neco model questions vol1 2021 economics | Essay

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Question 1 View Details
A small open economy produces only two goods, rice and cloth. The economy has 1,000 hours of labour and 500 units of capital available each month. One tonne of rice requires 2 hours of labour and 1 unit of capital. One tonne of cloth requires 1 hour of labour and 2 units of capital.
Question Parts
(a)
Define scarcity and explain how it is illustrated in the above economy.
(b)
Derive the opportunity cost of producing one additional tonne of rice in terms of cloth.
(c)
The government imposes a price ceiling of ₦200 per tonne on rice. Discuss the likely effects on the rice market, mentioning at least three possible outcomes.
() Potential shortage of rice.
() Emergence of a black‑market or illegal sales.
() Possible decline in quality or reduction in supply incentives.
(d)
Explain how the price mechanism allocates resources efficiently in this economy when there is no government intervention.
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Question 2 View Details
The market for bottled water in a city is described by the linear equations: Demand: Qd = 500 – 5P Supply: Qs = 100 + 3P where Q is quantity in thousands of litres per month and P is price in Naira per litre.
Question Parts
(a)
Find the equilibrium price and quantity before any tax is imposed.
(b)
A specific tax of ₦50 per litre is imposed on sellers. Determine the new equilibrium consumer price, producer price, and quantity.
(c)
Calculate the dead‑weight loss (DWL) that results from the tax.
(d)
Briefly explain how the tax affects consumer surplus and producer surplus.
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Question 3 View Details
The government is contemplating an increase in the excise duty on cigarettes from N50 per pack to N70 per pack. A recent market survey shows that when the price of a pack of cigarettes rises from N200 to N240, the quantity demanded falls from 2 million packs per month to 1.6 million packs per month.
Question Parts
(a)
Calculate the price elasticity of demand for cigarettes using the midpoint (arc) method.
(b)
Classify the demand for cigarettes as elastic, inelastic or unitary based on your result and explain what the classification implies for total revenue when price rises.
(c)
Discuss two likely effects of the proposed tax increase on (i) government revenue and (ii) consumer welfare.
(d)
Based on your analysis, advise whether the government should implement the tax increase. Provide two supporting arguments.
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Question 4 View Details
A small manufacturing firm produces wooden chairs. The following data show the firm's total product (TP) and total cost (TC) for different levels of output during a month.
Question Parts
(a)
Using the data below, compute for each output level the (i) average product (AP), (ii) marginal product (MP), (iii) average cost (AC) and (iv) marginal cost (MC). Present your results in a table.
(b)
If the market price of a chair is N500, determine the level of output at which the firm should produce to maximise profit. Show your working.
(c)
Explain why producing beyond the profit‑maximising output would reduce the firm’s profit, referring to the law of diminishing marginal returns.
(d)
Suggest two practical measures the firm could adopt to improve its production efficiency.
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Question 5 View Details
A firm operates in a perfectly competitive market where the market price of its product is ₦200 per unit. The firm’s total cost (TC) function is given by: TC = 0.5Q² + 30Q + 1,000 where Q is the quantity of output produced. Answer the following questions:
Question Parts
(a)
Derive the marginal cost (MC) function of the firm.
(b)
Determine the level of output that maximises the firm’s profit.
(c)
Calculate the firm’s total revenue, total cost and profit at the profit‑maximising output.
(d)
State the shutdown price for the firm and advise whether it should continue operating in the short run.
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Question 6 View Details
A firm operates in a monopolistically competitive market. Its demand curve is given by: P = 500 – 4Q and its total cost (TC) function is: TC = 1,000 + 20Q + Q² where Q is the quantity of output produced. Answer the following questions:
Question Parts
(a)
Derive the marginal revenue (MR) and marginal cost (MC) functions for the firm.
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Question 7 View Details
The following data relate to the economy of Nairaland for the year 2022 (all figures are in billions of naira): - Consumption (C) = 4,500 - Investment (I) = 1,200 - Government spending (G) = 800 - Exports (X) = 600 - Imports (M) = 700 - Indirect taxes (T) = 500 - Subsidies (S) = 150 - Depreciation (capital consumption allowance) (D) = 300 - Net factor income from abroad (NFIA) = 80 Using the above information, answer the following: a) Calculate the Gross Domestic Product (GDP) at market price. b) Determine GDP at factor cost. c) Compute Net National Product (NNP) at market price. d) Find Gross National Income (GNI) and Net National Income (NNI). e) The government decides to increase its spending by 10 % and finances the increase entirely by raising indirect taxes. Discuss, with reference to the Keynesian multiplier, the likely impact of this policy on the equilibrium level of national income.
Question Parts
(a)
Calculate the Gross Domestic Product (GDP) at market price.
(b)
Determine GDP at factor cost.
(c)
Compute Net National Product (NNP) at market price.
(d)
Find Gross National Income (GNI) and Net National Income (NNI).
(e)
The government decides to increase its spending by 10 % and finances the increase entirely by raising indirect taxes. Discuss, with reference to the Keynesian multiplier, the likely impact of this policy on the equilibrium level of national income.
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Question 8 View Details
Consider the banking system in Nairaland. The Central Bank has set the statutory reserve ratio at 12 %. Commercial banks currently hold cash reserves equal to 5 % of deposits as excess reserves. The total amount of deposits in the banking system is ₦2,500 billion. The public holds cash equal to 30 % of total deposits.
Question Parts
(a)
Calculate the monetary base (MB).
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