Each question is followed by four options lettered A to D. Find out the correct option for each question and shade in pencil on your answer sheet, the answer space which bears the same letter as the option you have chosen. Give only one answer to each question.
An example is given below.
“Economics is a science which studies human behaviour as a relationship between ends and scarce means which have alternative uses;” Ends here refers to
A. input. B. wants. C. choice. D. output.
The correct answer is wants, which is lettered B and therefore answer space B should be shaded.
Think carefully before you shade the answer spaces; erase completely any answer(s) you wish to change.
Do all rough work on this question paper.
Now answer the following questions.
1. The effect of adopting a new technology in a country on its production possibility curve (PPC) will be shown by
Explanation:
The correct answer is:
B
Topic: Technology and PPC
⭐ When a country adopts new technology, it becomes more efficient in production. This allows the country to produce more goods and services, which moves the PPC outward, showing an increase in the economy's capacity.
2. The real cost of a tractor purchased by an agricultural community is the
Explanation:
The correct answer is:
D
Topic: Opportunity Cost
⭐ The real cost of purchasing the tractor includes what could have been done with the resources used to acquire it. For example, the money could have been used to hire casual workers who are now unemployed, which is the opportunity cost of buying the tractor.
3. The factor of production that is rewarded for risk bearing is
Explanation:
The correct answer is:
A
Topic: Factors of Production
⭐ Entrepreneurs take on the risk of starting a business or making investments. They are rewarded with profits if the business succeeds, or they may lose money if it fails. The risk they take is what makes them unique in the economy.
4. A free enterprise economy may be preferred to other economic systems because it
Explanation:
The correct answer is:
C
Topic: Free Enterprise System
⭐ In a free enterprise economy, businesses compete with each other to offer the best goods and services. This competition encourages businesses to be more efficient and to come up with new ideas, which helps the economy grow and improve over time.
5. The bags of rice in kg produced by a group of farmers are 20, 40, 20, 28, 20, 30, 20, 18, 40, 24, 18 and 15. What is the mode?
Explanation:
The mode is the value that appears most frequently in a given set of data.
Let's look at the data set provided:
20, 40, 20, 28, 20, 30, 20, 18, 40, 24, 18, 15
Now, let's count the frequency of each number:
20 appears 4 times
40 appears 2 times
18 appears 2 times
28, 30, 24, and 15 each appear 1 time
The number 20 appears most frequently (4 times).
Therefore, the mode is 20 kg.
The correct answer is:
C. 20 kg
6. One factor that does not determine the demand for a commodity is the
Explanation:
The correct answer is:
C
Topic: Factors Determining Demand
⭐ The change in production technology affects the supply of a good, not the demand. Demand depends on factors like consumer tastes, the price of related goods, and the price of the commodity itself.
7. A demand curve which is parallel to the price axis has price elasticity
Explanation:
The correct answer is:
C
Topic: Price Elasticity of Demand
⭐ A demand curve parallel to the price axis means that consumers will buy any amount at a certain price. This type of demand is perfectly elastic, meaning the price elasticity is infinite.
8. When more of a tax on a good is borne by the seller than the buyer, demand for this good is
Explanation:
The correct answer is:
B
Topic: Tax Incidence
⭐ If the seller bears more of the tax burden, it means that consumers are sensitive to price changes. This suggests that demand is elastic, and consumers reduce their purchases more when prices rise due to taxes.
9. If the demand for a normal good is unit price elastic, other things being equal, a fall in its price will
Explanation:
The correct answer is:
C
Topic: Unit Price Elasticity
⭐ When demand is unit price elastic, the percentage change in price is exactly offset by the percentage change in quantity demanded. This keeps total revenue the same, even when the price changes.
10. If a commodity has no substitute, its demand will most likely be
Explanation:
The correct answer is:
A
Topic: Inelastic Demand
⭐ When a good has no substitute, consumers have no choice but to buy it, no matter how much the price increases. This makes the demand for that good perfectly inelastic, meaning it doesn’t change with price changes.
11. If an increase in the supply of commodity X results in an increase in the supply of commodity Y, then commodities X and Y are in
Explanation:
The correct answer is:
A
Topic: Supply Relationships
⭐ Joint supply occurs when an increase in the supply of one good leads to an increase in the supply of another good. This is because the goods are produced together, often from the same resources.
12. The law of supply states that, all other things remaining constant, as the price of a commodity falls
Explanation:
The correct answer is:
C
Topic: Law of Supply
⭐ The law of supply says that if the price of a commodity falls, producers are less willing to supply the good, leading to a decrease in the quantity supplied. This happens because the lower price reduces potential profits.
13. If an individual consumes more unit of a good, total utility
Explanation:
The correct answer is:
B
Topic: Utility Theory
⭐ As more units of a good are consumed, total utility increases, but the additional satisfaction (marginal utility) from each additional unit decreases. This is known as diminishing marginal utility.
14. What is the effect of imposing a price floor in a market?
Explanation:
The correct answer is:
D
Topic: Price Floors
⭐ A price floor sets a minimum price above the market equilibrium price. When the price is too high, it leads to excess supply because producers are willing to supply more at that price, but consumers are not willing to buy as much, creating a surplus of goods.
15. When demand increases and supply is constant, equilibrium
Explanation:
The correct answer is:
C
Topic: Changes in Market Equilibrium
⭐ When demand increases and supply remains constant, more people want the good at the current price. As a result, the equilibrium quantity increases because producers will sell more at the higher price. The price itself also tends to rise due to the increase in demand.
16. A firm whose per unit cost of production begins to rise in the long-run is experiencing
Explanation:
The correct answer is:
A
Topic: Economies of Scale
⭐ Diseconomies of scale occur when a firm’s per unit costs begin to rise as it expands in the long-run. This happens due to inefficiencies, such as management problems, coordination issues, or resource constraints as the firm grows too large.
17. One advantage of division of labour is that
Explanation:
The correct answer is:
B
Topic: Division of Labour
⭐ One of the key advantages of the division of labour is that it allows the use of machinery to increase efficiency. When workers specialize in specific tasks, machines can be introduced to make those tasks faster and more accurate, improving overall production.
18. The U-shape of the marginal and average cost curves can be best explained in terms of the law of
Explanation:
The correct answer is:
D
Topic: Cost Curves
⭐ The U-shape of the marginal and average cost curves is explained by the law of variable proportions. This law states that as more units of a variable factor (like labor) are added to fixed factors (like machinery), initially, the additional output increases (increasing returns), but after a certain point, each additional unit of input produces less output, causing costs to rise (diminishing returns). This leads to the U-shape of the cost curves.
19. If a service is offered by a monopolistic firm, its demand curve
Explanation:
The correct answer is:
D
Topic: Monopoly Demand Curve
⭐ In a monopolistic market, the firm is the only producer of the service, so it faces the market demand curve. This curve slopes downward from left to right, indicating that as the price decreases, the quantity demanded increases. This is typical for all firms with market power, as they control the supply of the good or service.
20. When output is zero, total variable cost
Explanation:
The correct answer is:
C
Topic: Total Variable Cost
⭐ Total variable cost refers to the costs that change as the level of output changes. When output is zero, there are no variable factors being used in production, so the total variable cost is zero. These costs only arise when production starts and inputs are used to produce goods or services.
21. One feature of a Private limited company is that
Explanation:
The correct answer is:
A
Topic: Private Limited Company
⭐ A key feature of a private limited company is that its shares cannot be offered for sale to the public. The ownership is limited to a small group of individuals, and shares are typically transferred privately. This ensures that control of the company remains within the group of shareholders.
22. Which of the following business units usually belongs to the government?
Explanation:
The correct answer is:
C
Topic: Business Units
⭐ A **statutory corporation** is a business unit that is owned and operated by the government. These businesses are established through specific legislation or statutes passed by the government. They often provide essential public services like utilities or transport, and they operate under government control.
23. In distributive trade, the producer can sometimes play the role of
Explanation:
The correct answer is:
B
Topic: Distributive Trade
⭐ In **distributive trade**, a producer can sometimes play the role of a **wholesaler**. This occurs when a producer sells goods in bulk directly to retailers or other businesses, bypassing the middleman. In this case, the producer assumes the role of a wholesaler, providing large quantities of products for resale.
24. The natural growth rate of a country's population is measured by
Explanation:
The correct answer is:
A
Topic: Population Growth
⭐ The **natural growth rate** of a country's population is calculated by subtracting the **death rate** from the **birth rate**. This measure reflects how fast a population is increasing or decreasing due to natural factors, without considering migration.
25. In the theory of population, Malthus' main concern was that
Explanation:
The correct answer is:
B
Topic: Malthusian Theory of Population
⭐ Malthus' theory of population was based on the idea that population grows at a faster rate (geometrically) than the means of subsistence, such as food and resources, which increase at a slower, arithmetic rate. His main concern was that if population growth continued unchecked, it would eventually outstrip the ability to feed and support the growing population, leading to widespread poverty and famine.
26. Negotiations for wage increase by trade unions will be successful if there is
Explanation:
The correct answer is:
D
Topic: Wage Negotiations
⭐ Trade unions are more likely to succeed in negotiating higher wages when there is an **increase in the marginal productivity of labor**. This means that workers are becoming more productive, creating more value for the employer. When workers' productivity increases, employers are more willing to pay higher wages because the workers contribute more to the company's output.
27. Real wages are likely to decline, if the prices of goods and services
Explanation:
The correct answer is:
C
Topic: Real Wages and Inflation
⭐ **Real wages** represent the purchasing power of income, i.e., how much goods and services workers can buy with their nominal wages. If the prices of goods and services rise faster than nominal wages, real wages decline because the purchasing power of income decreases. In other words, workers' wages are not enough to buy as much as they could before prices increased.
28. Productivity in agriculture can be increased if
Explanation:
The correct answer is:
B
Topic: Agricultural Productivity
⭐ **Mechanized farming** refers to the use of machinery to assist in farming activities. Adopting mechanized farming can significantly increase agricultural productivity by making processes like planting, harvesting, and irrigation more efficient and less labor-intensive. This leads to higher output and lower costs per unit of produce, which boosts productivity in agriculture.
29. Most West African countries are less industrialized because
Explanation:
The correct answer is:
C
Topic: Industrialization in West Africa
⭐ One of the key reasons why most **West African countries** are less industrialized is the **low level of income and savings**. In these countries, limited financial resources and a lack of capital for investment hinder the development of industries. Without sufficient income and savings, it is challenging to fund industrial projects, buy machinery, or support the growth of businesses, thus slowing down industrial progress.
30. Government may enhance industrialization by
Explanation:
The correct answer is:
A
Topic: Government Policies for Industrialization
⭐ Governments can boost industrialization by **establishing industrial estates**, which are designated areas where businesses can set up factories and manufacturing plants. These estates offer infrastructure, such as roads, electricity, and water supply, at affordable rates, making it easier for industries to operate. This encourages investment, promotes industrial growth, and leads to the creation of jobs, thus enhancing industrialization.
31. Which of the following is not a method of calculating National Income?
Explanation:
The correct answer is:
D
Topic: Methods of Calculating National Income
⭐ The **four main methods** of calculating National Income are the **Expenditure method**, the **Output method**, and the **Income method**. These methods measure national income from different perspectives: expenditure focuses on total spending, output calculates total production, and income looks at total earnings. The **Input method**, however, is not a recognized method for calculating National Income.
32. An increase in the standard of living of a country means a fall in
Explanation:
The correct answer is:
B
Topic: Standard of Living
⭐ An **increase in the standard of living** of a country typically means that the quality of life for people improves. This improvement often results from better access to goods and services, better wages, and more job opportunities. A fall in the **cost of living** is a key indicator of this improvement, as it means that people can afford more with their income, leading to a higher standard of living.
33. In measuring the national income, any payment made or received which is not directly in return for services rendered is called?
Explanation:
The correct answer is:
D
Topic: National Income Measurement
⭐ A **transfer payment** refers to payments made by the government or other institutions to individuals, which are not made in exchange for goods or services. Examples include unemployment benefits, pensions, or social security payments. These payments do not contribute directly to the production of goods and services but are included in national income measurements to account for overall income distribution within the economy.
34. One way of dealing with inflation in an economy is to
Explanation:
The correct answer is:
B
Topic: Controlling Inflation
⭐ One way to control **inflation** is to **raise interest rates on loans**. By increasing interest rates, borrowing becomes more expensive, which tends to reduce consumer spending and business investments, ultimately reducing the pressure on prices. This can help slow down inflation, as there is less money circulating in the economy, helping to stabilize prices.
35. The best indicator of the value of money in an economy is the
Explanation:
The correct answer is:
A
Topic: Value of Money
⭐ The **price level** is the best indicator of the **value of money** in an economy. When the price level is low, money holds more purchasing power, meaning that it can buy more goods and services. When the price level rises (inflation), the value of money declines because it buys fewer goods and services. Thus, changes in the price level reflect how much the value of money has changed in the economy.
36. Inflation will not occur if there is
Explanation:
The correct answer is:
B
Topic: Causes of Inflation
⭐ Inflation occurs when there is a general increase in the prices of goods and services over time. **A reduction in the quantity of money in circulation** helps prevent inflation because when there is less money available, demand for goods and services is less likely to outpace supply, which helps to keep prices stable. Reducing money supply is a way to control inflation, as it limits the purchasing power in the economy.
37. A cash payment made by the government to producers in order to increase the supply and reduce the price of a commodity is
Explanation:
The correct answer is:
D
Topic: Government Subsidies
⭐ A **subsidy** is a payment made by the government to producers to help reduce their costs of production. This encourages producers to increase supply and often helps reduce the price of a commodity. The goal is to make goods more affordable for consumers and to ensure that producers continue to supply the market, especially for essential goods.
38. A type of tax which is usually regressive is
Explanation:
The correct answer is:
C
Topic: Types of Taxes
⭐ **Value added tax (VAT)** is considered a **regressive tax** because it takes a larger percentage of income from low-income earners than from high-income earners. This is because VAT is typically a flat percentage applied to the price of goods and services, meaning that people with lower incomes spend a larger portion of their income on taxable items, compared to wealthier individuals who may spend a smaller percentage of their income on the same items.
39. The regulated financial market that deals with medium and long-term loans is the
Explanation:
The correct answer is:
B
Topic: Financial Markets
⭐ The **capital market** is the regulated financial market that deals with the buying and selling of medium and long-term loans and securities, such as stocks and bonds. It enables companies, governments, and other entities to raise capital for long-term investments. In contrast, the **money market** deals with short-term loans and instruments like treasury bills and certificates of deposit.
40. Treasury bills are sold mainly to provide short-term loans to
Explanation:
The correct answer is:
A
Topic: Treasury Bills
⭐ Treasury bills (T-bills) are short-term debt securities issued by the government to raise immediate funds. These bills are sold to investors, and the government repays them within a short period, typically less than a year. The funds raised help the government cover short-term financial needs, such as paying off debts or funding budget gaps.
41. A major source of government revenue in developing countries is from
Explanation:
The correct answer is:
D
Topic: Government Revenue
⭐ **Indirect taxes** such as value-added tax (VAT), sales tax, and excise duties are major sources of government revenue in many developing countries. These taxes are easier to collect, especially in economies with large informal sectors, and they apply to goods and services rather than income or property.
42. Which of the following best reflects the 'ability to pay' canon of taxation?
Explanation:
The correct answer is:
A
Topic: Taxation
⭐ The **progressive tax** system is based on the 'ability to pay' canon of taxation. This means that people with higher incomes pay a higher percentage of their income in taxes, reflecting their greater ability to contribute. It is designed to reduce the tax burden on those with lower incomes while asking those with higher incomes to contribute more.
43. The effect of increased rural-urban migration in an economy is that it will
Explanation:
The correct answer is:
A
Topic: Rural-Urban Migration
⭐ Increased rural-urban migration leads to a growing population in urban areas, which often results in higher government expenditure on services like healthcare, housing, and education to meet the needs of the new urban residents. This can place a significant burden on government resources in cities.
44. Which of the following factors is not a problem of development planning in West Africa?
Explanation:
The correct answer is:
D
Topic: Development Planning in West Africa
⭐ While **inadequate finance**, **inadequate supply of manpower**, and **political instability** are all common challenges faced by West African countries in their development planning, **inadequate statistical database** is not typically a direct problem. Governments usually face difficulties in finance, skilled labor, and political stability, which more directly affect the success of development plans.
45. A development plan cannot be financed through
Explanation:
The correct answer is:
D
Topic: Financing Development Plans
⭐ **Salaries of workers** cannot directly finance a development plan. Development plans typically require funding from **borrowing from foreign countries**, **taxes** collected from citizens, and **aids or grants** from international organizations or governments. Workers' salaries are a cost of production and are part of the expenses of running an economy, not a source of development funding.
46. A financial statement of transactions between a country and the rest of the world is
Explanation:
The correct answer is:
C
Topic: International Transactions
⭐ The **balance of payments** is a financial statement that summarizes all economic transactions between a country and the rest of the world. It includes trade in goods, services, investments, and transfers. The **balance of trade** is only part of this statement, focusing on exports and imports, while the balance of payments covers a broader range of transactions.
47. An example of payment for visible items on the balance of payments account is
Explanation:
The correct answer is:
B
Topic: Balance of Payments
⭐ **Visible items** in the balance of payments refer to physical goods that are traded, such as imports and exports of goods. **Payment for rice imports** is an example of a visible item because it involves a transaction related to physical goods. On the other hand, payments for services like shipping and banking fall under invisible items in the balance of payments.
48. If the price of imports is rising faster than that of exports, there is
Explanation:
The correct answer is:
A
Topic: Terms of Trade
⭐ When the price of **imports** is rising faster than the price of **exports**, it means that the country is paying more for imports while earning less from exports. This situation leads to **unfavourable terms of trade**, as the country is receiving less value for its exports relative to what it is paying for imports.
49. One feature of a free trade area is that
Explanation:
The correct answer is:
C
Topic: Free Trade Area
⭐ A **free trade area** is a region where countries agree to remove **tariffs** and **trade restrictions** between themselves, promoting easier trade. This means that goods and services can flow freely between member countries without the barriers that usually exist in international trade. However, it does not imply that imports from all non-member countries are duty-free, nor does it guarantee revenues for members.
50. Which of the following products can be obtained from crude oil
Explanation:
The correct answer is:
C
Topic: Products from Crude Oil
⭐ **Crude oil** is refined into a variety of products, including **petrol (gasoline)** and **gas** (natural gas). These products are derived through refining processes. On the other hand, **shea butter** and **olive oil** are natural oils derived from plants, not from crude oil.
