Practice neco model questions vol1 economics 2021 Past Questions

Question 1 View Details

The market for wheat is described by the demand equation ( Q_d = 500 - 5P \) and the supply equation ( Q_s = 2P - 20 \), where $ Q $ is quantity in thousand tonnes and $ P $ is price per tonne in naira. Determine the equilibrium price and quantity.

A. Price = 13.00 naira; Quantity = 425.00 thousand tonnes

Correct B. Price = 11.43 naira; Quantity = 442.86 thousand tonnes

C. Price = 12.50 naira; Quantity = 437.50 thousand tonnes

D. Price = 10.00 naira; Quantity = 450.00 thousand tonnes

Correct Answer: B

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Question 2 View Details

Country A had a population of 12 million in the year 2000, 15 million in 2010 and 18 million in 2020. $ (i) $ Assuming the population grew at a constant annual rate within each decade, calculate the annual growth rate for the periods 2000‑2010 and 2010‑2020 (expressed as a percentage to two decimal places). $ (ii) $ If the annual growth rate for the next decade (2020‑2030) is taken to be the average of the two rates found in part (i), in which year will the population reach 30 million? Assume the population continues to grow at this constant rate thereafter. Give the year to the nearest whole year.

Correct A. Annual rates: 2.26 % (2000‑2010) and 1.84 % (2010‑2020); population reaches 30 million in 2045

B. Annual rates: 2.50 % (2000‑2010) and 1.70 % (2010‑2020); population reaches 30 million in 2050

C. Annual rates: 2.30 % (2000‑2010) and 1.90 % (2010‑2020); population reaches 30 million in 2040

D. Annual rates: 2.10 % (2000‑2010) and 2.00 % (2010‑2020); population reaches 30 million in 2038

Correct Answer: A

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Question 3 View Details

The Central Bank purchases government securities worth ₦200 million, injecting this amount into the banking system. The public holds a currency‑deposit ratio of 0.25 and the required reserve ratio is initially 0.10. $ (i) $ Calculate the initial change in the money supply resulting from this open‑market operation. $ (ii) $ If the Central Bank subsequently raises the required reserve ratio to 0.15 while the currency‑deposit ratio remains unchanged, what is the new change in the money supply? $ (iii) $ By how much does the money supply change compared with the initial case? Express all monetary values in millions of naira to two decimal places.

A. Initial increase = 750.00 million; after raise = 630.00 million; reduction = 120.00 million

Correct B. Initial increase = 714.28 million; after raise = 625.00 million; reduction = 89.28 million

C. Initial increase = 800.00 million; after raise = 650.00 million; reduction = 150.00 million

D. Initial increase = 700.00 million; after raise = 620.00 million; reduction = 80.00 million

Correct Answer: B

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Question 4 View Details

The demand for bottled water is given by the linear equation $ Q = 120 - 4P $, where $ Q $ is quantity demanded in thousands of litres per day and $ P $ is the price in naira per litre. Compute the price elasticity of demand at a price of ₦10 per litre using the point‑elasticity formula, and state whether demand is elastic, inelastic or unit‑elastic at that price.

A. Elasticity = -0.5 (elastic)

Correct B. Elasticity = -0.5 (inelastic)

C. Elasticity = -0.8 (inelastic)

D. Elasticity = -1.2 (elastic)

Correct Answer: B

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Question 5 View Details

In the loanable‑funds market, investment is given by $ I = 500 - 20r $ and private savings by $ S = 30r - 100 $, where $ r $ is the interest rate in percent and the quantities are in millions of naira. $ (i) $ Find the equilibrium interest rate and the equilibrium quantity of loanable funds before any government borrowing. $ (ii) $ The government decides to borrow ₦150 million, which reduces the amount of private savings available for lending by the same amount. Determine the new equilibrium interest rate and the new equilibrium quantity of loanable funds after this borrowing.

A. Before borrowing: r = 13 %, Q = 240 million; After borrowing: r = 16 %, Q = 180 million

B. Before borrowing: r = 11 %, Q = 280 million; After borrowing: r = 17 %, Q = 160 million

C. Before borrowing: r = 10 %, Q = 300 million; After borrowing: r = 14 %, Q = 210 million

Correct D. Before borrowing: r = 12 %, Q = 260 million; After borrowing: r = 15 %, Q = 200 million

Correct Answer: D

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Question 6 View Details

A farmer can use his land and labour to produce either 100 kg of rice or 50 kg of beans. If he decides to produce 60 kg of rice, how many kilograms of beans does he forgo as the opportunity cost?

A. 15

B. 40

Correct C. 30

D. 20

Correct Answer: C

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Question 7 View Details

A firm's total product (output) as a function of labour input $L$ (in units) is given by $ Q = L^{3} - 9L^{2} + 24L $. Determine the level of labour at which average product equals marginal product, and state the corresponding output and the common product value.

A. Labour = 6 units, Output = 24 units, AP = MP = 4 units per labour

B. Labour = 3 units, Output = 12 units, AP = MP = 4 units per labour

C. Labour = 5 units, Output = 20 units, AP = MP = 4 units per labour

Correct D. Labour = 4.5 units, Output = 16.875 units, AP = MP = 3.75 units per labour

Correct Answer: D

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Question 8 View Details

The market for a good is described by the demand equation $ P = 100 - 2Q $ and the supply equation $ P = 20 + Q $. The government wants to raise exactly N240 million in revenue by imposing a specific tax $t$ per unit. Find the value of $t$ (rounded to one decimal place) that achieves this revenue target, and compute the resulting dead‑weight loss (rounded to one decimal place).

A. Tax t ≈ 9.5 (per unit); Dead‑weight loss ≈ 15.2

Correct B. Tax t ≈ 10.3 (per unit); Dead‑weight loss ≈ 17.7

C. Tax t ≈ 8.1 (per unit); Dead‑weight loss ≈ 13.9

D. Tax t ≈ 12.0 (per unit); Dead‑weight loss ≈ 20.5

Correct Answer: B

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Question 9 View Details

A firm in the automobile industry has total cost (in million N) given by $ TC = 0.5Q^{2} + 20Q + 100 $, where $Q$ is output in thousand units. The market demand is $ P = 200 - 0.5Q $. Initially there is no tax.\ (a) Find the profit‑maximising output, the market price, and the profit.\ (b) The government introduces a specific tax of N15 million per unit. Determine the new profit‑maximising output, the consumer price, the price received by the firm, and the new profit.\ (c) Calculate the change in profit and the proportion of the tax burden borne by consumers versus producers (expressed as percentages).

A. a) Q* = 85 (thousand), P* = 152.5 N, Profit = 7,500 million N. b) Q* = 80, Consumer price = 160 N, Producer price = 145 N, Profit = 6,500 million N. c) Profit falls by 1,000 million N; consumers bear 30 % of the tax, producers bear 70 %.

B. a) Q* = 88 (thousand), P* = 154 N, Profit = 7,900 million N. b) Q* = 81, Consumer price = 158 N, Producer price = 143 N, Profit = 6,600 million N. c) Profit falls by 1,300 million N; consumers bear 22 % of the tax, producers bear 78 %.

C. a) Q* = 95 (thousand), P* = 157 N, Profit = 8,200 million N. b) Q* = 85, Consumer price = 159 N, Producer price = 144 N, Profit = 6,800 million N. c) Profit falls by 1,400 million N; consumers bear 20 % of the tax, producers bear 80 %.

Correct D. a) Q* = 90 (thousand), P* = 155 N, Profit = 8,000 million N.\b) Q* = 82.5, Consumer price = 158.75 N, Producer price = 143.75 N, Profit = 6,706.25 million N.\c) Profit falls by 1,293.75 million N; consumers bear 25 % of the tax, producers bear 75 %.

Correct Answer: D

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Question 10 View Details

In a closed economy, consumption is $ C = 50 + 0.8(Y - T) $, investment is $ I = 30 $, government spending is $ G = 20 $, taxes are $ T = 0.2Y $, and net exports are $ NX = -10 $.\ (a) Compute the equilibrium national income $Y$.\ (b) If autonomous investment rises by 15 and net exports improve by 5 (so $NX$ becomes -5), determine the new equilibrium $Y$ and the change in income.\ (c) Calculate the fiscal multiplier.

Correct A. a) Y = 250\n b) New Y ≈ 306, increase of about 56\n c) Multiplier ≈ 2.78

B. a) Y = 240 b) New Y ≈ 295, increase of about 55 c) Multiplier ≈ 2.5

C. a) Y = 260 b) New Y ≈ 315, increase of about 55 c) Multiplier ≈ 3.0

D. a) Y = 250 b) New Y ≈ 300, increase of about 50 c) Multiplier ≈ 2.6

Correct Answer: A

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Question 11 View Details

In a country with a total population of $20\,000\,000$, the labour‑force participation rate is $60\%$. The unemployment rate is $12\%$, of which $40\%$ are structurally unemployed. How many persons are cyclically unemployed?

A. 960000

B. 720000

Correct C. 864000

D. 1152000

Correct Answer: C

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Question 12 View Details

The manufacturing sector's output is described by the Cobb‑Douglas production function $Y = A K^{\alpha} L^{\beta}$ with constant returns to scale ($\alpha+\beta = 1$). Between 2015 and 2018 the sector's real output rose from $\text{₦}150$ billion to $\text{₦}165$ billion, while the capital stock increased from $\text{₦}500$ billion to $\text{₦}600$ billion. Assuming the labour force remained unchanged, determine the capital‑share parameter $\alpha$ (to two decimal places).

A. 0.60

B. 0.48

C. 0.55

Correct D. 0.52

Correct Answer: D

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Question 13 View Details

A farm's total wheat output (in tonnes) for different numbers of workers is given below:\n\[\begin{array}{c|c}\text{Workers (L)} & \text{Output (Q)}\\ \hline 2 & 20\\ 4 & 48\\ 6 & 78\\ 8 & 96\\ 10 & 100\end{array}\]\nAt which number of workers is the average product of labour maximised, and what is that maximum average product (in tonnes per worker)?

Correct A. 6 workers, 13 tonnes per worker

B. 8 workers, 12 tonnes per worker

C. 6 workers, 12 tonnes per worker

D. 4 workers, 12 tonnes per worker

Correct Answer: A

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Question 14 View Details

In 2010 a country had a population of 30 million with the following age structure: 0-14 years 35 %, 15-64 years 60 %, and 65 + years 5 %. The population grows at a constant annual rate of 2.5 %. By 2025 the proportion of the 0-14 age group is projected to fall to 30 % and the proportion of the 65 + age group to rise to 8 %. Assuming the total population continues to grow at 2.5 % per year, calculate the projected dependency ratio (dependents per 100 working‑age persons) in 2025. Give your answer rounded to the nearest whole number.

A. 55

B. 73

Correct C. 61

D. 68

Correct Answer: C

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Question 15 View Details

The price of a good increases from $\text{₦}200$ to $\text{₦}250$ and the quantity demanded falls from 500 units to 400 units. Using the midpoint (arc) method, calculate the price elasticity of demand. State the elasticity value (to two decimal places) and indicate whether demand is elastic, inelastic or unit‑elastic.

A. -0.80 (inelastic)

B. -1.25 (elastic)

Correct C. -1.00 (unit‑elastic)

D. -0.60 (inelastic)

Correct Answer: C

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Question 16 View Details

In Year 1 the labour force was $200\,000$ persons and the unemployment rate was $7\%$. After a recession the labour force grew by $5\%$ and the unemployment rate rose to $12\%$. The natural rate of unemployment is unchanged at $6\%$. What is the increase in the number of persons who are cyclically unemployed between the two periods? Give your answer as an integer.

A. 12600

B. 10300

C. 11200

Correct D. 10600

Correct Answer: D

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Question 17 View Details

The Consumer Price Index (CPI) was $150$ in 2020 and rose to $165$ in 2021. A savings account offers a nominal interest rate of $12\%$ per annum. Using the exact Fisher equation, calculate the real interest rate for 2021 and state by how many percentage points it falls short of the central bank's target real rate of $5\%$. Give your answer rounded to two decimal places.

A. 3.00

B. 4.20

Correct C. 3.18

D. 2.09

Correct Answer: C

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Question 18 View Details

A government wishes to raise $\text{₦}2{,}000$ (in thousand Naira) by imposing a specific tax $t$ per unit on a good. The market without tax has demand $Q_d = 500 - 2P$ and supply $Q_s = 3P - 150$, where $P$ is the price inclusive of tax. After the tax, the equilibrium quantity is $Q$ and revenue is $t\times Q = 2{,}000$.\n\n(a) Determine the tax rate $t$ (in Naira per unit) that will raise exactly $\text{₦}2{,}000$.\n(b) Using the formula $\text{DWL}=\frac{1}{2}\,t\,(Q_0-Q)$, where $Q_0$ is the equilibrium quantity without tax, compute the dead‑weight loss in million Naira, rounded to two decimal places.

A. Tax = ₦9.20 per unit; DWL = ₦0.07 million

B. Tax = ₦7.50 per unit; DWL = ₦0.04 million

Correct C. Tax = ₦8.71 per unit; DWL = ₦0.05 million

D. Tax = ₦10.00 per unit; DWL = ₦0.09 million

Correct Answer: C

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Question 19 View Details

The competitive market for a product is described by demand $P = 200 - 0.5Q$ and supply $P = 20 + 0.2Q$.\n\nA monopoly faces the same demand curve and has a constant marginal cost equal to the competitive equilibrium price. The government imposes a per‑unit tax of $\text{₦}30$ on the monopoly.\n\n(a) Determine the monopoly's profit‑maximising quantity and the price it charges to consumers.\n(b) Compute the monopoly's profit after tax.\n(c) Calculate the dead‑weight loss relative to the competitive outcome, expressed in Naira and rounded to two decimal places.

A. Quantity = 88 units; Price = ₦145.00; Profit = ₦4,200.10; DWL = ₦4,500.60

B. Quantity = 102 units; Price = ₦152.30; Profit = ₦5,100.25; DWL = ₦3,500.75

C. Quantity = 95 units; Price = ₦148.50; Profit = ₦4,500.00; DWL = ₦4,200.00

Correct D. Quantity = 99 units; Price = ₦150.72; Profit = ₦4,858.03; DWL = ₦3,907.57

Correct Answer: D

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Question 20 View Details

A firm faces the linear demand curve $P = 500 - 4Q$. Its total cost function is $TC = 2000 + 20Q + 0.5Q^{2}$.\n\n(a) Find the output level that maximises profit, the corresponding price, and the maximum profit (all rounded to two decimal places).\n(b) Determine the quantities at which the firm breaks even (profit = 0). Give both break‑even quantities rounded to two decimal places.

A. Q* = 53.33 units; Price = ₦280.00; Max profit = ₦10,000.00; Break‑even quantities = 4.34 units and 110.00 units

Correct B. Q* = 53.33 units; Price = ₦286.67; Max profit = ₦10,799.84; Break‑even quantities = 4.34 units and 102.32 units

C. Q* = 48.75 units; Price = ₦306.99; Max profit = ₦9,500.12; Break‑even quantities = 5.12 units and 98.45 units

D. Q* = 60.00 units; Price = ₦260.00; Max profit = ₦11,200.00; Break‑even quantities = 3.80 units and 105.60 units

Correct Answer: B

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Question 21 View Details

A good's price increases from $\text{₦}200$ to $\text{₦}250$ and its quantity demanded falls from 500 units to 400 units. Using the midpoint (arc) formula, calculate the price elasticity of demand.

A. -1.1

B. -2

Correct C. -1

D. -0.9

Correct Answer: C

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Question 22 View Details

The labour force of a country is 10 million, with 1.2 million unemployed. Structural unemployment is known to be 0.4 million. The government implements a policy that reduces cyclical unemployment by 25% while leaving structural unemployment unchanged. What is the new unemployment rate (as a percentage)?

A. 15

B. 12

C. 8

Correct D. 10

Correct Answer: D

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Question 23 View Details

The world price of wheat is $5 per kg. The government imposes a specific tariff of $2 per kg on wheat imports. Domestic demand is $Q_d = 500 - 30P$ and domestic supply is $Q_s = 20P$, where $P$ is the price (in dollars) received by domestic producers. Determine the tariff revenue collected by the government after the tariff is imposed.

A. 400

B. 200

C. 150

Correct D. 300

Correct Answer: D

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Question 24 View Details

A consumer's income rises from $\text{₦}50{,}000$ to $\text{₦}60{,}000$, and his expenditure on good X rises from $\text{₦}20{,}000$ to $\text{₦}24{,}000$. Assuming the price of X remains constant, calculate the income elasticity of demand for good X using the midpoint method, and state whether the good is a normal or luxury good.

A. 1.2

Correct B. 1

C. 0.5

D. 0.8

Correct Answer: B

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Question 25 View Details

In a monopolistically competitive market, the demand curve faced by a firm is $P = 100 - 2Q$ and marginal cost is constant at $MC = 20$. The firm has fixed costs of $\text{₦}200$. Determine the profit‑maximising output, price, and the resulting profit.

A. 800

B. 500

Correct C. 600

D. 400

Correct Answer: C

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