waec model questions vol1 2020 economics | Essay

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Question 1 View Details
Scarcity is the fundamental problem facing every economy. Explain how scarcity forces individuals, firms and the government to make choices and allocate resources.
Question Parts
(a)
Define opportunity cost and illustrate the concept with a realistic example from a Nigerian household.
(b)
Explain the role of marginal analysis in making economic decisions, giving one example related to a small business.
(c)
Discuss how scarcity influences the allocation of resources in a mixed economy such as Nigeria.
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Question 2 View Details
The market for cigarettes in Nigeria is represented by linear demand and supply curves. At the original equilibrium the price of a pack is ₦200 and the quantity sold is 5,000 packs per month. When the price is ₦250, the quantity demanded falls to 4,000 packs. When the price is ₦150, the quantity supplied rises to 3,000 packs. The government then imposes a specific excise tax of ₦50 per pack on cigarettes.
Question Parts
(a)
Derive the equations of the original demand and supply curves.
(b)
Calculate the new equilibrium price paid by consumers, the price received by producers, and the equilibrium quantity after the ₦50 tax is imposed.
(c)
Briefly discuss the impact of the tax on (i) consumer surplus, (ii) producer surplus and (iii) government revenue.
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Question 3 View Details
The government is considering increasing the excise duty on cigarettes from ₦50 per pack to ₦70 per pack. The price elasticity of demand for cigarettes in Nigeria is estimated to be -0.5. The average weekly consumption per smoker is 2 packs and the total number of smokers is 5 million.
Question Parts
(a)
Calculate the expected percentage change in the quantity demanded of cigarettes as a result of the tax increase.
(b)
Estimate the new total weekly consumption of cigarettes (in packs) after the tax increase.
(c)
Assuming the tax revenue per pack is equal to the excise duty, compute the change in total weekly tax revenue for the government.
(d)
Discuss two possible economic consequences of the tax increase on the market for cigarettes, considering both consumer welfare and government revenue.
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Question 4 View Details
A small‑scale agro‑processing firm produces processed cassava flour. Its short‑run total cost (STC) function is STC = ₦150,000 + ₦200Q + ₦0.5Q², where Q is the quantity of output (in tonnes) produced per month. The current market price of processed cassava flour is ₦600 per tonne.
Question Parts
(a)
Derive the short‑run marginal cost (SMC) function and compute the output level at which SMC equals the market price.
(b)
Using the output level from part (a), calculate the firm’s short‑run profit (or loss) for that month.
(c)
Explain why the firm should continue operating in the short run even if it is making a loss, referencing the concept of the shutdown point.
(d)
If the firm expects a permanent increase in market price to ₦800 per tonne, determine the new profit‑maximising output and the corresponding profit. Discuss how this change would affect the firm’s long‑run decision to expand capacity.
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Question 5 View Details
A small manufacturing firm produces wooden chairs. The fixed cost per month is ₦150,000. The variable cost per unit can be expressed as VC = 20Q + 0.05Q² where Q is the number of chairs produced in a month. The firm sells each chair at a price that depends on the quantity sold: P = 500 – 0.1Q.
Question Parts
(a)
Write the expressions for total cost (TC) and total revenue (TR) as functions of Q.
(b)
Determine the break‑even output(s) where total revenue equals total cost. State the corresponding revenue at each break‑even output.
(c)
If the firm expects to sell 2,000 chairs in a month, compute the profit (or loss) it will make.
(d)
Suggest two practical ways the firm could improve its profitability and briefly explain how each would affect profit.
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Question 6 View Details
The table below summarises the observable features of four different product markets in Nigeria. | Market | Number of Sellers | Product Type | Barriers to Entry | Price Behaviour | |--------|-------------------|--------------|-------------------|-----------------| | A | Many | Homogeneous | Low | Price taker | | B | Few | Differentiated| Moderate | Interdependent | | C | One | Unique | High | Price maker | | D | Many | Differentiated| Low | Some price power| Using the information above, answer the questions that follow.
Question Parts
(a)
Identify the market structure represented by each market (A, B, C and D).
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Question 7 View Details
The table below shows Nigeria’s nominal Gross Domestic Product (GDP) and the GDP deflator for the years 2021 and 2022. In 2022 the government increased its spending on infrastructure by ₦2 trillion, financed through borrowing. | Year | Nominal GDP (₦ trillion) | GDP Deflator (index) | |------|--------------------------|----------------------| | 2021 | 30 | 120 | | 2022 | 36 | 130 | Assume the marginal propensity to consume (MPC) is 0.75 and that there is no crowding‑out of private investment.
Question Parts
(a)
Calculate the real GDP for each year and the real‑GDP growth rate between 2021 and 2022.
(b)
Using the given MPC, compute the Keynesian multiplier. Then estimate the change in equilibrium national income that results from the additional government spending, assuming no crowding‑out.
(c)
Discuss two major limitations of using real GDP as a measure of the welfare of a nation’s citizens.
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Question 8 View Details
In March 2023 the Central Bank of Nigeria (CBN) announced two monetary‑policy actions: (i) a reduction of the statutory reserve‑requirement ratio (RRR) from 10 % to 8 %; and (ii) an open‑market purchase of government securities worth ₦5 trillion. Assume the economy is operating under the simple money‑multiplier framework and that the marginal propensity to consume is unchanged.
Question Parts
(a)
Calculate the theoretical money multiplier before and after the change in the reserve‑requirement ratio.
(b)
Using the new multiplier, estimate the maximum possible increase in the money supply that could result from the open‑market purchase.
(c)
Explain how the two actions are expected to affect interest rates, investment and inflation in the short run. Mention any potential offsetting factors.
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