2} + 40Q + 200$ and its total revenue (TR) in thousand Naira is $TR = 120Q - Q^{2}$, where $Q$ is output in units. Determine the output level that maximizes profit and state the maximum profit.

A. Output Q = 90\/3 units; Maximum profit = 3000\/3 thousand Naira (≈ 1000 thousand Naira)

B. Output Q = 70\/3 units; Maximum profit = 2100\/3 thousand Naira (≈ 700 thousand Naira)

Correct C. Output Q = 80/3 units; Maximum profit = 2600/3 thousand Naira (≈ 866.67 thousand Naira)

D. Output Q = 100\/3 units; Maximum profit = 3500\/3 thousand Naira (≈ 1166.67 thousand Naira)

Correct Answer: C

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Question 13 View Details

A monopolistically competitive firm faces the demand curve $P = 200 - 4Q$ and has total cost $TC = 20Q + 100$. Find the profit‑maximising output and price, and compute the consumer surplus at that equilibrium.

A. Output Q = 25 units; Price P = 100 Naira; Consumer surplus = 1250 Naira

Correct B. Output Q = 22.5 units; Price P = 110 Naira; Consumer surplus = 1012.5 Naira

C. Output Q = 20 units; Price P = 120 Naira; Consumer surplus = 1200 Naira

D. Output Q = 18 units; Price P = 128 Naira; Consumer surplus = 1152 Naira

Correct Answer: B

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Question 14 View Details

Two firms, A and B, produce a homogeneous product. Market demand is $P = 500 - Q$ where $Q = q_{A}+q_{B}$. Firm A's total cost is $TC_{A}=20q_{A}+100$ and Firm B's total cost is $TC_{B}=30q_{B}+150$. Assuming Cournot competition, determine the equilibrium outputs $q_{A}$ and $q_{B}$, the market price, and each firm's profit.

A. q_A = 470/3 ≈ 156.67 units; q_B = 480/3 ≈ 160 units; Price P = 530/3 ≈ 176.67 Naira; Profit_A = 220000/9 ≈ 24,444.44 Naira; Profit_B = 230000/9 ≈ 25,555.56 Naira

B. q_A = 480/3 ≈ 160 units; q_B = 470/3 ≈ 156.67 units; Price P = 560/3 ≈ 186.67 Naira; Profit_A = 230000/9 ≈ 25,555.56 Naira; Profit_B = 220000/9 ≈ 24,444.44 Naira

C. q_A = 500/3 ≈ 166.67 units; q_B = 440/3 ≈ 146.67 units; Price P = 540/3 ≈ 180 Naira; Profit_A = 250000/9 ≈ 27,777.78 Naira; Profit_B = 200000/9 ≈ 22,222.22 Naira

Correct D. q_A = 490/3 ≈ 163.33 units; q_B = 460/3 ≈ 153.33 units; Price P = 550/3 ≈ 183.33 Naira; Profit_A = 239200/9 ≈ 26,577.78 Naira; Profit_B = 210250/9 ≈ 23,361.11 Naira

Correct Answer: D

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Question 15 View Details

The central bank purchases government securities worth ₦200 million, increasing the monetary base by that amount. The public holds a currency‑to‑deposit ratio of 0.3, banks keep a required reserve ratio of 10 % of deposits and hold excess reserves equal to 2 % of deposits. Calculate the resulting change in the money supply.

Correct A. Approximately ₦619.05 million increase in the money supply

B. Approximately ₦650.00 million increase in the money supply

C. Approximately ₦600.00 million increase in the money supply

D. Approximately ₦580.00 million increase in the money supply

Correct Answer: A

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Question 16 View Details

In 2020 a consumer bought 2 kg of rice, 5 L of cooking oil and 10 loaves of bread. Prices in 2020 were $\text{rice}=\,\text{₦}200$ per kg, $\text{oil}=\,\text{₦}500$ per litre and $\text{bread}=\,\text{₦}150$ per loaf. In 2021 the prices became $\text{rice}=\,\text{₦}240$, $\text{oil}=\,\text{₦}560$ and $\text{bread}=\,\text{₦}165$. The nominal monthly wage rose from $\text{₦}30{,}000$ to $\text{₦}33{,}600$.\n\n(a) Compute the Consumer Price Index (CPI) for 2021 relative to 2020.\n(b) Determine the inflation rate for the year.\n(c) Calculate the percentage change in the real wage over the year.

Correct A. CPI = 112.0; inflation = 12.0 %; real‑wage change ≈ -0.04 %

B. CPI = 115.5; inflation = 15.5 %; real‑wage change ≈ -3.5 %

C. CPI = 108.3; inflation = 8.3 %; real‑wage change ≈ 3.7 %

D. CPI = 110.0; inflation = 10.0 %; real‑wage change ≈ 2.0 %

Correct Answer: A

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Question 17 View Details

A firm uses labour (L) while capital is fixed. The total product (Q) obtained from successive units of labour is given below:\n\n\begin{tabular}{c|c}\nL & Q \\ \hline\n1 & 20\\\n2 & 45\\\n3 & 66\\\n4 & 82\\\n5 & 93\\n\end{tabular}\n\n(a) Compute the average product (AP) and marginal product (MP) of labour for each level of L.\n(b) Identify the range of labour where diminishing marginal returns set in.\n(c) If the firm wishes to maximise total product without entering the diminishing‑returns region, how many workers should it employ?

A. AP: 20, 22.5, 22.0, 20.5, 18.6; MP: -, 30, 20, 14, 9; diminishing returns start at L=2; employ 1 worker.

B. AP: 20, 22.5, 22.0, 21.0, 19.0; MP: -, 25, 21, 15, 12; diminishing returns start at L=4; employ 3 workers.

Correct C. AP: 20, 22.5, 22.0, 20.5, 18.6; MP: -, 25, 21, 16, 11; diminishing returns start at L=3; employ 2 workers.

D. AP: 20, 22.5, 22.0, 20.5, 18.6; MP: -, 25, 22, 17, 13; diminishing returns start at L=5; employ 4 workers.

Correct Answer: C

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Question 18 View Details

Country X had a per‑capita GNI of $\$4{,}500$ in 2020. Real GDP grew at $5\%$ per year while the population grew at $2\%$ per year.\n\n(a) Compute the annual growth rate of GNI per capita.\n(b) Estimate the GNI per capita in 2025 (five years later).\n(c) The UN classifies a country as "developed" when GNI per capita reaches $\$12{,}000$. Assuming the population growth rate stays at $2\%$, what constant annual real‑GDP growth rate must the country sustain from 2020 to 2025 to achieve the developed‑country threshold?

A. Per‑capita growth ≈ 2.50 %; GNI per capita 2025 ≈ $4,800; required real‑GDP growth ≈ 26 % per year.

Correct B. Per‑capita growth ≈ 2.94 %; GNI per capita 2025 ≈ $5,200; required real‑GDP growth ≈ 24 % per year.

C. Per‑capita growth ≈ 3.12 %; GNI per capita 2025 ≈ $5,500; required real‑GDP growth ≈ 22 % per year.

D. Per‑capita growth ≈ 3.00 %; GNI per capita 2025 ≈ $5,100; required real‑GDP growth ≈ 23 % per year.

Correct Answer: B

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Question 19 View Details

The following data (in billions of Naira) are recorded for a country in a given year:\n\n- Compensation of employees: $150$\n- Gross operating surplus: $80$\n- Gross mixed income: $30$\n- Taxes on production and imports: $45$\n- Subsidies: $12$\n- Depreciation (consumption of fixed capital): $20$\n- Net factor income from abroad: $-5$\n\n(a) Calculate Gross Domestic Product (GDP) at market prices.\n(b) Determine Net Domestic Product (NDP).\n(c) Find Net National Income (NNI).

A. GDP = 295 bn; NDP = 275 bn; NNI = 270 bn

B. GDP = 290 bn; NDP = 270 bn; NNI = 265 bn

C. GDP = 300 bn; NDP = 280 bn; NNI = 275 bn

Correct D. GDP = 293 bn; NDP = 273 bn; NNI = 268 bn

Correct Answer: D

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Question 20 View Details

A manufacturing firm has fixed costs of $\text{₦}500{,}000$ per month. The variable cost per unit is $\text{₦}150$. The current selling price of each unit is $\text{₦}250$.\n\n(a) Determine the break‑even output (in units).\n(b) If the firm can reduce the variable cost by 10 % and raise the selling price by 5 %, what is the new break‑even output?\n(c) By what percentage does the break‑even output change compared with the original break‑even point?

A. Original break‑even = 5,000 units; new break‑even ≈ 4,200 units; break‑even falls by about 16.0 %

Correct B. Original break‑even = 5,000 units; new break‑even ≈ 3,922 units; break‑even falls by about 21.6 %.

C. Original break‑even = 4,000 units; new break‑even ≈ 3,500 units; break‑even falls by about 12.5 %

D. Original break‑even = 5,500 units; new break‑even ≈ 3,922 units; break‑even falls by about 28.7 %

Correct Answer: B

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Question 21 View Details

A farmer can produce either $100$ kg of rice or $200$ kg of beans using the same resources. If he decides to produce $40$ kg of rice, how many kilograms of beans must he give up?

A. 40

Correct B. 80

C. 120

D. 60

Correct Answer: B

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Question 22 View Details

A consumer's monthly income rises from $\₦50{,}000$ to $\₦60{,}000$. During the same period his expenditure on clothing increases from $\₦8{,}000$ to $\₦9{,}600$. Compute the income elasticity of demand for clothing and state whether clothing is a normal or inferior good.

A. 0.5

Correct B. 1

C. 0.8

D. 1.2

Correct Answer: B

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Question 23 View Details

A country's population was $12$ million in 2010. It grew at an annual rate of $2.5\%$ for the first five years and then at $1.8\%$ per year thereafter (compound annually). In which calendar year will the population first exceed $20$ million?

A. 2040

Correct B. 2037

C. 2035

D. 2038

Correct Answer: B

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Question 24 View Details

In 2020 the Consumer Price Index (CPI) was $120$ and by 2023 it had risen to $138$. A government bond pays a nominal annual interest rate of $10\%$ payable at the end of each year. Assuming inflation follows the CPI change uniformly over the three years, calculate the average real interest rate per annum earned by the bond, using the Fisher approximation $r \approx i - \pi$. Give your answer to two decimal places as a percentage.

Correct A. 5.23

B. 3.95

C. 4.87

D. 6.12

Correct Answer: A

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Question 25 View Details

A farmer's total cost (in $\₦$) for producing $Q$ tonnes of maize is given by $C(Q)=200{,}000 + 30{,}000Q + 2{,}000Q^{2}$. The market price per tonne follows the inverse demand function $P(Q)=500 - 5Q$. The government introduces a per‑tonne subsidy of $\₦80$ paid to the farmer, but to fund the subsidy it raises the price of fertilizer, increasing the linear cost term by $20\%$ (so the term $30{,}000Q$ becomes $36{,}000Q$). Assuming the farmer maximises profit, determine the new equilibrium quantity $Q^{*}$ (in tonnes) after the subsidy and tax are implemented. Round your answer to two decimal places.

A. 9.12

B. 10.05

C. 7.95

Correct D. 8.83

Correct Answer: D

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