POST UTME ACHIEVERS UNIVERSITY 2022 Economics | Objective

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Question 1
U\sing the concept of returns to scale, explain why a firm's production function is typically represented by a decrea\sing marginal product of labor curve.
Correct A. The law of diminishing returns states that as the quantity of a variable input increases, while holding other inputs cons\tant, the marginal product of that input will eventually decrease.
B. The production function is typically represented by a decrea\sing marginal product of labor curve because the marginal product of labor decreases as the quantity of labor increases.
C. The firm's production function is typically represented by a decrea\sing marginal product of labor curve because the marginal product of labor increases as the quantity of labor increases.
D. The production function is typically represented by a decrea\sing marginal product of labor curve because the marginal product of labor remains cons\tant as the quantity of labor increases.

Correct Answer: A

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Question 2
A firm's production function is given by Q = 2L^2 + 3K, where Q is the quantity of output, L is the quantity of labor, and K is the quantity of capital. If the firm increases the quantity of labor from 4 units to 6 units, while holding the quantity of capital cons\tant, what is the change in the marginal product of labor?
A. The marginal product of labor increases by 2 units.
Correct B. The marginal product of labor decreases by 2 units.
C. The marginal product of labor remains cons\tant.
D. The marginal product of labor increases by 4 units.

Correct Answer: B

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Question 3
A firm's demand for labor is given by the equation L = 100 - 2P_L, where L is the quantity of labor demanded and P_L is the wage rate. If the wage rate increases from ₦50 to ₦60, what is the change in the quantity of labor demanded?
A. The quantity of labor demanded increases by 10 units.
Correct B. The quantity of labor demanded decreases by 10 units.
C. The quantity of labor demanded remains cons\tant.
D. The quantity of labor demanded increases by 20 units.

Correct Answer: B

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Question 4
A government imposes a tax on a firm's output, cau\sing the firm's supply curve to shift to the left. What is the effect of this tax on the firm's profit-maximizing output level?
A. The firm's profit-maximizing output level increases.
Correct B. The firm's profit-maximizing output level decreases.
C. The firm's profit-maximizing output level remains cons\tant.
D. The firm's profit-maximizing output level increases, but at a lower price.

Correct Answer: B

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Question 5
A firm's production function is given by Q = 2L^2 + 3K, where Q is the quantity of output, L is the quantity of labor, and K is the quantity of capital. If the firm increases the quantity of capital from 4 units to 6 units, while holding the quantity of labor cons\tant, what is the change in the marginal product of capital?
Correct A. The marginal product of capital increases by 2 units.
B. The marginal product of capital decreases by 2 units.
C. The marginal product of capital remains cons\tant.
D. The marginal product of capital increases by 4 units.

Correct Answer: A

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Question 6
Consider a production function with cons\tant returns to scale. If the output increases by 20% when the input increases by 10%, what is the value of the output elasticity of scale?
A. 0.5
Correct B. 1.0
C. 1.2
D. 2.0

Correct Answer: B

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Question 7
A firm's production function is given by Q = 2L^0.5K^0.5. If the firm increases its labor input by 50% and keeps the capital input cons\tant, what is the percentage change in output?
A. 25%
Correct B. 50%
C. 75%
D. 100%

Correct Answer: B

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Question 8
A country's GDP is ₦100 billion, and its GNP is ₦120 billion. What is the value of the net factor income from abroad?
A. ₦10 billion
B. ₦20 billion
Correct C. ₦30 billion
D. ₦40 billion

Correct Answer: C

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Question 9
A government imposes a tax on a firm's output. If the firm's supply curve shifts to the left, what is the effect on the equilibrium price and quantity?
Correct A. Price increases, quantity decreases
B. Price decreases, quantity increases
C. Price increases, quantity increases
D. Price decreases, quantity decreases

Correct Answer: A

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Question 10
A firm's demand function is given by Q = 100 - 2P. If the firm's revenue is ₦100,000, what is the value of the price elasticity of demand?
A. 0.5
Correct B. 1.0
C. 1.5
D. 2.0

Correct Answer: B

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Question 11
A firm's total revenue (TR) is given by the equation TR = 100x - 2x^2, where x is the number of units sold. If the firm's marginal revenue (MR) is 80, find the value of x.
A. 10
Correct B. 20
C. 30
D. 40

Correct Answer: B

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Question 12
A country's GDP is given by the equation GDP = C + I + G + \( X - M \), where C is consumption, I is investment, G is government sp\ending, X is exports, and M is imports. If the country's GDP is $100 billion, and the values of C, I, G, X, and M are $50 billion, $20 billion, $15 billion, $30 billion, and $25 billion respectively, find the value of X.
A. 35
B. 40
Correct C. 45
D. 50

Correct Answer: C

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Question 13
A firm's demand curve is given by the equation Qd = 100 - 2P, where Qd is the quantity demanded and P is the price. If the firm's supply curve is given by the equation Qs = 2P - 50, find the equilibrium price and quantity.
Correct A. 25, 75
B. 30, 70
C. 35, 65
D. 40, 60

Correct Answer: A

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Question 14
A country's balance of payments (BOP) is given by the equation BOP = X - M + \( F - I \), where X is exports, M is imports, F is foreign investment, and I is domestic investment. If the country's BOP is $10 billion, and the values of X, M, F, and I are $20 billion, $15 billion, $5 billion, and $10 billion respectively, find the value of F.
A. 15
Correct B. 20
C. 25
D. 30

Correct Answer: B

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Question 15
A firm's elasticity of demand is given by the equation E_d = \( P_1 - P_2 \) / \( Q_1 - Q_2 \), where E_d is the elasticity of demand, P_1 and P_2 are the initial and final prices, and Q_1 and Q_2 are the initial and final quantities. If the firm's demand curve is given by the equation Qd = 100 - 2P, and the initial and final prices are $10 and $20 respectively, find the elasticity of demand.
A. 0.5
B. 1
Correct C. 2
D. 5

Correct Answer: C

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Question 16
The government of a country imposes a tax on imported goods to raise revenue. This type of tax is an example of a _______ tax.
A. Direct
Correct B. Indirect
C. Proportional
D. Progressive

Correct Answer: B

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Question 17
A firm's production function is given by Q = 2L^0.5K^0.5. If the firm's current output is 16 units, and the number of workers (L) is 4, find the number of machines (K) required.
A. 4
B. 6
Correct C. 8
D. 10

Correct Answer: C

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Question 18
A consumer's budget constraint is given by P1Q1 + P2Q2 = I, where P1 and P2 are the prices of two goods, Q1 and Q2 are the quantities consumed, and I is the consumer's income. If the consumer's income is ₦1000, and the prices of the two goods are ₦5 and ₦10 respectively, find the maximum quantity of good 2 that the consumer can afford.
A. 20
B. 30
Correct C. 40
D. 50

Correct Answer: C

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Question 19
A firm's \cost function is given by C = 2L + 3K, where L is the number of workers and K is the number of machines. If the firm's current \cost is ₦1500, and the number of workers is 3, find the number of machines required.
A. 2
B. 4
Correct C. 6
D. 8

Correct Answer: C

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Question 20
A consumer's indifference curve is given by U = 2Q1 + Q2, where U is the level of satisfaction, Q1 and Q2 are the quantities consumed of two goods. If the consumer's current level of satisfaction is 10 units, and the quantity of good 1 consumed is 4 units, find the quantity of good 2 that the consumer is indifferent to.
A. 2
B. 4
Correct C. 6
D. 8

Correct Answer: C

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Question 21
Consider a firm operating in a perfectly competitive market with a production function Q = 2L^0.5K^0.5. If the firm's current input prices are w = ₦100 and r = ₦50, and it currently employs 4 units of labor and 2 units of capital, calculate the firm's current total \cost. Assume that the firm's production function exhibits cons\tant returns to scale.
A. ₦800
Correct B. ₦1000
C. ₦1200
D. ₦1500

Correct Answer: B

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Question 22
A government is considering implementing a policy to reduce inflation. The policy involves increa\sing the reserve requirement for commercial banks. Which of the following is a likely effect of this policy?
A. Increase in money supply
Correct B. Decrease in money supply
C. Increase in interest rates
D. Decrease in interest rates

Correct Answer: B

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Question 23
A firm's demand function is given by Q = 100 - 2P. If the firm's current price is ₦50, calculate the firm's current revenue.
A. ₦2500
Correct B. ₦3000
C. ₦3500
D. ₦4000

Correct Answer: B

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Question 24
A government is considering implementing a policy to reduce unemployment. The policy involves increa\sing the minimum wage. Which of the following is a likely effect of this policy?
A. Increase in employment
Correct B. Decrease in employment
C. Increase in inflation
D. Decrease in inflation

Correct Answer: B

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Question 25
A firm's production function is given by Q = 2L^0.5K^0.5. If the firm's current input prices are w = ₦100 and r = ₦50, and it currently employs 4 units of labor and 2 units of capital, calculate the firm's current marginal \cost.
Correct A. ₦25
B. ₦50
C. ₦75
D. ₦100

Correct Answer: A

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