Practice post utme wellspring university economics 2018 Past Questions

Question 1

Consider a firm operating in a perfectly competitive market with a downward-sloping demand curve. If the firm's marginal revenue (MR) curve intersects its marginal \cost (MC) curve at point E, where MR = MC, and the price elasticity of demand is unit elastic at point E, what is the implication for the firm's profit-maximizing output?

Correct A. The firm will produce at the point where MR = MC, and the price elasticity of demand is unit elastic.

B. The firm will produce at the point where MR = MC, but the price elasticity of demand is not unit elastic.

C. The firm will not produce at the point where MR = MC, and the price elasticity of demand is unit elastic.

D. The firm will not produce at the point where MR = MC, and the price elasticity of demand is not unit elastic.

Correct Answer: A

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Question 2

A country's balance of payments (BOP) accounts are in equilibrium when the current account is equal to the capital account. If the country's current account is in deficit, what is the implication for the capital account?

Correct A. The capital account will be in surplus.

B. The capital account will be in deficit.

C. The capital account will be in equilibrium.

D. The capital account will be in surplus, but the current account will be in equilibrium.

Correct Answer: A

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Question 3

A firm's \cost function is given by C(q) = 2q^2 + 5q + 10. If the firm's revenue function is given by R(q) = 3q^2 + 2q + 5, what is the firm's profit function?

Correct A. π(q) = q^2 - 3q + 5

B. π(q) = 2q^2 - 3q + 5

C. π(q) = q^2 + 2q + 5

D. π(q) = 2q^2 + 5q + 10

Correct Answer: A

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Question 4

A country's inflation rate is 5% per annum, and its nominal interest rate is 10% per annum. If the country's real interest rate is 5% per annum, what is the expected rate of inflation?

A. 5%

Correct B. 10%

C. 15%

D. 20%

Correct Answer: B

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Question 5

A firm's demand curve is given by Qd = 100 - 2P, and its supply curve is given by Qs = 2P. If the firm's equilibrium price is $10, what is the firm's equilibrium quantity?

A. 20

Correct B. 30

C. 40

D. 50

Correct Answer: B

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Question 6

Consider a firm operating in a perfectly competitive market with a given production function Q = 2L^0.5K^0.5. If the firm's current input prices are w = ₦100 and r = ₦200, and it is currently producing 4 units of output, calculate the firm's current total \cost.

Correct A. ₦800

B. ₦1200

C. ₦1600

D. ₦2000

Correct Answer: A

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Question 7

A government is considering a policy to reduce inflation by increa\sing the reserve requirement of commercial banks. If the current reserve requirement is 10% and the government wants to increase it by 5 percentage points, what will be the new reserve requirement?

A. 15%

Correct B. 20%

C. 25%

D. 30%

Correct Answer: B

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Question 8

A firm is considering investing in a new project with an initial \cost of ₦1,000,000 and expected annual profits of ₦200,000 for 5 years. If the firm's \cost of capital is 10%, calculate the net present value (NPV) of the project.

A. ₦500,000

Correct B. ₦750,000

C. ₦1,000,000

D. ₦1,250,000

Correct Answer: B

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Question 9

A government is considering a policy to increase the minimum wage from ₦20,000 to ₦30,000 per month. If the government expects the policy to increase employment by 10%, calculate the change in the government's tax revenue.

A. ₦100,000,000

Correct B. ₦150,000,000

C. ₦200,000,000

D. ₦250,000,000

Correct Answer: B

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Question 10

A firm is considering investing in a new project with an initial \cost of ₦500,000 and expected annual profits of ₦150,000 for 3 years. If the firm's \cost of capital is 12%, calculate the internal rate of return (IRR) of the project.

A. 15%

Correct B. 18%

C. 20%

D. 22%

Correct Answer: B

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Question 11

In a perfectly competitive market, the supply curve is upward-sloping because of the law of increa\sing

A. diminishing returns

B. increa\sing \costs

C. decrea\sing marginal revenue

Correct D. increa\sing marginal \cost

Correct Answer: D

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Question 12

A country's balance of payments is in equilibrium when the current account is balanced with the capital account

A. and the trade deficit is zero

B. and the trade surplus is zero

C. and the capital account is zero

Correct D. and the current account is zero

Correct Answer: D

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Question 13

The opportunity \cost of producing one more unit of a good is the

A. marginal benefit

Correct B. marginal \cost

C. average \cost

D. average revenue

Correct Answer: B

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Question 14

A budget is a

A. statement of government revenue and exp\enditure

Correct B. a plan for government revenue and exp\enditure

C. a statement of government exp\enditure only

D. a plan for government revenue only

Correct Answer: B

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Question 15

The money supply is the total amount of

A. currency in circulation

B. currency in banks

Correct C. currency in circulation and in banks

D. currency in circulation and in foreign banks

Correct Answer: C

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Question 16

The production function for a firm is given by Q = 2L^0.5K^0.5, where Q is output, L is labor and K is capital. If the firm increases labor from 100 to 121 units and capital from 100 to 121 units, calculate the percentage change in output.

A. 10%

Correct B. 20%

C. 30%

D. 40%

Correct Answer: B

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Question 17

A firm is producing a good u\sing the production function Q = 2L^0.5K^0.5. If the firm is currently producing 100 units of output with 100 units of labor and 100 units of capital, calculate the marginal product of labor and marginal product of capital.

Correct A. MP_L = 0.5, MP_K = 0.5

B. MP_L = 1, MP_K = 1

C. MP_L = 0.25, MP_K = 0.25

D. MP_L = 0.5, MP_K = 0.25

Correct Answer: A

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Question 18

The demand function for a good is given by P = 100 - 2Q, where P is price and Q is quantity demanded. If the supply function is given by P = 2Q + 10, calculate the equilibrium price and quantity.

A. P^* = 20, Q^* = 5

Correct B. P^* = 25, Q^* = 7.5

C. P^* = 30, Q^* = 10

D. P^* = 35, Q^* = 12.5

Correct Answer: B

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Question 19

A firm is producing a good u\sing the production function Q = 2L^0.5K^0.5. If the firm is currently producing 100 units of output with 100 units of labor and 100 units of capital, calculate the total product and total \cost.

A. TP = 150, TC = 150

Correct B. TP = 200, TC = 200

C. TP = 250, TC = 250

D. TP = 300, TC = 300

Correct Answer: B

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Question 20

The government of Nigeria is considering a policy to increase agricultural production. If the policy is expected to increase the supply of agricultural products by 10%, calculate the effect on the price of agricultural products.

A. \frac{\Delta P}{P} = -0.05

Correct B. \frac{\Delta P}{P} = -0.1

C. \frac{\Delta P}{P} = -0.15

D. \frac{\Delta P}{P} = -0.2

Correct Answer: B

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