Practice neco model questions vol1 economics 2024 Past Questions

Question 1 View Details

A farmer has 10 hectares of land and 800 kg of fertilizer. He can grow maize or beans. The yield per hectare depends on the amount of fertilizer applied per hectare as follows: - For maize, total output (in tonnes) from $x$ hectares receiving $f_m$ kg of fertilizer per hectare is $Q_m = 2 f_m x$. - For beans, total output (in tonnes) from $y$ hectares receiving $f_b$ kg of fertilizer per hectare is $Q_b = 1.5 \sqrt{f_b}\, y$. The farmer may allocate the land between the two crops ($x + y = 10$) and must satisfy the fertilizer constraint $f_m x + f_b y = 800$. The market price is ₦1500 per tonne of maize and ₦2000 per tonne of beans. Fixed costs are ₦5000 and other variable costs are negligible. Determine the allocation of land ($x$ and $y$) and the amount of fertilizer per hectare ($f_m$ and $f_b$) that maximizes the farmer's profit, and state the maximum profit.

Correct A. Allocate 8 ha to maize with 100 kg/ha fertilizer and 2 ha to beans with no fertilizer; maximum profit = ₦2,395,000.

B. Allocate 9 ha to maize with 80 kg/ha fertilizer and 1 ha to beans with no fertilizer; maximum profit = ₦2,420,000.

C. Allocate 8 ha to maize with 90 kg/ha fertilizer and 2 ha to beans with 10 kg/ha fertilizer; maximum profit = ₦2,380,000.

D. Allocate 7 ha to maize with 120 kg/ha fertilizer and 3 ha to beans with no fertilizer; maximum profit = ₦2,310,000.

Correct Answer: A

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Question 2 View Details

The price of a commodity rises from ₦120 to ₦134, and as a result the quantity demanded falls from 500 units to 470 units. Calculate the price elasticity of demand using the midpoint (arc) formula and state whether demand is elastic, inelastic or unit‑elastic.

Correct A. -0.56 (inelastic)

B. -0.62 (inelastic)

C. -0.68 (elastic)

D. -0.45 (inelastic)

Correct Answer: A

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Question 3 View Details

A firm's total product (TP) schedule for labour input is given below: L (workers) : 0 1 2 3 4 5 TP (units) : 0 20 45 66 80 88 (a) Compute the marginal product (MP) and average product (AP) of labour for each additional worker from L=1 to L=5. (b) Using linear interpolation between the relevant points, estimate the number of workers at which MP equals AP. (c) State whether the firm is experiencing diminishing marginal returns beyond that point.

A. MP: 18, 26, 22, 15, 9; AP: 20, 23, 21, 20.5, 18.2. MP = AP at approximately 2.9 workers; beyond this point marginal product remains constant, so diminishing marginal returns are not observed.

B. MP: 20, 24, 20, 13, 7; AP: 20, 22, 21, 19, 16.5. MP = AP at approximately 2.5 workers; beyond this point marginal product falls, indicating diminishing marginal returns.

Correct C. MP: 20, 25, 21, 14, 8; AP: 20, 22.5, 22, 20, 17.6. MP = AP at approximately 2.71 workers; beyond this point marginal product falls, so the firm experiences diminishing marginal returns.

D. MP: 20, 25, 21, 14, 8; AP: 20, 22.5, 22, 20, 17.6. MP = AP at approximately 3.2 workers; beyond this point marginal product rises, so the firm does not experience diminishing marginal returns.

Correct Answer: C

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Question 4 View Details

The market for a good is described by the demand equation $P = 200 - 5Q$ and the supply equation $P = 20 + 3Q$, where $P$ is price in naira and $Q$ is quantity. The government imposes a specific tax of ₦30 per unit on sellers. Find the new equilibrium quantity and the price paid by buyers after the tax.

A. Quantity = 17.5 units, price paid by buyers = ₦103.75

Correct B. Quantity = 18.75 units, price paid by buyers = ₦106.25

C. Quantity = 15.0 units, price paid by buyers = ₦100.00

D. Quantity = 20.0 units, price paid by buyers = ₦112.50

Correct Answer: B

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Question 5 View Details

The marginal propensity to consume (MPC) in an economy is 0.8 and the marginal tax rate is 25 %. The government decides to increase autonomous expenditure (government spending) by ₦200 million. Using the appropriate fiscal multiplier that incorporates the tax rate, calculate (a) the resulting change in equilibrium national income, and (b) the increase in tax revenue that arises from the higher income.

Correct A. ΔY = ₦500 million; ΔTax revenue = ₦125 million

B. ΔY = ₦600 million; ΔTax revenue = ₦150 million

C. ΔY = ₦500 million; ΔTax revenue = ₦50 million

D. ΔY = ₦400 million; ΔTax revenue = ₦100 million

Correct Answer: A

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Question 6 View Details

A farmer has 10 hectares of land. Baseline yield is 1.5 tonnes per hectare and the market price of the crop is $\mathrm{N}1500$ per tonne. He can use fertilizer A costing $\mathrm{N}200$ per kilogram, which increases yield by 20 % and requires 2 kg per hectare. Fertilizer B costs $\mathrm{N}350$ per kilogram, increases yield by 35 % and also requires 2 kg per hectare. The total amount he can spend on fertilizer is limited to $\mathrm{N}5000$. He may allocate fertilizer A to some hectares, fertilizer B to others, and leave any remaining hectares unfertilised. Determine how many hectares should receive fertilizer A, how many should receive fertilizer B, and the maximum total profit he can obtain.

A. 1 hectare with fertilizer A, 7 hectares with fertilizer B (2 ha left unfertilised); maximum profit = $\mathrm{N}22,900$.

Correct B. 2 hectares with fertilizer A, 6 hectares with fertilizer B (2 ha left unfertilised); maximum profit = $\mathrm{N}23,125$.

C. 2 hectares with fertilizer A, 5 hectares with fertilizer B (3 ha left unfertilised); maximum profit = $\mathrm{N}21,750$.

D. 3 hectares with fertilizer A, 5 hectares with fertilizer B (2 ha left unfertilised); maximum profit = $\mathrm{N}22,500$.

Correct Answer: B

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Question 7 View Details

In year 1 a country's export price index is 120 and its import price index is 100. It exports 500 units and imports 800 units. In year 2 the export price index rises to 138 and the import price index to 110, while quantities exported and imported remain unchanged. (a) Compute the terms of trade index for each year and the percentage change between the two years. (b) Assuming the base‑year price of one unit is $\mathrm{N}1$, calculate the real income measured in import‑goods units for each year and the percentage change in real income.

A. TOT₁ = 120, TOT₂ ≈ 122.5; improvement ≈ 2.1 %. Real income: 600 import‑goods units in year 1, ≈610.0 units in year 2; increase ≈1.7 %.

Correct B. TOT₁ = 120, TOT₂ ≈ 125.5; improvement ≈ 4.6 %. Real income: 600 import‑goods units in year 1, ≈627.3 units in year 2; increase ≈4.5 %.

C. TOT₁ = 120, TOT₂ ≈ 128.0; improvement ≈ 6.7 %. Real income: 600 import‑goods units in year 1, ≈635.0 units in year 2; increase ≈5.8 %.

D. TOT₁ = 120, TOT₂ ≈ 124.0; improvement ≈ 3.3 %. Real income: 600 import‑goods units in year 1, ≈620.0 units in year 2; increase ≈3.3 %.

Correct Answer: B

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Question 8 View Details

A farmer can allocate one hectare of land to either produce rice or beans. With the current technology, one hectare can produce either 40 bags of rice or 30 bags of beans. If the farmer decides to produce 20 bags of rice on a hectare, how many bags of beans can be produced on the same hectare? Also state the opportunity cost of one bag of rice in terms of beans.

A. 18 bags of beans; opportunity cost = 0.9 bag of beans per bag of rice.

Correct B. 15 bags of beans; opportunity cost = 0.75 bag of beans per bag of rice.

C. 12 bags of beans; opportunity cost = 0.6 bag of beans per bag of rice.

D. 10 bags of beans; opportunity cost = 0.5 bag of beans per bag of rice.

Correct Answer: B

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Question 9 View Details

When the price of wheat rises from $\mathrm{N}500$ to $\mathrm{N}600$ per tonne, the quantity demanded falls from 2000 tonnes to 1500 tonnes. Using the midpoint (arc) method, calculate the price elasticity of demand for wheat.

Correct A. -1.57 (elastic demand)

B. -0.85 (inelastic demand)

C. -2.10 (elastic demand)

D. -1.20 (inelastic demand)

Correct Answer: A

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Question 10 View Details

A firm needs to transport 500 tonnes of goods each month from Lagos to Kano. It can choose either road or rail. Road transport costs a fixed $\mathrm{N}20{,}000$ per shipment plus $\mathrm{N}150$ per tonne, and arrives on time 90 % of the time. Rail transport costs a fixed $\mathrm{N}35{,}000$ per shipment plus $\mathrm{N}80$ per tonne, and arrives on time 98 % of the time. For each tonne that is delayed, the firm incurs a penalty of $\mathrm{N}200$. Determine which mode of transport minimises the firm's total expected monthly cost and state that minimum cost.

A. Road; minimum expected monthly cost = $\mathrm{N}95,000$.

Correct B. Rail; minimum expected monthly cost = $\mathrm{N}77,000$.

C. Rail; minimum expected monthly cost = $\mathrm{N}75,000$.

D. Road; minimum expected monthly cost = $\mathrm{N}105,000$.

Correct Answer: B

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Question 11 View Details

A consumer price index (CPI) was 120 at the start of 2022, rose to 132 at the end of 2023 and to 144 at the end of 2024. A bank offers a nominal interest rate of $12\%$ per annum for a 2‑year fixed deposit starting on 1 January 2023, while another bank offers $10\%$ per annum for a 3‑year fixed deposit starting on the same date. Assuming that inflation each year equals the percentage change in CPI for that year, which deposit option gives the higher real total return at the end of its term? State the option (2‑year or 3‑year).

Correct A. 2-year

B. 1-year

C. 4-year

D. 3-year

Correct Answer: A

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Question 12 View Details

The market demand for a product is given by $P = 100 - 2Q$ and the industry's marginal cost is constant at $MC = 20$. (i) Determine the equilibrium price and quantity under perfect competition. (ii) Assuming the same demand and cost structure, find the monopoly price and quantity. (iii) Calculate the dead‑weight loss caused by monopoly. Give your answer in monetary units.

A. 600

Correct B. 400

C. 300

D. 500

Correct Answer: B

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Question 13 View Details

The world price of wheat is US\$2 per kilogram. The exchange rate is 360 Naira per US\$. The government imposes a 15 % ad valorem tariff on wheat imports and simultaneously grants a subsidy of US\$0.10 per kilogram to domestic wheat producers. Compute (i) the effective price paid by consumers for wheat in Naira, and (ii) the effective protection rate expressed as a percentage of the original world price. Round the protection rate to one decimal place.

A. 8.5

B. 12.3

C. 15.0

Correct D. 10.0

Correct Answer: D

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Question 14 View Details

In a country the required reserve ratio is 10 % and the public holds currency equal to 25 % of bank deposits (currency‑deposit ratio $c = 0.25$). The central bank purchases government securities worth ₦500 million, paying by increasing bank reserves. Using the money multiplier formula $m = \frac{1+c}{r+c}$, where $r$ is the required reserve ratio, calculate the resulting increase in the money supply. Express your answer in millions of Naira, rounded to the nearest million.

A. 1500

Correct B. 1786

C. 2000

D. 2100

Correct Answer: B

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Question 15 View Details

A monopolist practices third‑degree price discrimination on two separate consumer groups. The inverse demand functions are $P_A = 120 - 4Q_A$ for group A and $P_B = 100 - 2Q_B$ for group B. The firm's marginal cost is constant at $MC = 20$. Determine (i) the profit‑maximising quantity and price for each group, and (ii) the total profit earned by the monopolist. Give the total profit in monetary units.

Correct A. 1425

B. 1250

C. 1325

D. 1525

Correct Answer: A

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Question 16 View Details

The economy's Gross Domestic Product (GDP) is $12,500$ billion Naira. Residents earned $800$ billion Naira as factor income abroad, while $500$ billion Naira was paid to foreign residents as factor income. Depreciation (consumption of fixed capital) amounts to $1,200$ billion Naira. Calculate the Net National Income (NNI) for the year.

Correct A. 11,600

B. 12,500

C. 12,800

D. 10,400

Correct Answer: A

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Question 17 View Details

In a given year, the government's tax revenue is $4,200$ billion Naira and non‑tax revenue is $800$ billion Naira. Total expenditure amounts to $5,500$ billion Naira, of which $300$ billion Naira are interest payments on existing debt. The country's GDP is $15,000$ billion Naira and the government wishes to keep the primary deficit no larger than 5 % of GDP. What is the maximum additional borrowing the government can undertake while respecting this primary‑deficit limit?

A. 550

B. 300

C. 200

Correct D. 250

Correct Answer: D

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Question 18 View Details

A country's Gross National Income (GNI) was $10,000$ billion Naira in 2022, with a population of 200 million. In 2023 the population grew by 2.5 % and GNI grew by 4 %. What was the per‑capita GNI in 2023, expressed in thousands of Naira (rounded to the nearest whole thousand)?

A. 50

B. 52

C. 54

Correct D. 51

Correct Answer: D

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Question 19 View Details

The demand for a product is given by $Q = 120 - 2P$, where $Q$ is quantity demanded and $P$ is price (in Naira). The firm currently sells at price $P = 30$. (i) Determine the price elasticity of demand at this price. (ii) If the firm raises the price to $P = 35$, will total revenue increase, decrease, or remain unchanged? State the expected change.

A. Elasticity = -0.5; total revenue will increase

B. Elasticity = -1; total revenue will remain unchanged

C. Elasticity = -2; total revenue will increase

Correct D. Elasticity = -1; total revenue will decrease

Correct Answer: D

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Question 20 View Details

The labour force of a country is 10 million workers. The observed unemployment rate is 12 %, while the natural rate of unemployment is estimated at 7 %. Calculate the number of people who are unemployed due to cyclical factors (i.e., the cyclical unemployment) in millions.

A. 0.7

B. 0.2

C. 1.2

Correct D. 0.5

Correct Answer: D

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Question 21 View Details

During a five‑year period the real GDP of a country rose from $\text{₦}2.5$ trillion to $\text{₦}3.0$ trillion while its population increased from 150 million to 165 million. In the final year the government's policy raised net investment as a proportion of GDP from 20 % to 25 %. If the marginal propensity to consume (MPC) is 0.8, estimate the change in average per‑capita disposable income that can be attributed to the increase in net investment, using the simple Keynesian multiplier. Give your answer in Naira (rounded to the nearest Naira).

A. 7625

Correct B. 7576

C. 7560

D. 7480

Correct Answer: B

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Question 22 View Details

The price of wheat falls because of a good harvest, which raises the demand for bread. At the same time a severe drought reduces wheat output, shifting the wheat supply curve leftward. Assuming wheat is the only input for bread, what is the likely direction of change in the equilibrium price and the equilibrium quantity of bread?

Correct A. Price rises; quantity indeterminate

B. Price rises; quantity rises

C. Price falls; quantity indeterminate

D. Price falls; quantity falls

Correct Answer: A

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Question 23 View Details

When the price of a product falls from $\text{₦}200$ to $\text{₦}150$, the quantity demanded rises from 5,000 units to 6,500 units. Using the midpoint method, calculate the price elasticity of demand and state whether total revenue will increase, decrease, or remain unchanged as a result of the price fall.

A. Elasticity ≈ -0.91 (elastic); total revenue decreases

Correct B. Elasticity ≈ -0.91 (inelastic); total revenue decreases

C. Elasticity ≈ -0.45 (inelastic); total revenue remains unchanged

D. Elasticity ≈ -1.25 (elastic); total revenue increases

Correct Answer: B

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Question 24 View Details

A textile firm has total cost (in million Naira) given by $TC = 0.05Q^{2} + 0.1Q + 0.05$, where $Q$ is output in thousand units. The government imposes a per‑unit tax of $\text{₦}2$ on each unit produced. The market price of the product is $\text{₦}500$ per unit. Determine the profit‑maximising output level (in thousand units) after the tax and compute the firm's profit (or loss) in million Naira, rounding the profit to three decimal places.

A. 0.658

B. 0.690

Correct C. 0.742

D. 0.815

Correct Answer: C

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Question 25 View Details

A farmer has a 5‑hectare plot that can be used either for maize or for beans. Maize yields 4 tonnes per hectare and beans yield 2.5 tonnes per hectare. The market price of maize is $\text{₦}150$ per kilogram and that of beans is $\text{₦}200$ per kilogram. What is the opportunity cost, in kilograms of beans, of planting maize on one hectare?

A. 4000

Correct B. 2500

C. 2000

D. 3000

Correct Answer: B

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