Practice waec model questions vol1 economics 2017 Past Questions

Question 1 View Details

According to Okun's law, a 1 percentage‑point decrease in the unemployment rate above the natural rate raises actual real GDP growth by 2 percentage points above the potential growth rate. If a country's potential real GDP growth is 5 % per year and the unemployment rate falls from 8 % to 6 % during the year, what is the actual real GDP growth rate for that year?

A. 11%

B. 5%

Correct C. 9%

D. 7%

Correct Answer: C

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Question 2 View Details

The public holds currency equal to 25 % of the amount of deposits (c = 0.25). The central bank initially requires banks to hold 12 % of deposits as required reserves (r₁ = 0.12). If the central bank injects ₦20 billion of high‑powered money into the banking system, compute the resulting money supply. Afterwards the reserve requirement is reduced to 8 % (r₂ = 0.08) while the currency‑to‑deposit ratio remains unchanged. What is the increase in the money supply after the change in the reserve requirement?

A. ₦6.8 billion

B. ₦9.0 billion

C. ₦7.5 billion

Correct D. ₦8.2 billion

Correct Answer: D

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Question 3 View Details

A farmer can use his land and labour to produce either 100 kg of rice or, alternatively, 50 kg of beans. If he decides to produce rice, what is the opportunity cost of producing one kilogram of rice in terms of beans?

A. 2

B. 0.25

C. 1

Correct D. 0.5

Correct Answer: D

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Question 4 View Details

The government imposes a specific tax of ₦200 per unit on a good. The price elasticity of demand for the good is -0.5 and the price elasticity of supply is 0.8. Before the tax, 5 000 units were sold each month. After the tax, quantity sold falls to 4 000 units. (a) What proportion of the tax is borne by consumers? (b) How much tax does a consumer pay per unit (in naira)? (c) Compute the dead‑weight loss arising from the tax.

Correct A. Consumer bears 61.5% (≈₦123) per unit; DWL = ₦100,000

B. Consumer bears 55% (≈₦110) per unit; DWL = ₦90,000

C. Consumer bears 50% (≈₦100) per unit; DWL = ₦80,000

D. Consumer bears 70% (≈₦140) per unit; DWL = ₦120,000

Correct Answer: A

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Question 5 View Details

A firm's production function is Q = 10 L^{0.5} K^{0.5}, where L is labour units and K is capital units. The firm currently employs L = 25 and K = 16. (a) Calculate the marginal product of labour (MP_L) and marginal product of capital (MP_K). (b) Determine the marginal rate of technical substitution (MRTS_{LK}) and compare it with the ratio of input prices given by a wage of ₦20 per unit of labour and a rental rate of capital of ₦40 per unit. State whether the firm is cost‑minimising at the current input mix.

A. MP_L=4, MP_K=6.25, MRTS=0.5 (=0.5), cost‑minimising

B. MP_L=3, MP_K=7, MRTS=0.43 (<0.5), not cost‑minimising

C. MP_L=5, MP_K=5, MRTS=1.0 (>0.5), not cost‑minimising

Correct D. MP_L=4, MP_K=6.25, MRTS=0.64 (>0.5), not cost‑minimising

Correct Answer: D

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Question 6 View Details

The price of a commodity rises from ₦200 to ₦250 and its quantity demanded falls from 5,000 units to 4,200 units. Using the midpoint (arc) method, calculate the price elasticity of demand. State the elasticity to two decimal places.

A. -0.65

Correct B. -0.78

C. -0.92

D. -1.10

Correct Answer: B

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Question 7 View Details

A country's population was 20 million in 2010. It grew at an annual rate of 2.5 % for the first five years and then at a constant unknown rate $r$ for the next five years, reaching 30 million in 2020. Determine the annual growth rate $r$ (in percent) for the period 2015‑2020. Give your answer to one decimal place.

A. 4.3

B. 7.2

Correct C. 5.8

D. 6.9

Correct Answer: C

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Question 8 View Details

In 2022 the total labour force of a country is 12 million and the unemployment rate is 8 %. Frictional unemployment accounts for 2 % and structural unemployment for 3 % of the labour force.\n(a) Calculate the cyclical unemployment rate and the number of people unemployed due to cyclical factors.\n(b) If a policy reduces frictional unemployment by 0.5 percentage points and structural unemployment by 0.2 percentage points while the labour force remains unchanged, what is the new overall unemployment rate?

Correct A. 7.3

B. 6.5

C. 9.2

D. 8.0

Correct Answer: A

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Question 9 View Details

Country A has a current GNP per capita of $4,000. The government aims to raise GNP per capita to $5,000 in five years. The population grows at 2 % per annum. The economy's marginal propensity to consume (MPC) is 0.75, giving a multiplier of 4. Assuming that net investment is the only autonomous expenditure and that the multiplier effect works instantly each year, calculate the constant annual net investment (in dollars) required to achieve the target. Use an initial population of 10 million and give your answer in millions of dollars, rounded to one decimal place.

Correct A. 760.2

B. 650.3

C. 800.0

D. 720.5

Correct Answer: A

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Question 10 View Details

In 2020 a consumer price index (CPI) basket contains 100 kg of rice priced at ₦200 per kg and 50 kg of beans priced at ₦500 per kg. In 2021 the prices rise to ₦220 per kg for rice and ₦540 per kg for beans, while the quantities purchased change to 90 kg of rice and 55 kg of beans.\n(a) Compute the Laspeyres price index (using 2020 quantities).\n(b) Compute the Paasche price index (using 2021 quantities).\n(c) Determine the Fisher price index (geometric mean of Laspeyres and Paasche) and give the overall inflation rate to two decimal places.

A. 9.12

B. 9.00

C. 8.45

Correct D. 8.84

Correct Answer: D

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Question 11 View Details

A transport company operates a bus service on a popular route. The daily demand for seats (in passengers) is given by Q = 2000 - 30P, where P is the fare per passenger in Naira. The variable cost per passenger is N20 and the fixed daily cost is N10,000. The company can run at most two buses per day, each with a capacity of 500 seats, so the total daily capacity is 1000 passengers. Determine the fare that maximizes the company's daily profit while respecting the capacity limit, and state the maximum profit (both to two decimal places).

A. Optimal fare = N38.00 per passenger; Maximum profit = N5,200.00

Correct B. Optimal fare = N43.33 per passenger; Maximum profit = N6,333.33

C. Optimal fare = N50.00 per passenger; Maximum profit = N6,000.00

D. Optimal fare = N45.00 per passenger; Maximum profit = N6,100.00

Correct Answer: B

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Question 12 View Details

A small firm produces two products, A and B, using the same plant. The market demand equations are: $P_A = 200 - 0.5Q_A$ and $P_B = 150 - 0.4Q_B$, where $P$ is price (Naira) and $Q$ is quantity (units). The variable cost per unit is N10 for product A and N15 for product B, and the fixed daily cost is N10,000. The plant can produce at most 600 units in total ($Q_A + Q_B \le 600$). Determine the output levels of A and B that maximise total daily profit and state the maximum profit (rounded to the nearest Naira).

A. Q_A = 170 units, Q_B = 160 units (rounded); Maximum profit = N19,200

B. Q_A = 200 units, Q_B = 150 units (rounded); Maximum profit = N18,500

Correct C. Q_A = 190 units, Q_B = 169 units (rounded); Maximum profit = N19,441

D. Q_A = 180 units, Q_B = 180 units (rounded); Maximum profit = N19,000

Correct Answer: C

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Question 13 View Details

When the price of wheat rises from N200 to N250 per bag, the quantity demanded falls from 10,000 to 8,000 bags, while the quantity supplied rises from 6,000 to 9,000 bags. Using the midpoint (arc) method, calculate the price elasticity of demand and the price elasticity of supply over this price change.

A. Elasticity of demand = -0.8; Elasticity of supply ≈ 2.0

B. Elasticity of demand = -1.2; Elasticity of supply ≈ 1.5

C. Elasticity of demand = -0.5; Elasticity of supply ≈ 2.5

Correct D. Elasticity of demand = -1.0; Elasticity of supply ≈ 1.8

Correct Answer: D

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Question 14 View Details

A monopolist faces the linear demand curve $P = 500 - 2Q$ and has a total cost function $TC = 20Q$ (no fixed cost).\n(a) Determine the monopoly output, price and profit.\n(b) Under perfect competition the firm would produce where price equals marginal cost. Determine the competitive output and price.\n(c) Compute the consumer surplus in both the monopoly and the competitive outcome and state which market structure yields a higher consumer surplus.

Correct A. Monopoly: Q=120, P=260, Profit=28,800; Competitive: Q=240, P=20; Consumer surplus - monopoly N14,400, competition N57,600 (competition higher).

B. Monopoly: Q=130, P=240, Profit=28,600; Competitive: Q=250, P=20; Consumer surplus - monopoly N16,900, competition N60,000 (competition higher).

C. Monopoly: Q=110, P=280, Profit=27,000; Competitive: Q=230, P=20; Consumer surplus - monopoly N12,600, competition N55,200 (competition higher).

D. Monopoly: Q=120, P=260, Profit=28,800; Competitive: Q=240, P=20; Consumer surplus - monopoly N14,400, competition N57,600 (monopoly higher).

Correct Answer: A

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Question 15 View Details

Country X imports wheat and exports cotton. The world price of wheat is $2 per kg and the world price of cotton is $5 per kg. Country X currently imports 500,000 kg of wheat and exports 200,000 kg of cotton. The government imposes a 20% tariff on wheat imports and a 10% export subsidy on cotton. Assuming quantities imported and exported remain unchanged, calculate (a) the new terms of trade (ratio of export price to import price) after the policy, (b) the original terms of trade, and (c) the net fiscal effect on the government (tariff revenue minus subsidy outlay).

Correct A. Original terms of trade = 2.5; New terms of trade ≈ 2.2917; Net fiscal gain = $100,000

B. Original terms of trade = 2.5; New terms of trade ≈ 2.4; Net fiscal gain = $120,000

C. Original terms of trade = 2.5; New terms of trade ≈ 2.2917; Net fiscal loss = $20,000

D. Original terms of trade = 2.5; New terms of trade ≈ 2.35; Net fiscal gain = $80,000

Correct Answer: A

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Question 16 View Details

In an economy the labour force at the beginning of the year is 20 million and the number of employed persons is 18 million. During the year the labour force grows by 5 % while employment grows by 2 %. Frictional unemployment is 2 % of the labour force and structural unemployment is 3 % of the labour force. Calculate the cyclical unemployment rate (as a percentage of the labour force) at the end of the year.

A. 6.84

B. 8.12

C. 10.45

Correct D. 7.57

Correct Answer: D

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Question 17 View Details

When the price of a product rises from ₦200 to ₦250, the quantity demanded falls from 5 000 units to 4 000 units. Using the midpoint (arc) method, determine the price elasticity of demand and state the percentage change in total revenue resulting from the price change.

A. 20%

Correct B. 0%

C. -5%

D. 10%

Correct Answer: B

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Question 18 View Details

A bank offers a nominal interest rate of 12 % per annum. Inflation rates are expected to be 4 % in the first year, 5 % in the second year and 6 % in the third year. If you invest ₦10 000 today, what will be the real value of the investment at the end of three years (rounded to the nearest naira)?

Correct A. 12133

B. 11987

C. 11542

D. 12456

Correct Answer: A

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Question 19 View Details

A firm faces the total cost function $TC = 500 + 20Q + 0.5Q^{2}$ where Q is output in units. The market price of the product is ₦40 per unit. Determine the output level that maximizes profit and compute the profit (or loss) at that output. Should the firm produce in the short run? State your answer.

Correct A. Produce 20 units; loss of ₦300

B. Produce 20 units; profit of ₦100

C. Produce 15 units; loss of ₦200

D. Produce 25 units; loss of ₦400

Correct Answer: A

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Question 20 View Details

A worker's nominal monthly wage increased from ₦50 000 to ₦55 000 over one year. During the same period the inflation rate was 8 %. Calculate the percentage change in the worker's real wage (rounded to two decimal places).

A. 10.00%

B. 9.26%

C. 2.00%

Correct D. 1.85%

Correct Answer: D

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Question 21 View Details

A transport company operates a bus with the following cost structure per month: fixed cost = ₦30,000; variable cost (excluding fuel) = ₦50 per kilometre; fuel price = ₦120 per litre; the bus runs 20 days a month covering 200 km each day. The bus's fuel efficiency is 5 km per litre. Ticket price per passenger is ₦500, but if the average number of passengers per day exceeds 40, a promotional discount of 10% is applied to all tickets (price becomes ₦450). The bus can carry at most 50 passengers. What is the smallest integer average number of passengers per day that will give the company a profit (i.e., total revenue greater than total cost)?

Correct A. 33

B. 34

C. 31

D. 30

Correct Answer: A

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Question 22 View Details

A farmer has one hectare of land that can be used either to grow maize or beans. If he grows maize, he can earn ₦120,000; if he grows beans, he can earn ₦90,000. What is the opportunity cost of choosing to grow maize?

A. ₦30,000

B. ₦120,000

Correct C. ₦90,000

D. ₦150,000

Correct Answer: C

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Question 23 View Details

When household incomes rise, the quantity demanded of instant noodles falls. According to the theory of consumer behaviour, instant noodles are an example of which type of good?

A. luxury good

B. normal good

Correct C. inferior good

D. necessity good

Correct Answer: C

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Question 24 View Details

The price of tea increases in the market. Assuming tea and coffee are substitute goods, what is the likely effect on the demand curve for coffee?

A. Quantity demanded of coffee increases (movement along curve)

B. Demand for coffee decreases (shifts left)

C. Supply of coffee increases (shifts right)

Correct D. Demand for coffee increases (shifts right)

Correct Answer: D

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Question 25 View Details

The Central Bank raises the reserve requirement ratio from 10% to 12%. Before the change, total deposits in the banking system amount to ₦5,000,000. Assuming the amount of reserves held by banks does not change, what is the maximum possible change in total deposits (i.e., the change in total credit creation) that can result from this policy change? Express your answer as a decrease in naira, rounded to the nearest naira.

A. Decrease of ₦1,000,000

B. Decrease of ₦750,000

C. Decrease of ₦500,000

Correct D. Decrease of ₦833,334

Correct Answer: D

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