Practice neco model questions vol1 economics 2025 Past Questions

Question 1 View Details

The market for a good is described by the inverse demand function $ P = 120 - 2Q $ and the total cost function $ TC = 20Q + 0.5Q^{2} $, where $P$ is price (₦) and $Q$ is quantity.\n\n(a) Determine the monopoly equilibrium price, quantity and profit.\n\n(b) Determine the competitive equilibrium price and quantity, and compute the total surplus (consumer surplus + producer surplus) in perfect competition.\n\n(c) What is the percentage increase in total surplus when the market changes from monopoly to perfect competition? Give your answer to two decimal places.

Correct A. 19.05

B. 12.34

C. 30.00

D. 25.67

Correct Answer: A

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Question 2 View Details

In an economy with a labour force of 10 million, the natural rate of unemployment is 5 % of the labour force, of which structural unemployment accounts for 60 % of the natural rate. After a recession the actual unemployment rate rises to 9 %.\n\nThe government introduces a training programme that reduces structural unemployment by 1 percentage point and a fiscal stimulus that reduces cyclical unemployment by 0.5 percentage point.\n\n(a) What is the new overall unemployment rate?\n\n(b) What percentage of the original total unemployment (the 9 % before the policies) is now structural? Give your answer to two decimal places.

Correct A. 7.5%; 22.22

B. 7.0%; 25.00

C. 6.5%; 18.75

D. 8.0%; 30.00

Correct Answer: A

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Question 3 View Details

A firm has total cost (in million Naira) given by\n\n\[ TC = 0.04Q^{3} - 0.3Q^{2} + 30Q + 50, \]\n\nwhere $Q$ is output in thousand units. The government imposes a specific tax of ₦40 per unit. The market price of the product is ₦500 per unit.\n\n(a) Determine the profit‑maximising output level after the tax and compute the resulting profit (in million Naira).\n\n(b) If the market price falls to ₦120 per unit, should the firm continue operating in the short run? Justify your answer.

A. Output ≈ 62.42 (thousand units); Profit ≈ 16,000.00 million Naira; Shut down

B. Output ≈ 70.25 (thousand units); Profit ≈ 20,500.30 million Naira; Continue operating

Correct C. Output ≈ 62.42 (thousand units); Profit ≈ 18,245.62 million Naira; Continue operating

D. Output ≈ 58.00 (thousand units); Profit ≈ 15,800.00 million Naira; Continue operating

Correct Answer: C

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Question 4 View Details

The wheat market is described by the supply function $ Q_{s}=20P-100 $ and the demand function $ Q_{d}=500-10P $, where quantities are in tonnes and price $P$ is in Naira per tonne.\n\nThe government introduces a price floor of ₦30 per tonne and, for every tonne produced above the equilibrium quantity, a per‑unit subsidy of ₦5 is paid to producers.\n\n(a) Find the equilibrium price and quantity without any intervention.\n\n(b) Determine the quantity supplied after the price floor is imposed.\n\n(c) Calculate the total subsidy paid by the government.\n\n(d) Compute the dead‑weight loss caused by the price floor together with the subsidy.

Correct A. Equilibrium: P=20, Q=300; Qs after floor=500; Subsidy=1,000 Naira; DWL=750 Naira

B. Equilibrium: P=25, Q=250; Qs after floor=450; Subsidy=900 Naira; DWL=800 Naira

C. Equilibrium: P=15, Q=350; Qs after floor=500; Subsidy=1,000 Naira; DWL=600 Naira

D. Equilibrium: P=20, Q=300; Qs after floor=600; Subsidy=1,200 Naira; DWL=700 Naira

Correct Answer: A

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Question 5 View Details

A farmer cultivates maize on 10 hectares. The yield per hectare (in tonnes) depends on the amount of fertilizer applied per hectare $L$ (kg) according to\n\n\[ Y = 2L - 0.05L^{2}. \]\n\nFertiliser costs ₦150 per kg, other variable costs are ₦20 000 per hectare, and total fixed costs are ₦100 000. The market price of maize is ₦120 000 per tonne.\n\n(a) Determine the amount of fertilizer per hectare that maximises profit.\n\n(b) Compute the farmer's total profit (in Naira) when the optimal fertilizer level is used on the 10 hectares.\n\n(c) Should the farmer expand cultivation to 12 hectares if the marginal profit per additional hectare (at the optimal $L$) exceeds the average fixed cost per hectare? State "Yes" or "No".

A. Optimal L = 18 kg/ha; Total profit = 21,500,000 Naira; Yes

B. Optimal L = 22 kg/ha; Total profit = 24,300,000 Naira; No

Correct C. Optimal L = 20 kg/ha; Total profit = 23,670,000 Naira; Yes

D. Optimal L = 20 kg/ha; Total profit = 22,000,000 Naira; No

Correct Answer: C

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Question 6 View Details

The money multiplier is given by $m = \frac{1 + c}{c + r}$, where $c$ is the currency‑deposit ratio and $r$ is the required reserve ratio. The Central Bank wishes to raise the money supply from ₦500 billion to ₦600 billion. The current currency‑deposit ratio is 0.25 and the required reserve ratio is 0.15, and these ratios will remain unchanged. How much new reserves must the Central Bank inject (in billions of naira) to achieve the target?

A. ₦25 billion

B. ₦40 billion

C. ₦20 billion

Correct D. ₦32 billion

Correct Answer: D

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Question 7 View Details

Using the income approach, compute Net National Income at market prices given the following data (in billions of naira): Compensation of employees = 150, Gross operating surplus = 80, Gross mixed income = 30, Indirect taxes = 25, Subsidies = 5, Depreciation = 20, Statistical discrepancy = -3. Assume net factor income from abroad is zero.

A. ₦267 billion

B. ₦247 billion

C. ₦237 billion

Correct D. ₦257 billion

Correct Answer: D

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Question 8 View Details

A firm produces output $Q$ according to the Cobb‑Douglas function $Q = 10 L^{0.5} K^{0.5}$, where $L$ and $K$ are units of labour and capital respectively. The market price of output is ₦100 per unit and the government imposes a specific tax of ₦50 per unit of output. The wage rate is ₦200 per unit of labour and the rental rate of capital is ₦500 per unit of capital. Determine the profit‑maximising levels of $L$ and $K$ and state the maximum profit (in billions of naira).

A. Positive production; profit = ₦0

B. No production; profit = ₦-50 billion

C. No production; profit = ₦100 billion

Correct D. No production; profit = ₦0

Correct Answer: D

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Question 9 View Details

Initially the currency‑deposit ratio is 0.20 and the required reserve ratio is 0.10, giving a money supply of ₦800 billion. The Central Bank wants to increase the money supply by 20 % to ₦960 billion while keeping the total reserves unchanged. Assuming the currency‑deposit ratio remains the same, what must the new required reserve ratio be (expressed as a percentage)?

Correct A. 5 %

B. 4 %

C. 6 %

D. 10 %

Correct Answer: A

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Question 10 View Details

In an economy the marginal propensity to consume is 0.75 and the marginal tax rate is 20 %. The government wishes to raise aggregate demand by ₦150 billion. It can do so by increasing government spending ($\Delta G$) and/or reducing taxes ($\Delta T$). Determine the combination of $\Delta G$ (in billions of naira) and $\Delta T$ (in billions of naira, negative for a tax cut) that achieves the target with the smallest total fiscal effort, measured by $|\Delta G| + |\Delta T|$.

A. Increase government spending by ₦75 billion; tax reduction = ₦0

Correct B. Increase government spending by ₦60 billion; tax reduction = ₦0

C. Increase government spending by ₦0; tax reduction = ₦-120 billion

D. Increase government spending by ₦30 billion; tax reduction = ₦-45 billion

Correct Answer: B

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Question 11 View Details

A country can produce either 120 units of wheat or 80 units of cloth using all its resources. If it decides to produce 30 units of cloth, how many units of wheat are forgone?

Correct A. 45

B. 40

C. 35

D. 55

Correct Answer: A

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Question 12 View Details

Two bonds are available. Bond A offers a nominal interest rate of 12% per annum, while Bond B offers 9% per annum. Expected inflation for the next year is 5% for the first six months and 7% for the next six months. Which bond provides the higher real rate of return?

A. Bond B

Correct B. Bond A

C. Neither bond

D. Both bonds

Correct Answer: B

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Question 13 View Details

The population of a country was 20 million in 2020. It grew at 2% per year from 2020 to 2025 and at 1.5% per year thereafter. In which year will the population first exceed 30 million?

A. 2045

B. 2044

Correct C. 2046

D. 2047

Correct Answer: C

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Question 14 View Details

The Consumer Price Index (CPI) was 150 in 2022 and rose to 162 in 2023. A worker's nominal monthly wage increased from $\text{₦}50{,}000$ to $\text{₦}55{,}000$ over the same period. Calculate the percentage change in the worker's real wage between 2022 and 2023 (to one decimal place).

A. 0.9

Correct B. 1.9

C. -1.2

D. 2.5

Correct Answer: B

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Question 15 View Details

Country X exports coffee and imports oil. The world price of coffee rose from $\$2.00$ per kg to $\$2.50$ per kg, while the world price of oil fell from $\$0.80$ per litre to $\$0.70$ per litre. Calculate the percentage change in Country X's terms of trade (export price index divided by import price index) and state whether its terms of trade improved or deteriorated.

Correct A. 42.9

B. 25.0

C. 57.1

D. 33.3

Correct Answer: A

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Question 16 View Details

In a country the labour force is 10 million and the overall unemployment rate is 8%. Structural unemployment accounts for 2% of the labour force and frictional unemployment accounts for 1.5% of the labour force. Assuming only structural, frictional and cyclical unemployment exist, calculate the cyclical unemployment rate (in percent).

A. 5.5

B. 3

Correct C. 4.5

D. 6

Correct Answer: C

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Question 17 View Details

A textile firm has total cost $TC = 5{,}000 + 30Q + 0.05Q^{2}$, where $Q$ is output in units. The government imposes a per‑unit tax of $\text{₦}2$. Market demand is given by $P = 150 - 0.1Q$. Determine the maximum profit the firm can earn (in naira) after the tax is applied.

A. 19222

B. 17222

C. 15800

Correct D. 18222

Correct Answer: D

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Question 18 View Details

The price of a good falls from $\text{₦}120$ to $\text{₦}90$ and the quantity demanded rises from 500 units to 800 units. Using the midpoint (arc) method, calculate the price elasticity of demand and state whether demand is elastic, inelastic or unit‑elastic.

Correct A. -1.62

B. -2

C. -0.75

D. -1.33

Correct Answer: A

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Question 19 View Details

A country's expenditure components are: Consumption $C = \text{₦}2{,}300$ million, Investment $I = \text{₦}800$ million, Government spending $G = \text{₦}1{,}200$ million, and Net factor income from abroad $NFIA = \text{₦}200$ million. If Gross National Product (GNP) equals $\text{₦}5{,}200$ million, calculate the value of Net exports $NX$ (in million naira).

A. 500

B. 300

C. 900

Correct D. 700

Correct Answer: D

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Question 20 View Details

A firm faces the demand curve $P = 200 - 0.5Q$ (price in naira, $Q$ in units). Its total cost function is $TC = 5{,}000 + 30Q + 0.2Q^{2}$.\n(a) Determine the output level (in whole units) at which the firm breaks even for the first time (i.e., the smaller positive solution of $TR = TC$).\n(b) Calculate the profit (or loss) when the firm produces 300 units.

A. -15000

B. -1700

Correct C. -17000

D. -19000

Correct Answer: C

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Question 21 View Details

The population of a country follows the logistic model $P(t)=\frac{K}{1+A e^{-rt}}$, where $t$ is the number of years after 2000. In the year 2000 the population was 8 million, and in 2010 it was 10 million. The intrinsic growth rate is $r=0.04$ per year. Determine the first calendar year in which the population will exceed 15 million.

A. 2029

B. 2035

C. 2042

Correct D. 2037

Correct Answer: D

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Question 22 View Details

A farmer can use his land and labour to produce either 10 tonnes of rice or 5 tonnes of cassava. If he devotes all his resources to rice, he produces 10 tonnes; if he devotes them to cassava, he produces 5 tonnes. What is the opportunity cost of producing one tonne of rice in terms of cassava?

A. 1 tonne of cassava

Correct B. 0.5 tonne of cassava

C. 0.25 tonne of cassava

D. 2 tonne of cassava

Correct Answer: B

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Question 23 View Details

A firm's total cost (in naira) for producing $Q$ units is given by $TC = 0.5Q^{2} + 20Q + 150$. The market demand is described by the price function $P = 120 - 0.5Q$. Assuming the firm can sell all output at the market price, determine the output level that maximises profit and compute the maximum profit.

A. Q = 55 units, profit = 2100 naira

Correct B. Q = 50 units, profit = 2350 naira

C. Q = 45 units, profit = 2000 naira

D. Q = 40 units, profit = 1600 naira

Correct Answer: B

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Question 24 View Details

A farmer has 100 hectares of land, 240 labour units and 460 water units available. He can plant maize (profit $\text{₦}3000$ per hectare) requiring 2 labour units and 5 water units per hectare, or soybeans (profit $\text{₦}4000$ per hectare) requiring 3 labour units and 4 water units per hectare. How many hectares of each crop should be planted to maximise total profit, and what is the maximum profit?

Correct A. 60 ha maize, 40 ha soybeans; maximum profit = 340000 naira

B. 50 ha maize, 50 ha soybeans; maximum profit = 350000 naira

C. 70 ha maize, 30 ha soybeans; maximum profit = 330000 naira

D. 40 ha maize, 60 ha soybeans; maximum profit = 360000 naira

Correct Answer: A

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Question 25 View Details

The market demand for a good is $Q_d = 500 - 5P$ and the market supply is $Q_s = 100 + 3P$, where $P$ is the price in naira and $Q$ is quantity. Find the equilibrium price and quantity.

A. P = 45 naira, Q = 275 units

B. P = 60 naira, Q = 200 units

Correct C. P = 50 naira, Q = 250 units

D. P = 40 naira, Q = 300 units

Correct Answer: C

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