Practice post utme nile university economics 2018 Past Questions

Question 1

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 price elasticity of demand is -2, what is the percentage change in quantity demanded when the price increases by 10%?

Correct A. -20%

B. -40%

C. -60%

D. -80%

Correct Answer: A

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Question 2

A firm's production function is given by Q = 2L^0.5K^0.5, where Q is the output, L is the labor and K is the capital. If the firm wants to increase its output by 20% and the labor increases by 10%, what is the percentage change in capital required?

A. -10%

Correct B. -20%

C. -30%

D. -40%

Correct Answer: B

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Question 3

A consumer's budget constraint is given by the equation P1Q1 + P2Q2 = I, where P1 and Q1 are the price and quantity of good 1, P2 and Q2 are the price and quantity of good 2, and I is the income. If the price of good 1 increases by 20% and the price of good 2 decreases by 10%, what is the new budget constraint equation?

A. P1Q1 + 0.9P2Q2 = I

Correct B. 1.2P1Q1 + 0.9P2Q2 = I

C. 1.2P1Q1 + 0.9P2Q2 = 1.1I

D. 1.2P1Q1 + 0.9P2Q2 = 0.9I

Correct Answer: B

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Question 4

A firm's \cost function is given by the equation TC = 100 + 2L + 3K, where TC is the total \cost, L is the labor and K is the capital. If the firm wants to minimize its \cost, what is the optimal level of labor?

A. L = 0

Correct B. L = 10

C. L = 20

D. L = 30

Correct Answer: B

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Question 5

A consumer's indifference curve is given by the equation U = 2Q1 + Q2, where U is the utility and Q1 and Q2 are the quantities of good 1 and good 2. If the consumer's income increases by 20% and the price of good 1 decreases by 10%, what is the new indifference curve equation?

Correct A. U = 2.2Q1 + 1.1Q2

B. U = 2.2Q1 + Q2

C. U = 2Q1 + 1.1Q2

D. U = 2Q1 + Q2

Correct Answer: A

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Question 6

The government of Nigeria has implemented a policy to increase the production of rice to reduce imports. However, the policy has led to a significant increase in the price of rice. U\sing the concept of opportunity \cost, explain why the price of rice has increased.

A. The increase in price is due to the increase in demand for rice.

B. The increase in price is due to the increase in supply of rice.

Correct C. The increase in price is due to the opportunity \cost of producing rice.

D. The increase in price is due to the increase in transportation \cost.

Correct Answer: C

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Question 7

A firm is producing a good with a total revenue of ₦100,000 and a total \cost of ₦80,000. If the price of the good is ₦20, and the firm sells 5,000 units, calculate the profit of the firm.

A. ₦10,000

Correct B. ₦20,000

C. ₦30,000

D. ₦40,000

Correct Answer: B

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Question 8

The Central Bank of Nigeria has increased the reserve requirement for commercial banks from 10% to 15%. If a commercial bank has a deposit of ₦100,000,000, calculate the amount of cash it must keep in reserve.

A. ₦15,000,000

Correct B. ₦17,500,000

C. ₦20,000,000

D. ₦22,500,000

Correct Answer: B

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Question 9

A consumer has a budget of ₦50,000 and a utility function given by U(x,y) = 2x + 3y. If the prices of x and y are ₦10 and ₦20 respectively, find the optimal combination of x and y that the consumer will choose.

A. x = 2, y = 2

Correct B. x = 3, y = 2

C. x = 4, y = 2

D. x = 5, y = 2

Correct Answer: B

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Question 10

The Nigerian government has implemented a policy to increase the production of rice to reduce imports. However, the policy has led to a significant increase in the price of rice. U\sing the concept of supply and demand, explain why the price of rice has increased.

A. The increase in price is due to the increase in demand for rice.

B. The increase in price is due to the increase in supply of rice.

Correct C. The increase in price is due to the opportunity \cost of producing rice.

D. The increase in price is due to the increase in transportation \cost.

Correct Answer: C

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Question 11

Consider a smallholder farmer in Nigeria who cultivates maize and soybeans. The farmer's production function for maize is given by Q = 100 + 2L + 3K, where Q is the quantity of maize produced, L is the labor input, and K is the capital input. The production function for soybeans is given by Q = 80 + 2L + 4K. If the farmer allocates 20 units of labor and 30 units of capital to maize production, and 15 units of labor and 25 units of capital to soybeans production, what is the opportunity \cost of producing one unit of maize?

Correct A. ₦20

B. ₦30

C. ₦40

D. ₦50

Correct Answer: A

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Question 12

A country's balance of payments (BOP) is in equilibrium when the current account (CA) is equal to the capital account (KA). If the CA is ₦100 billion and the KA is ₦120 billion, what is the value of the BOP?

A. ₦100 billion

B. ₦120 billion

Correct C. ₦180 billion

D. ₦200 billion

Correct Answer: C

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Question 13

A firm's production function is given by Q = 100 + 2L + 3K, where Q is the quantity of output produced, L is the labor input, and K is the capital input. If the firm allocates 20 units of labor and 30 units of capital, what is the marginal product of labor?

A. 20

Correct B. 30

C. 40

D. 50

Correct Answer: B

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Question 14

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 has an income of ₦100, the price of good 1 is ₦10, and the price of good 2 is ₦20, what is the consumer's indifference curve?

A. 45°

B. 60°

Correct C. 90°

D. 120°

Correct Answer: C

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Question 15

A country's GDP is given by the formula 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 ₦500 billion, consumption is ₦150 billion, investment is ₦100 billion, government sp\ending is ₦50 billion, exports are ₦200 billion, and imports are ₦100 billion, what is the value of the country's GDP?

A. ₦400 billion

B. ₦450 billion

Correct C. ₦500 billion

D. ₦550 billion

Correct Answer: C

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Question 16

Consider a perfectly competitive market with n firms, each producing a homogeneous product. If the market demand curve is downward sloping and the firms are price takers, what is the equilibrium price and quantity in this market?

A. \( P = 10, Q = 100 \)

B. \( P = 20, Q = 50 \)

Correct C. \( P = 15, Q = 75 \)

D. \( P = 25, Q = 40 \)

Correct Answer: C

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Question 17

A firm's production function is given by \( Q = 2L^{1/2}K^{1/2} \). If the firm's current input prices are \( w = 10 \) and \( r = 20 \), and the firm's current output price is \( p = 30 \), what is the firm's optimal input combination?

Correct A. \( L = 100, K = 200 \)

B. \( L = 200, K = 100 \)

C. \( L = 50, K = 150 \)

D. \( L = 150, K = 50 \)

Correct Answer: A

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Question 18

A consumer's utility function is given by \( U = 2x + 3y \), where (x) and (y) are the quantities of two goods consumed. If the consumer's budget constraint is \( 2x + 3y = 100 \), and the prices of the two goods are \( p_x = 5 \) and \( p_y = 10 \), what is the consumer's optimal consumption bundle?

A. \( x = 20, y = 30 \)

B. \( x = 30, y = 20 \)

Correct C. \( x = 25, y = 25 \)

D. \( x = 10, y = 40 \)

Correct Answer: C

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Question 19

A monopolist's demand curve is given by \( Q = 100 - 2P \). If the monopolist's marginal \cost curve is given by \( MC = 10 \), what is the monopolist's optimal price and quantity?

A. \( P = 20, Q = 40 \)

B. \( P = 30, Q = 30 \)

Correct C. \( P = 25, Q = 35 \)

D. \( P = 35, Q = 25 \)

Correct Answer: C

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Question 20

A government is considering a tax on a particular good. The pre-tax demand curve for the good is given by \( Q = 100 - 2P \), and the pre-tax supply curve is given by \( Q = 2P \). If the government imposes a tax of \( t = 5 \), what is the new equilibrium price and quantity?

A. \( P = 15, Q = 25 \)

B. \( P = 20, Q = 20 \)

Correct C. \( P = 22.5, Q = 18.75 \)

D. \( P = 25, Q = 15 \)

Correct Answer: C

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Question 21

A consumer's indifference curve is downward sloping because of the law of increa\sing marginal disutility. Which of the following is a correct statement about the law of increa\sing marginal disutility?

Correct A. The law states that as the quantity of a good consumed increases, the marginal utility derived from it decreases.

B. The law states that as the quantity of a good consumed increases, the marginal utility derived from it increases.

C. The law states that as the quantity of a good consumed increases, the marginal utility derived from it remains cons\tant.

D. The law states that as the quantity of a good consumed increases, the marginal utility derived from it first increases and then decreases.

Correct Answer: A

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Question 22

A country's balance of payments is in equilibrium when the current account is balanced and the capital account is also balanced. Which of the following is a correct statement about the balance of payments?

A. The balance of payments is a statement of a country's international transactions over a specific period of time.

Correct B. The balance of payments is a statement of a country's international transactions over a specific period of time, and it includes the current account and the capital account.

C. The balance of payments is a statement of a country's international transactions over a specific period of time, and it includes the current account but not the capital account.

D. The balance of payments is a statement of a country's international transactions over a specific period of time, and it includes the capital account but not the current account.

Correct Answer: B

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Question 23

A firm's \cost function is given by C(q) = 2q^2 + 10q + 5. What is the marginal \cost function?

A. ( C'(q) = 2q + 5 )

Correct B. ( C'(q) = 4q + 10 )

C. ( C'(q) = 6q + 15 )

D. ( C'(q) = 8q + 20 )

Correct Answer: B

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Question 24

A central bank uses open market operations to increase the money supply in the economy. Which of the following is a correct statement about open market operations?

Correct A. Open market operations involve the central bank buying government securities from commercial banks.

B. Open market operations involve the central bank selling government securities to commercial banks.

C. Open market operations involve the central bank buying government securities from the public.

D. Open market operations involve the central bank selling government securities to the public.

Correct Answer: A

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Question 25

A monopolist faces a demand curve given by p = 100 - 2q. The marginal revenue function is given by MR(q) = 100 - 4q. What is the profit-maximizing quantity?

A. q = 10

Correct B. q = 15

C. q = 20

D. q = 25

Correct Answer: B

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