2021 WAEC (WASSCE) Economics Past Questions and Answers

Questions

1. 1.

   By passing the middlemen in the chain of distribution can lead to _________

   1. A.a problem of unemployment of labour
   2. B.the creation of artificial scarcity
   3. C.high prices of goods and services
   4. D.an increase in government tax revenue

   Show answer

   Answer: A. a problem of unemployment of labour

   AI explanation

   Question analysis: The question asks about the effect of "bypassing" middlemen (wholesalers and retailers) in the chain of distribution. This means producers sell directly to consumers.

   Concept: The chain of distribution is: Producer → Wholesaler → Retailer → Consumer. Middlemen perform jobs such as buying in bulk, storing, breaking bulk, transporting, and retailing. They also employ many people, such as shop attendants, drivers, warehouse workers, and porters.

   Step-by-step reasoning:

   • Option A: unemployment of labour. If middlemen are removed, the workers they employ (sales staff, storekeepers, transporters, and the traders themselves) lose their jobs. This is a well-known consequence of eliminating middlemen. It fits.
   • Option B: artificial scarcity. Artificial scarcity is created when middlemen hoard goods. Removing them would reduce this, not cause it.
   • Option C: high prices. Removing middlemen typically lowers prices, since there are fewer profit margins added along the chain. This is the opposite of the claim.
   • Option D: increased government tax revenue. There is no direct link. If anything, fewer trading businesses could reduce tax revenue.

   Answer: Bypassing middlemen removes the trading jobs they provide, so it can lead to a problem of unemployment of labour.

   Exam tip: For "removing middlemen" questions, remember the pros and cons:

   • Advantages: lower prices, no hoarding, and producers get closer to consumers.
   • Disadvantage: unemployment among distributive workers.

   If the question asks for a negative effect, pick unemployment.

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2. 2.

   Demand-pull inflation can be as a result of___________

   1. A.increase in the cost of production.
   2. B.excessive supply of foodstuff
   3. C.deficit financing by the government.
   4. D.increase in import duties.

   Show answer

   Answer: C. deficit financing by the government.

   AI explanation

   Step 1: Analyze the question The question asks which factor can cause demand-pull inflation.

   Step 2: The concept Demand-pull inflation happens when total demand (aggregate demand) in the economy grows faster than the economy's ability to supply goods and services. It is often described as "too much money chasing too few goods." Its causes include:

   • An increase in the money supply
   • Government deficit spending (financed by printing money or borrowing from the central bank)
   • Increased consumer spending or bank credit
   • Increased exports or foreign demand

   Cost-push inflation, by contrast, comes from rising production costs (wages, raw materials, import duties on inputs, and so on) pushing prices up from the supply side.

   Step 3: Evaluate the options

   • A. Increase in the cost of production: This is the classic cause of cost-push inflation, so it is not correct.
   • B. Excessive supply of foodstuff: A larger supply tends to lower prices, so it does not cause inflation.
   • C. Deficit financing by the government: The government spends more than it earns and covers the gap by borrowing or creating money. This raises the money supply and purchasing power, which increases aggregate demand and pulls prices up. This is a demand-pull cause.
   • D. Increase in import duties: Duties raise the cost of imported goods and inputs, which is a cost-push factor.

   Step 4: Answer The correct option is C. Deficit financing by the government.

   Tip: Ask yourself whether the cause adds to spending/money in circulation (demand-pull) or adds to production costs (cost-push). Remember: Demand-pull = money and spending up. Cost-push = costs up.

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3. 3.

   What will be the reaction of consumers in a market if there is a fall in the price of the substitute commodity X?

   1. A.Price of commodity X will increase
   2. B.Demand for the substitute of commodity X will decrease
   3. C.Demand for commodity X will decrease
   4. D.Supply of both commodity X and its substitute will increase.

   Show answer

   Answer: B. Demand for the substitute of commodity X will decrease

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4. 4.

   An increase in market supply is caused by the following factors except_________

   1. A.An improvement in innovation and technology.
   2. B.An increase in the price of the commodity
   3. C.A reduction in the cost of raw materials.
   4. D.A favourable weather condition.

   Show answer

   Answer: B. An increase in the price of the commodity

   AI explanation

   Analyze the question: It asks which factor does NOT cause an increase in market supply (a shift of the supply curve to the right). The key is knowing the difference between a change in quantity supplied and a change in supply.

   Concept:

   • Change in quantity supplied (extension/contraction): caused only by a change in the price of the commodity itself. It is a movement along the same supply curve.
   • Change in supply (increase/decrease): caused by factors other than the commodity's own price. It shifts the whole supply curve. These factors are: • Technology • Cost of production (raw materials, wages) • Weather (for agricultural goods) • Taxes and subsidies • Number of sellers • Prices of related goods

   Checking each option:

   • A. Improved innovation and technology: lowers production costs and raises output, so supply increases (curve shifts right).
   • B. Increase in the price of the commodity: this only causes a movement along the supply curve, an extension in quantity supplied, not an increase in supply itself.
   • C. Reduction in the cost of raw materials: production becomes cheaper and more profitable, so supply increases.
   • D. Favourable weather: gives higher agricultural yields, so supply increases.

   Answer: The only factor that does not cause an increase in (market) supply is the commodity's own price rising, which causes an extension in quantity supplied.

   Exam tip: Remember "Own price = move along; everything else = shift." Whenever WASSCE or JAMB asks about "increase in supply" and lists the commodity's own price as an option, that is usually the exception.

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5. 5.

   Use this data below to answer the question The following data relates to the national income of a country. Gross domestic product = $2800 Net factor income from abroad =$250 Depreciation = $700 Indirect taxes =$120   What is the country's Net National Product (NNP) at factor cost?

   1. A.$3.050
   2. B.$2,680
   3. C.$2,230
   4. D.$2.220

   Show answer

   Answer: C. $2,230

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6. 6.

   Balance of payments and trade problems that arose after the world wars were resolved by the____________

   1. A.International Bank tor Reconstruction and Development.
   2. B.International Monetary Fund.
   3. C.African Development Bank.
   4. D.Organization of Petroleum Exporting Countries.

   Show answer

   Answer: B. International Monetary Fund.

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7. 7.

   Functions of money does not include_______

   1. A.store of value.
   2. B.medium of exchange
   3. C.standard of deferred payment.
   4. D.general acceptability.

   Show answer

   Answer: D. general acceptability.

   AI explanation

   1. Analyze the question The question asks which option is not a function of money. Be careful: "does not include" means we are looking for the odd one out.

   2. The concept: functions of money Money performs four main functions in economics:

   1. Medium of exchange: it is used to buy and sell goods and services, which removes the problem of barter.
   2. Measure of value (unit of account): it lets us express the worth of goods and services in prices.
   3. Store of value: it lets us save purchasing power for future use.
   4. Standard of deferred payment: it lets us settle debts and credit transactions in the future, such as loans.

   Characteristics (qualities) of money are different. These include general acceptability, durability, portability, divisibility, scarcity or limited supply, homogeneity and stability in value.

   3. Step-by-step solution

   • A. Store of value is a function.
   • B. Medium of exchange is a function.
   • C. Standard of deferred payment is a function.
   • D. General acceptability is a characteristic of money. It is what makes money able to work as a medium of exchange, but it is not a function in itself.

   So the option that is not a function of money is D.

   4. Answer D. General acceptability

   5. Exam tip Students often confuse the functions of money with its qualities. Remember it this way:

   • Functions are what money does: exchange, measure, store, defer payment.
   • Characteristics are what money has: acceptability, durability, portability, divisibility, scarcity.

   When you see "does not include" or "except", check each option and separate the "does" items from the "has" items.

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8. 8.

   If a country imposes a barrier on trade, the resultant effect will be _________

   1. A.a halt in buying and selling
   2. B.high quality goods from local industries
   3. C.an increase in the demand for locally produced goods
   4. D.shutdown of infant industries

   Show answer

   Answer: C. an increase in the demand for locally produced goods

   AI explanation

   Step 1: Analyze the question A trade barrier is any restriction on international trade, such as tariffs, quotas, embargoes, or import licences. The question asks what the likely result of imposing one is.

   Step 2: Explain the concept Trade barriers make imported goods more expensive or harder to get. This is the idea behind protectionism. When foreign goods become costly or scarce, consumers and businesses turn to local substitutes. Demand for domestic products therefore rises, which is why governments often use barriers to protect their local industries.

   Step 3: Evaluate each option

   • A. A halt in buying and selling: Wrong. Barriers restrict or reduce trade, but they do not stop all buying and selling. Domestic trade continues, and even some international trade continues.
   • B. High quality goods from local industries: Not a direct result. Protection from competition can actually reduce the pressure to improve quality. Quality is not automatically guaranteed.
   • C. An increase in the demand for locally produced goods: Correct. Imports become more expensive or limited, so consumers switch to local alternatives.
   • D. Shutdown of infant industries: Wrong. Barriers are used to protect infant industries (the infant industry argument), not to shut them down.

   Step 4: Answer The correct option is C.

   Tip: Link "barrier" with "protection." Whenever a question asks about the effect of tariffs, quotas, or bans on imports, think: imports fall, so local demand and local production rise. Also remember that the infant industry argument is a reason for trade barriers, so options suggesting that barriers hurt infant industries are usually traps.

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9. 9.

   When market supply increases , the equilibrium price_________

   1. A.Rises and quantity falls.
   2. B.Falls and quantity rises.
   3. C.And quantity increase
   4. D.And quantity fall.

   Show answer

   Answer: B. Falls and quantity rises.

   AI explanation

   Analyze the question: The question asks what happens to equilibrium price and quantity when market supply increases (assuming demand stays constant).

   Concept: Equilibrium is where the demand curve meets the supply curve. An increase in supply shifts the supply curve to the right.

   Step-by-step solution:

   1. At the old equilibrium price, the new supply is greater than demand. This creates a surplus (excess supply).
   2. Sellers compete to get rid of the surplus, so the price falls.
   3. As price falls, consumers buy more (a movement along the demand curve, so quantity demanded rises). Producers also supply a little less than they wanted to at the higher price (a movement along the new supply curve).
   4. A new equilibrium is reached at a lower price and a higher quantity.

   Checking the options:

   • A. Price rises and quantity falls: this describes a decrease in supply. Wrong.
   • B. Price falls and quantity rises: matches our analysis. Correct.
   • C. Price and quantity both increase: this would need an increase in demand. Wrong.
   • D. Price and quantity both fall: this would need a decrease in demand. Wrong.

   Exam tip: Remember that supply and price move in opposite directions, so more supply means a lower price. Then use this quick guide:

   • Supply up: price down, quantity up
   • Supply down: price up, quantity down
   • Demand up: price up, quantity up
   • Demand down: price down, quantity down

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10. 10.

    Non-economic factors that influence the location of firms include ________

    1. A.the existence of required materials for production
    2. B.availability of population of buyers
    3. C.adequate supply of power, good road and rail network
    4. D.the activities of politicians in deciding location of firms

    Show answer

    Answer: D. the activities of politicians in deciding location of firms

    AI explanation

    Analyze the question: It asks for a non-economic factor that influences where a firm is located. So we need to separate factors based on cost, market and production (economic) from factors based on politics, personal preference or government decisions (non-economic).

    Concept: Factors influencing the location of firms fall into two groups.

    Economic factors (related to cost, production and sales):

    • Availability of raw materials
    • Market (population of buyers)
    • Power supply (electricity, fuel)
    • Transport and communication facilities (roads, rail)
    • Labour supply, capital and water

    Non-economic factors (not driven mainly by cost or profit):

    • Government policy and political influence (for example, siting industries in particular regions for political balance)
    • Personal or family reasons of the entrepreneur
    • Security and climate
    • Social and cultural considerations

    Step-by-step evaluation:

    • A. Existence of required materials for production: This is an economic factor, because raw materials affect production costs.
    • B. Availability of a population of buyers: This is an economic factor, because it concerns the market.
    • C. Adequate supply of power, good road and rail network: This is an economic factor, because it concerns infrastructure and cost.
    • D. The activities of politicians in deciding location of firms: This is a political, non-economic factor. Politicians may site a firm in a particular area for political reasons, not because of cost or profit.

    Answer: The correct option is D.

    Exam tip: Remember "cost, market, materials, power, transport" as economic factors. If the option mentions politics, government influence, personal choice or sentiment, it is non-economic.

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11. 11.

    Market supply may increase if there is an increase in the________

    1. A.Price of the product
    2. B.Prices of factors of production.
    3. C.Tax paid on raw materials
    4. D.Subsidies on raw materials.

    Show answer

    Answer: D. Subsidies on raw materials.

    AI explanation

    Analyze the question: It asks which factor would cause market supply to increase, meaning the whole supply curve shifts to the right.

    Concept: movement along vs. shift of the supply curve

    • A change in the price of the product itself causes a movement along the supply curve. Economists call this an "extension" of supply, not an "increase in supply."
    • A change in other determinants (cost of production, technology, taxes, subsidies, number of sellers, weather) shifts the curve. A rightward shift is an increase in supply.

    Evaluate each option:

    • A. Price of the product: This only causes a change in quantity supplied, a movement along the curve. It is not a true increase in supply.
    • B. Prices of factors of production: Higher input prices raise the cost of production, so producers supply less at each price. Supply decreases.
    • C. Tax paid on raw materials: Tax raises production costs, so supply decreases.
    • D. Subsidies on raw materials: A subsidy lowers the cost of production, making production more profitable at every price. Producers supply more, so the supply curve shifts right. Supply increases.

    **Answer: D.

    Exam tip: Remember "Cost up, supply down; cost down, supply up." Subsidies reduce costs (supply rises), while taxes raise costs (supply falls). Also watch the wording: "increase in supply" means a shift, while "price of the product" only gives a movement along the curve.

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12. 12.

    In order to enable the government of a country to increase its tax revenue, it will be advisable for it to increase taxes on_______

    1. A.Textile materials with elastic demand
    2. B.Alcoholic beverages with inelastic demand
    3. C.Agricultural products with inelastic supply
    4. D.Luxury goods with elastic supply

    Show answer

    Answer: B. Alcoholic beverages with inelastic demand

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13. 13.

    When a commodity market operates without government interference, commodities are distributed through_______

    1. A.A government distribution agencies.
    2. B.The operation of price mechanism.
    3. C.A central planning committee
    4. D.Retailers only.

    Show answer

    Answer: B. The operation of price mechanism.

    AI explanation

    Step 1: Analyze the question The phrase "without government interference" describes a free market (market economy). We need to identify how goods are distributed in such a market.

    Step 2: Explain the concept In a free market, the price mechanism (also called the market mechanism or the "invisible hand") coordinates economic activity. Prices rise and fall according to demand and supply:

    • When demand is higher than supply, prices rise. This encourages producers to supply more and discourages some buyers.
    • When supply is higher than demand, prices fall. This encourages buyers to purchase more and discourages producers from supplying as much.
    • Eventually, the market reaches equilibrium, where the quantity demanded equals the quantity supplied.

    Goods therefore go to those who are willing and able to pay the price, with no authority directing the allocation.

    Step 3: Evaluate the options

    • A. Government distribution agencies: This involves the government, so it contradicts "without government interference." ❌
    • B. The operation of price mechanism: This is how a free market allocates goods. ✅
    • C. A central planning committee: This is a feature of a command (centrally planned) economy. ❌
    • D. Retailers only: Retailers are just one link in the distribution chain. They do not determine how goods are allocated across the market. ❌

    Step 4: Answer The correct answer is **B. The operation of price mechanism.

    Step 5: Exam tip Link each economic system to its allocation method:

    • Market economy → price mechanism
    • Command economy → central planning
    • Mixed economy → a combination of both

    If a question says "without government interference," think price mechanism, free market, or laissez-faire.

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14. 14.

    One way of obtaining the median of a given data is to__________

    1. A.Sum the value and divide by the number of items.
    2. B.Arrange the data in ascending order and subtract each item from the mean.
    3. C.Arrange the data in descending order and add each item to the least.
    4. D.Arrange the data in either ascending or descending order and find what item divides the set in two equal parts.

    Show answer

    Answer: D. Arrange the data in either ascending or descending order and find what item divides the set in two equal parts.

    AI explanation

    Analyze the question: It asks how to obtain the median of a set of data.

    Concept: The median is the middle value of a data set once the values are arranged in order. It splits the data into two equal halves, with 50% of the values below it and 50% above it.

    Steps to find the median:

    1. Arrange the data in order, either ascending or descending.
    2. If the number of items (n) is odd, the median is the middle item, at position (n + 1)/2.
    3. If n is even, the median is the average of the two middle items, at positions n/2 and (n/2 + 1).

    Example: For the data 7, 2, 9, 4, 5:

    • Ordered: 2, 4, 5, 7, 9
    • The middle item is 5, so the median is 5.

    Checking each option:

    • A. Summing the values and dividing by the number of items gives the mean, not the median. ✗
    • B. Subtracting each item from the mean is used to find deviations (for variance or standard deviation). It has nothing to do with the median. ✗
    • C. Adding each item to the least has no statistical meaning here. ✗
    • D. Arranging the data in ascending or descending order and finding the item that divides the set into two equal parts is the definition of the median. ✓

    Tip: Remember the three averages like this:

    • Mean = "Mean" is the arithmetic average (add up and divide).
    • Median = "Middle" (arrange in order first).
    • Mode = "Most" frequent.

    If a question mentions arranging in order and finding the middle, think median.

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15. 15.

    The age distribution of a country's population is shown below. Use the information is answer the question below. Age group (YEARS) Population 0 - 15 16 - 40 41 - 60 Over 60 30% 45% 15% 10%   What is the dependency ratio?

    1. A.2:3
    2. B.3:2
    3. C.1:2
    4. D.6:1

    Show answer

    Answer: A. 2:3

    AI explanation

    Analyze the question

    The dependency ratio compares the dependent population (people who are too young or too old to work) with the working-age (economically active) population.

    Concept

    Dependency ratio = (Young dependents + Old dependents) : Working-age population

    In Nigerian economics syllabuses, the usual groups are:

    • Young dependents: 0-15 years
    • Working population: 16-60 years
    • Old dependents: over 60 years

    Solution

    Using the standard grouping:

    • Dependents = 0-15 (30%) + over 60 (10%) = 40%
    • Working population = 16-40 (45%) + 41-60 (15%) = 60%

    Dependency ratio = 40 : 60 = 2 : 3

    Check the other options

    • 3:2 is the inverse (workers to dependents), so it is wrong.
    • 1:2 and 6:1 do not match the figures.

    Tip

    Always put dependents first, then workers. Dependents are the children (0-15) and the aged (over 60). Add them up, add up the workers (16-60), then simplify the ratio. For example, 40:60 becomes 2:3 after dividing by 20.

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16. 16.

    The standard of living in two countries can be compared using the___________

    1. A.number of industries in each country
    2. B.size of their arms and ammunition
    3. C.size of their national incomes only
    4. D.gross national product per head

    Show answer

    Answer: D. gross national product per head

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17. 17.This question needs a diagram, table or passage that we don't have yet, so it isn't shown.

18. 18.

    A customs union is an economic grouping which has___________

    1. A.free movement of factors of production
    2. B.common tariffs against non-Members.
    3. C.common currency for trading
    4. D.common military defence

    Show answer

    Answer: B. common tariffs against non-Members.

    AI explanation

    Step 1: Analyze the question The question asks for the defining feature of a customs union, one of the forms of economic integration.

    Step 2: The concept Economic integration has stages, each adding more features:

    1. Free Trade Area: members remove tariffs among themselves, but each keeps its own tariffs against non-members (e.g., AfCFTA).
    2. Customs Union: a free trade area plus a common external tariff against non-members.
    3. Common Market: a customs union plus free movement of factors of production (labour and capital).
    4. Economic Union: a common market plus a common currency and harmonised economic policies (e.g., the Eurozone/EU).

    Step 3: Evaluate the options

    • A. Free movement of factors of production: this is a feature of a common market, not a basic customs union.
    • B. Common tariffs against non-members: this is the defining feature of a customs union (the common external tariff). ✔
    • C. Common currency for trading: this belongs to a monetary or economic union.
    • D. Common military defence: this is a political or military alliance (e.g., NATO), not an economic feature.

    Step 4: Answer

    Tip: Remember the ladder "F-C-C-E": Free trade area → Customs union → Common market → Economic union. Customs union means Common external Tariff. The word "customs" refers to duties or tariffs charged at the border, so look for the answer about tariffs.

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19. 19.

    A measure that can be adopted to correct a country 's balance of payments deficit is ____________

    1. A.Allow the currency to appreciate to encourage imports.
    2. B.Allow the currency to depreciate to encourage imports
    3. C.Adopt import substitution strategy
    4. D.Restrict trade with all countries

    Show answer

    Answer: C. Adopt import substitution strategy

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20. 20.

    When a government cuts down her expenditure to reduce inflation, she has embarked on___________

    1. A.A restrictive Fiscal policy.
    2. B.An expansionary monetary policy.
    3. C.Physical policy.
    4. D.Implementing budget deficit

    Show answer

    Answer: A. A restrictive Fiscal policy.

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21. 21.

    The leftward shift in the supply curve for a commodity indicates_________

    1. A.An increase in quantity supplied
    2. B.A decrease in supply.
    3. C.A reduction in quantity supplied.
    4. D.An increase in supply.

    Show answer

    Answer: B. A decrease in supply.

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22. 22.

    Which of the following is not an argument for the policy of privatization in West Africa?

    1. A.To make businesses more profitable
    2. B.Government is able to participate and control the operation of the privatized businesses
    3. C.Members of the public are able to acquire shares
    4. D.It encourages the inflow of capital and expertise from local and foreign sources

    Show answer

    Answer: B. Government is able to participate and control the operation of the privatized businesses

    AI explanation

    Analyze the question: You are asked for the option that is NOT an argument in favour of privatization. Three options are benefits of privatization, and one is the opposite of what privatization means.

    Concept: Privatization is the transfer of ownership (fully or partly) of government-owned enterprises to private individuals or organizations. The main arguments for it in West Africa are:

    • Greater efficiency and profitability, since private owners want profit and cut waste.
    • Wider ownership, because the public can buy shares.
    • Less government financial burden, since the government no longer subsidizes loss-making enterprises.
    • More capital and expertise from local and foreign investors.
    • Less political interference in management.

    Step-by-step evaluation:

    • A. To make businesses more profitable: This is a valid argument. Private management is profit-driven, so it is an argument for privatization.
    • B. Government is able to participate and control the operation of the privatized businesses: This contradicts privatization. The aim is to reduce or remove government control and participation. Continued government control is a feature of public ownership or nationalization, so this is not an argument for privatization.
    • C. Members of the public are able to acquire shares: This is a valid argument, since privatization often involves selling shares to citizens (popular or wider ownership).
    • D. It encourages the inflow of capital and expertise from local and foreign sources: This is a valid argument, since private investors bring funds and skills.

    Answer: The option that is not an argument for privatization is B.

    Exam tip: In "which is NOT" questions, look for the option that describes the opposite concept. Here, "government control" signals public ownership, not privatization. Remember: Privatization = less government, more private.

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23. 23.

    The law of diminishing returns is applicable to the__________

    1. A.fixed inputs of production.
    2. B.variable factors of production.
    3. C.plants and machinery of the firm.
    4. D.equipment and other capital.

    Show answer

    Answer: B. variable factors of production.

    AI explanation

    Analyze the question: The question asks what the law of diminishing returns applies to. The law is about what happens to output when you change the quantity of one input.

    Explain the concept: The law of diminishing returns (also called the law of variable proportions) states that if you keep adding units of a variable factor (such as labour) to a fixed quantity of other factors (such as land or capital), the extra output from each additional unit will eventually start to fall.

    Step-by-step solution:

    1. In the short run, at least one factor is fixed, such as land, plant, or machinery.
    2. Another factor, usually labour, is variable, meaning we can increase or decrease it.
    3. As more variable input is added to the fixed input, the marginal product of the variable input rises at first, then reaches a peak and begins to fall.
    4. This fall in marginal product is the diminishing returns. It is observed in the variable factor, because that is the input being increased.

    Checking the options:

    • A. Fixed inputs: these are held constant, so they are not what is being varied. Wrong.
    • B. Variable factors of production: this is where the extra units are added and where the declining marginal returns show up. Correct.
    • C. Plants and machinery: these are typical fixed factors in the short run. Wrong.
    • D. Equipment and other capital: these are also usually fixed in the short run. Wrong.

    Example: A farmer in Benue has 1 hectare of land (fixed). One worker produces 10 bags of yam, two workers produce 24, and three workers produce 32. The added output from the third worker is only 8 bags, less than the 14 from the second. More workers on the same fixed land means diminishing returns to labour.

    Exam tip: Remember "Diminishing returns happen to the VARIABLE input, because the FIXED input is what makes it happen." If an option says "variable factor," it is usually the answer to this kind of question.

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24. 24.

    An increase in cash ratio by the central bank will_______

    1. A.Increase the supply of money.
    2. B.Increase banks lending
    3. C.Encourage borrowing.
    4. D.Reduce the supply of money.

    Show answer

    Answer: D. Reduce the supply of money.

    AI explanation

    Step 1: Analyze the question The question asks about the effect of the central bank increasing the cash ratio. This is a monetary policy tool used to control the money supply.

    Step 2: Explain the concept The cash ratio (also called the cash reserve requirement) is the percentage of a commercial bank's total deposits that it must keep as cash, either in its vaults or with the central bank (in Nigeria, the CBN). The bank cannot lend out this portion.

    Step 3: Work through the effect When the central bank raises the cash ratio:

    1. Banks must hold more of their deposits as cash reserves.
    2. Banks therefore have less money available to lend.
    3. Less lending means less credit creation, so the total money supply falls.
    4. With less credit available, loans become harder to get and often more expensive, which discourages borrowing.

    Step 4: Check each option

    • A. Increase the supply of money. Wrong. This is the opposite of the effect. A decrease in the cash ratio would do this.
    • B. Increase banks' lending. Wrong. Banks have less to lend, so lending falls.
    • C. Encourage borrowing. Wrong. Tighter credit discourages borrowing.
    • D. Reduce the supply of money. Correct. Less lendable funds leads to less credit creation, so the money supply contracts.

    Exam tip: Remember that cash ratio and money supply move in opposite directions:

    • Cash ratio ↑ → money supply ↓ (a contractionary policy used to fight inflation)
    • Cash ratio ↓ → money supply ↑ (an expansionary policy used to fight recession)

    The same logic applies to other tools. Raising the Monetary Policy Rate (MPR) or selling government securities also reduces the money supply.

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25. 25.

    Government can increase farmers' incomes by__________

    1. A.Fixing maximum prices.
    2. B.Fixing minimum prices.
    3. C.Encouraging them to produce surplus output.
    4. D.Increasing taxes on inputs.

    Show answer

    Answer: B. Fixing minimum prices.

    AI explanation

    Analyze the question: It asks which government action raises farmers' incomes. This is about price controls in agricultural markets.

    Concept:

    • Maximum price (price ceiling): Set below the equilibrium price to protect consumers. It lowers what producers receive, which reduces farmers' incomes and can cause shortages.
    • Minimum price (price floor): Set above the equilibrium price to protect producers. Farmers sell at a guaranteed higher price. The government usually buys any surplus, so farmers' incomes rise. Nigeria has used guaranteed minimum prices for crops such as grains.

    Evaluate each option:

    • A. Fixing maximum prices: This pushes prices down, so farmers earn less. Wrong.
    • B. Fixing minimum prices: This guarantees a higher price and raises revenue per unit sold. Correct.
    • C. Encouraging surplus output: Without a buyer or a guaranteed price, surplus output pushes market prices down, and farmers may earn less. It is also not a direct government income policy. Wrong.
    • D. Increasing taxes on inputs: This raises production costs and reduces farmers' net income. Wrong.

    Answer: Option B, fixing minimum prices.

    Exam tip: Remember "Floor protects Farmers, Ceiling protects Consumers." A minimum price (floor) helps producers, and a maximum price (ceiling) helps buyers.

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26. 26.

    The output of an extra unit of an input is referred to as________

    1. A.Output of the input.
    2. B.Marginal product of the input
    3. C.Average product of the input
    4. D.Utility of the input employed

    Show answer

    Answer: B. Marginal product of the input

    AI explanation

    Step 1: Analyze the question The question asks for the term used for the extra output obtained when one more unit of an input is added.

    Step 2: Explain the concept In production theory, the key product concepts are:

    • Total product (TP): the total output from all units of an input employed.
    • Average product (AP): output per unit of input, AP = TP ÷ number of units of input.
    • Marginal product (MP): the additional output from employing one more unit of the input, MP = change in TP ÷ change in input.

    Step 3: Work through the options

    • A. Output of the input: This is vague and not a standard economic term.
    • B. Marginal product of the input: The word "marginal" means "extra" or "additional", so this matches the definition exactly.
    • C. Average product of the input: This is total output divided by the number of units, not the extra unit's contribution.
    • D. Utility of the input employed: Utility is the satisfaction from consuming a good, and has nothing to do with production.

    Example: | Workers | Total Product | Marginal Product | |---|---|---| | 1 | 10 | 10 | | 2 | 22 | 12 | | 3 | 30 | 8 |

    When the third worker is added, total output rises from 22 to 30, so MP = 30 − 22 = 8 units. This is the output of the extra worker.

    Step 4: Answer The correct option is B. Marginal product of the input.

    Exam tip: "Marginal" always means "extra" or "additional". Marginal product is the extra output, marginal cost is the extra cost, and marginal utility is the extra satisfaction. If you see "extra unit" in a question, think "marginal".

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27. 27.

    A floating exchange rate means that the exchange rate is fixed by the __________

    1. A.Central bank of the country
    2. B.Forces of demand and supply
    3. C.International monetary fund (IMF)
    4. D.Ministry of Finance

    Show answer

    Answer: B. Forces of demand and supply

    AI explanation

    Step 1: Analyze the question The question asks who or what determines the exchange rate under a floating exchange rate system.

    Step 2: Explain the concept An exchange rate is the price of one country's currency in terms of another (e.g., how many naira equal one US dollar). There are two main systems:

    • Fixed (pegged) exchange rate: The government or central bank sets the rate and intervenes to keep it there.
    • Floating (flexible) exchange rate: The rate is determined freely in the foreign exchange market by the demand for and supply of currencies, with little or no government intervention.

    Step 3: Work through the options

    • A. Central bank of the country: This describes a fixed system, where the central bank sets or defends the rate. ❌
    • B. Forces of demand and supply: This is the definition of a floating rate. ✅
    • C. IMF: The IMF supervises the international monetary system but does not set exchange rates. ❌
    • D. Ministry of Finance: This is a government body that, like the central bank, would be associated with fixing rates. ❌

    Step 4: Show how it works If Nigerians want more US dollars (for imports, school fees abroad, etc.), demand for dollars rises. The dollar becomes more expensive in naira, so the naira depreciates. If more dollars flow in (from oil exports or remittances), the supply of dollars rises, and the naira appreciates.

    **Answer: B. Forces of demand and supply.

    Exam tip: Remember "Float = Free market." A boat floats freely on water, and a floating currency moves freely with market forces. "Fixed = Fixed by the government/central bank."

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28. 28.

    Abundant natural resources do not contribute to economic growth in developing countries because of_________

    1. A.high rate of inflation
    2. B.urban congestion.
    3. C.over-reliance on multiple commodities.
    4. D.mismanagement and corruption.

    Show answer

    Answer: D. mismanagement and corruption.

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29. 29.

    Separation of ownership of resources and their control is mostly found in a __________

    1. A.sole proprietorship
    2. B.partnership
    3. C.joint stock company
    4. D.consumer co-operative

    Show answer

    Answer: C. joint stock company

    AI explanation

    Step 1: Analyze the question The question asks which type of business organization usually has owners (those who provide the capital/resources) that are different from the people who manage and control the business.

    Step 2: The concept In a joint stock company (a limited liability company), the owners are the shareholders, who contribute capital by buying shares. They are often numerous and do not run the business daily. Instead, they elect a Board of Directors, who appoint managers to run the company. This is called the separation of ownership from control.

    Step 3: Check each option

    • A. Sole proprietorship: One person owns, finances, and manages the business, so there is no separation.
    • B. Partnership: Partners usually both own and manage the business, so there is little or no separation.
    • C. Joint stock company: Shareholders own it, while directors and managers control it. Separation is clearly present.
    • D. Consumer co-operative: Members own and democratically run it, with a management committee drawn from among them. The separation is much less pronounced.

    Step 4: Answer The correct option is **C.

    Exam tip: Remember "Shareholders own, directors control." Whenever you see "separation of ownership and control" in Economics or Commerce, think of companies (joint stock/limited liability).

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30. 30.

    The relationship between the marginal revenue (MR) and the average revenue(AR) of a monopolist is that the marginal revenue curve____

    1. A.is above the average revenue curve
    2. B.slopes down to the right and is below the AR curve.
    3. C.and the AR curve are downward sloping and are identical.
    4. D.is vertical while the average revenue curve is horizontal.

    Show answer

    Answer: B. slopes down to the right and is below the AR curve.

    AI explanation

    Analyze the question: It asks how a monopolist's MR curve relates to its AR curve.

    Concept: A monopolist is the only seller, so it faces the whole market demand curve. To sell more, it must lower the price. This has two consequences:

    • The AR curve (which is the same as the demand curve) slopes downward to the right.
    • Lowering the price applies to all units sold, not just the extra unit. So the extra revenue from one more unit (MR) is always less than the price (AR).

    Step-by-step working: Take a linear demand curve: P = a − bQ

    1. AR = P = a − bQ
    2. TR = P × Q = aQ − bQ²
    3. MR = d(TR)/dQ = a − 2bQ

    Compare the two:

    • Both start at the same point on the price axis (intercept a).
    • The MR curve has twice the slope of the AR curve (−2b compared with −b).
    • So MR falls faster and lies below AR at every positive output.

    Numerical check: Suppose P = 10 − Q.

    • Q = 1: TR = 9, AR = 9
    • Q = 2: TR = 16, AR = 8, MR = 16 − 9 = 7
    • Q = 3: TR = 21, AR = 7, MR = 21 − 16 = 5

    MR (7, 5) is less than AR (8, 7), and both fall as output rises.

    Checking the options:

    • A. Wrong, because MR is below AR, not above.
    • B. Correct. MR slopes downward to the right and lies below the AR curve.
    • C. Wrong, because the curves are identical only under perfect competition, where both are horizontal.
    • D. Wrong, because MR is not vertical, and AR is not horizontal for a monopolist.

    Answer: B

    Exam tip: Remember "Monopoly: MR is below AR and twice as steep." In perfect competition, AR = MR = price, a horizontal line. In monopoly, MR drops faster than AR.

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31. 31.

    Use this data below to answer the question The following data relates to the national income of a country. Gross domestic product = $2800 Net factor income from abroad =$250 Depreciation = $700 Indirect taxes =$120   What is the country's Gross National (GNP)?

    1. A.$ 3.050
    2. B.$ 2.680
    3. C.$ 2,350
    4. D.$2,100

    Show answer

    Answer: A. $ 3.050

    AI explanation

    Analyze the question: You are asked for Gross National Product (GNP), given GDP, net factor income from abroad, depreciation and indirect taxes.

    Concept: GNP = GDP + Net factor income from abroad (NFIA)

    Net factor income from abroad is the income Nigerians (or citizens of the country) earn abroad minus the income foreigners earn in the country. Depreciation and indirect taxes are not needed for GNP. They are included as distractors. Depreciation would be used to get Net National Product (NNP = GNP - depreciation), and indirect taxes would be used to convert to National Income at factor cost.

    Solution: GNP = GDP + NFIA GNP = 2800 + 250 GNP = $3,050

    Check the options:

    • A. $3,050 (matches; the "3.050" is just a typing format for 3,050)
    • B. $2,680 (not obtainable from the relevant formula)
    • C. $2,350 (this would be 2800 - 700 + 250, which wrongly subtracts depreciation)
    • D. $2,100 (this would be 2800 - 700, which is wrong)

    Exam tip: Remember the chain:

    • GNP = GDP + NFIA
    • NNP = GNP - Depreciation
    • National Income (at factor cost) = NNP - Indirect taxes + Subsidies

    When the question asks for GNP, ignore depreciation and indirect taxes. Always spot which data is a distractor.

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32. 32.

    Government can curb inflation by_________

    1. A.encouraging banks to lend for any purpose.
    2. B.increasing her own expenditure.
    3. C.buying treasury bills in the open market.
    4. D.selling securities in the open market

    Show answer

    Answer: D. selling securities in the open market

    AI explanation

    Analyze the question: The question asks how government can curb (reduce) inflation. Inflation is a persistent rise in the general price level, usually caused by too much money chasing too few goods. To curb it, government needs to reduce the money supply or total spending (demand) in the economy. This is called a contractionary (tight) policy.

    Concept: Open Market Operations (OMO) This is a monetary policy tool used by the Central Bank (the CBN in Nigeria):

    • Selling securities (treasury bills, bonds) → people and banks pay money to the CBN → money leaves circulation → money supply falls → inflation is curbed.
    • Buying securities → CBN pays money into the economy → money supply rises → this can fuel inflation (used to fight deflation or recession).

    Step-by-step evaluation of the options:

    • A. Encouraging banks to lend for any purpose. More loans means more money in circulation and higher spending, which increases inflation. ❌
    • B. Increasing her own expenditure. More government spending raises aggregate demand and pushes prices up. To curb inflation, government should reduce spending. ❌
    • C. Buying treasury bills in the open market. Buying releases money into the economy, which increases the money supply and worsens inflation. ❌
    • D. Selling securities in the open market. This withdraws money from circulation, reduces the money supply and spending, and so helps bring down prices. ✅

    Answer: D.

    💡 Exam tip: Remember "Sell to Shrink, Buy to Boost."

    • Sell securities → money shrinks → fights inflation.
    • Buy securities → money boosts → fights deflation/recession.

    Keep it up! Open market operations questions appear often in WASSCE, NECO and JAMB Economics.

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33. 33.

    The age distribution of a country's population is shown below. Use the information is answer the question below. Age group (YEARS) Population 0 - 15 16 - 40 41 - 60 Over 60 30% 45% 15% 10%   What is the percentage of the working population?

    1. A.75%
    2. B.60%
    3. C.45%
    4. D.15%

    Show answer

    Answer: B. 60%

    AI explanation

    Analyze the question: We need the percentage of the population that is of working age (the economically active population).

    Concept: In Nigerian economics, the working (economically active) population is usually taken as those aged 15 to 60 years. Children (below 15) and the aged (over 60) are dependants.

    Applying it to the table:

    • 0 – 15 years: 30% (dependants, children)
    • 16 – 40 years: 45% (working)
    • 41 – 60 years: 15% (working)
    • Over 60 years: 10% (dependants, aged)

    Calculation: Working population = 45% + 15% = 60%

    Check: Dependants = 30% + 10% = 40%, and 60% + 40% = 100%. ✔

    Answer: The working population is 60%, which is option B.

    Why the others are wrong:

    • A (75%) would be 30% + 45%, wrongly including children.
    • C (45%) counts only the 16–40 group.
    • D (15%) counts only the 41–60 group.

    Exam tip: For working-population questions, cross out the youngest group (children) and the oldest group (over 60), then add what is left. Always check that working and dependent populations add up to 100%.

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34. 34.

    If a country's import bill is high, she can encourage exports by___________

    1. A.Allowing her currency to depreciate
    2. B.Allowing her currency to appreciate
    3. C.Liberalizing importation
    4. D.Increasing taxes on all locally produced goods

    Show answer

    Answer: A. Allowing her currency to depreciate

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35. 35.

    The coefficient of price elasticity of supply of land is usually____________

    1. A.One
    2. B.Greater than one
    3. C.Zero
    4. D.Less than one.

    Show answer

    Answer: C. Zero

    AI explanation

    Step 1: Analyze the question We are asked for the usual value of the price elasticity of supply (PES) of land.

    Step 2: Explain the concept PES measures how responsive quantity supplied is to a change in price:

    PES = % change in quantity supplied ÷ % change in price

    • PES = 0 means perfectly inelastic supply (quantity does not change whatever the price)
    • PES < 1 means inelastic supply
    • PES = 1 means unitary elasticity
    • PES > 1 means elastic supply

    Step 3: Apply it to land In economics, land means all natural resources (the physical surface, minerals, forests and so on). The total supply of land is fixed by nature. If the price of land rises, we cannot create more of it, and if the price falls, the total available does not shrink.

    So:

    • % change in quantity supplied = 0
    • PES = 0 ÷ % change in price = 0

    The supply curve for land as a whole is therefore a vertical line, which is perfectly inelastic.

    Step 4: Check the options

    • A. One: this is unitary elasticity, which does not fit land.
    • B. Greater than one: this is elastic, which is wrong because land cannot be expanded.
    • C. Zero: this is perfectly inelastic, which is correct for the total supply of land.
    • D. Less than one: land is inelastic, but "less than one" is not the best description. The usual textbook answer is exactly zero.

    Note: The supply of land to a particular use (for example, land for building versus farming) can be somewhat elastic, because land can be switched between uses. The question, however, refers to land in general, so the answer is zero.

    Exam tip: Remember "Land = Fixed = Vertical = Zero elasticity." Whenever you see a fixed supply in an elasticity question, think of a vertical supply curve and a coefficient of zero.

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36. 36.

    A major source of finance to the Railway Corporation in West African countries is_______

    1. A.sale of shares
    2. B.government subvention
    3. C.trade credit
    4. D.surplus

    Show answer

    Answer: B. government subvention

    AI explanation

    Analyze the question: The question asks about the main source of finance for the Railway Corporation in West African countries. A railway corporation is a public enterprise, meaning it is owned and run by the government.

    Explain the concept: Public corporations such as the Nigerian Railway Corporation, Ghana Railway Company and similar bodies are usually set up to provide essential services, not to make profit. Their finance typically comes from:

    • Government grants and subventions (regular financial support from the government)
    • Government loans
    • Internal revenue from fares and freight charges

    Because railways often run at a loss, with high maintenance costs, low fares and limited patronage, the revenue they earn is rarely enough. They depend heavily on government support.

    Check each option:

    • A. Sale of shares: This is how private limited or public limited companies raise capital. Government-owned corporations do not sell shares to the public, so this is wrong.
    • B. Government subvention: Public corporations rely on this for funding. This is correct.
    • C. Trade credit: This is a short-term arrangement where suppliers allow delayed payment. It is not a major source of finance for railways.
    • D. Surplus: Railway corporations seldom make a surplus, so they cannot depend on it as a major source.

    Answer: The correct option is B. government subvention.

    Exam tip: In Economics, link the type of business to its source of finance:

    • Private companies → sale of shares and debentures
    • Public corporations → government subvention
    • Sole traders → personal savings

    If the question mentions a "Corporation" owned by the government, think subvention.

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37. 37.

    The price of soap rose from $10 to$20 causing a trader to increase her supply from 50 to 120 boxes per week. This makes supply_________

    1. A.Unitary elastic.
    2. B.Perfectly inelastic.
    3. C.Fairly elastic.
    4. D.Inelastic.

    Show answer

    Answer: C. Fairly elastic.

    AI explanation

    Analyze the question: We need the price elasticity of supply (PES) when price rises from 10 to 20 and quantity supplied rises from 50 to 120.

    Concept: PES = % change in quantity supplied ÷ % change in price

    • PES > 1: elastic
    • PES = 1: unitary elastic
    • PES < 1: inelastic
    • PES = 0: perfectly inelastic

    Solution (using the simple/original-base method used in WASSCE):

    1. % change in quantity supplied = (120 − 50) / 50 × 100 = 70/50 × 100 = 140%
    2. % change in price = (20 − 10) / 10 × 100 = 100%
    3. PES = 140 / 100 = 1.4

    (Using the midpoint method gives: 70/85 ÷ 10/15 = 0.8235 ÷ 0.6667 ≈ 1.24, which is also greater than 1, so the conclusion is the same.)

    Interpretation: PES = 1.4 is greater than 1, so supply is elastic. Quantity supplied responds more than proportionately to the price change. Among the options, "fairly elastic" is the one that describes elasticity greater than 1 (but not infinite).

    • A (Unitary) would need PES = 1. ✗
    • B (Perfectly inelastic) would need PES = 0. ✗
    • D (Inelastic) would need PES < 1. ✗
    • C (Fairly elastic) matches PES > 1. ✓

    Exam tip: Always compute PES first and compare to 1. Greater than 1 means elastic ("fairly elastic" in WASSCE wording), less than 1 means inelastic. Remember: if the percentage change in quantity is bigger than the percentage change in price, it is elastic.

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38. 38.

    Two factors which can improve the efficiency of labour are_________

    1. A.population size and age of retirement
    2. B.school leaving age and number of disabled workers
    3. C.work environment and health status of workers
    4. D.school leaving age and number of part-time workers

    Show answer

    Answer: C. work environment and health status of workers

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39. 39.

    The supply of land for agricultural purpose can be increased through _______

    1. A.The introduction of mechanized farming
    2. B.reclamation and irrigation
    3. C.increase in prices of land
    4. D.conversion of building sites to farmlands

    Show answer

    Answer: B. reclamation and irrigation

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40. 40.

    Examples of land that are non-renewable include___________

    1. A.marshy and water-logged land.
    2. B.farmland already used tor many years.
    3. C.some natural resources such as natural gas.
    4. D.oxygen and carbon dioxide in the atmosphere

    Show answer

    Answer: C. some natural resources such as natural gas.

    AI explanation

    Step 1: Analyze the question The question asks which example of "land" (in the economic sense) is a non-renewable resource.

    Step 2: Explain the concept In Economics, "land" means all natural resources provided by nature, including soil, water, minerals, forests, and fossil fuels. These resources are grouped into two types:

    • Renewable resources can be replenished or regenerated naturally within a reasonable time, for example forests, fish, water, and the air.
    • Non-renewable resources exist in fixed amounts, or take millions of years to form, so they get used up. Examples are crude oil, natural gas, coal, and mineral ores such as tin and columbite.

    Step 3: Check each option

    • A. Marshy and water-logged land: This is a type of terrain. It can be drained and reclaimed, so it is not a depletable resource.
    • B. Farmland used for many years: Soil fertility can be restored with fertilizer, manure, crop rotation, or fallowing, so this is renewable.
    • C. Some natural resources such as natural gas: Natural gas is a fossil fuel. Once extracted and burned, it cannot be replaced within a human timeframe, so it is non-renewable.
    • D. Oxygen and carbon dioxide in the atmosphere: These are continuously recycled through photosynthesis and respiration, so they are renewable.

    Step 4: Answer

    Exam tip: Think of "non-renewable" as "finite, and once gone, gone." Remember the list crude oil, natural gas, coal, minerals. If an option names a fossil fuel or mineral, it is usually the non-renewable one. Anything that nature or human effort can restore, such as soil, air, water, or forests, is renewable.

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41. 41.This question needs a diagram, table or passage that we don't have yet, so it isn't shown.

42. 42.

    The distinguishing function of an entrepreneur is_______

    1. A.Planning.
    2. B.Control.
    3. C.Risk-bearing.
    4. D.Management.

    Show answer

    Answer: C. Risk-bearing.

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43. 43.

    A country may be able to earn more from exports if she_____________

    1. A.increase her export duty
    2. B.devalues her currency
    3. C.increases her import duty
    4. D.allows her currency to appreciate

    Show answer

    Answer: B. devalues her currency

    AI explanation

    Analyze the question: The question asks which action can help a country earn more from its exports (foreign exchange earnings).

    Concept: Exports earn more when foreign buyers demand more of them. Demand rises when the goods become cheaper in foreign currency terms.

    Evaluating the options:

    • A. Increase her export duty: An export duty is a tax on exports. It raises the cost of exporting, makes goods more expensive abroad, and discourages exports. This reduces earnings.
    • B. Devalues her currency: Devaluation lowers the value of the home currency relative to foreign currencies. Exports then become cheaper for foreigners. For example, if ₦1,000 per unit of a product is worth $2 before devaluation and only$1 after, foreign buyers will buy more. Export volume rises, and export earnings can increase (provided demand is reasonably elastic).
    • C. Increases her import duty: This taxes imports and protects local industries. It reduces imports but does not directly raise exports, and trading partners may retaliate.
    • D. Allows her currency to appreciate: A stronger currency makes exports more expensive abroad, so demand for them falls. This is the opposite of what is needed.

    Exam tip: Remember it this way:

    • Devaluation → exports cheaper abroad, imports costlier at home
    • Appreciation → exports costlier abroad, imports cheaper at home

    When a question asks how to boost exports, look for the option that makes the goods cheaper for foreigners.

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44. 44.

    An increase in the rice harvest, all things being equal, may cause____________

    1. A.Price to increase substantially.
    2. B.Price to fall substantially.
    3. C.Demand to fall substantially.
    4. D.Farmer's incomes to be more than doubled

    Show answer

    Answer: B. Price to fall substantially.

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45. 45.

    The demand for wood and labour is an example of______

    1. A.Effective demand.
    2. B.Complementary demand
    3. C.Derived demand
    4. D.Competitive demand

    Show answer

    Answer: C. Derived demand

    AI explanation

    Analyze the question: The question asks what type of demand applies to wood and labour. Neither is wanted for its own sake. Both are wanted because of what they help produce, for example furniture.

    Concept:

    • Effective demand: the desire for a good backed by the ability to pay.
    • Complementary demand (joint demand): demand for goods used together, such as car and fuel, or bread and butter.
    • Derived demand: demand for a good or factor of production that arises from the demand for the final product it helps make.
    • Competitive demand: demand for goods that are substitutes, such as Indomie and spaghetti.

    Solution:

    1. Wood is an input, a raw material, used to make furniture such as tables, chairs and doors.
    2. Labour is a factor of production, and carpenters are hired to make that furniture.
    3. Demand for both depends on how much consumers demand the finished furniture. If demand for furniture rises, carpenters and wood are demanded more. If it falls, they are demanded less.
    4. This is the definition of derived demand.

    You could argue that wood and labour are also used together, which would make them complementary. However, the question is really about why they are demanded. That reason is the demand for the final product, so "derived demand" is the best answer.

    Answer: C. Derived demand

    Exam tip: When a question mentions factors of production (land, labour, capital) or raw materials, think derived demand. Remember it as: "Derived = demanded because of something else."

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46. 46.

    The supply of mangoes is represented as P=0.3Q, where P is the price ($) and Q is the quantity. What is P when Q is 50?

    1. A.$1.50
    2. B.$15.00
    3. C.$150.03
    4. D.$166.67

    Show answer

    Answer: B. $15.00

    AI explanation

    Analyze the question You are given a supply function P = 0.3Q and asked to find the price (P) when the quantity (Q) is 50.

    Concept A supply equation shows the relationship between price and quantity supplied. To find P at a given Q, substitute the value of Q into the equation.

    Solution

    P = 0.3Q

    P = 0.3 × 50

    P = 15

    So P = $15.00.

    Check against the options

    • A. $1.50: this would come from 0.3 × 5, which is a decimal-place slip.
    • B. $15.00: matches our working.
    • C. $150.03: not a possible result.
    • D. $166.67: this is 50 ÷ 0.3, where the student divided instead of multiplied.

    Tip When a function is written as P = (something) × Q, you multiply. Only divide when you are asked to find Q from P (Q = P ÷ 0.3). Also, quickly estimate: 0.3 is about one-third, and one-third of 50 is roughly 16, so an answer near 15 makes sense. This helps you reject options like $1.50 or$150.03 immediately.

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47. 47.

    A consumer with $10 needs a dress, a pair of shoes, a handbag and jewelry costing$20, $10,$7 and $3 respectively. The opportunity cost of buying the pair of shoes Is the________

    1. A.Dress.
    2. B.Jewelry.
    3. C.Handbag and Jewelry.
    4. D.Dress and Jewelry

    Show answer

    Answer: C. Handbag and Jewelry.

    AI explanation

    Analyze the question: The consumer has $10. The items cost: dress$20, shoes $10, handbag$7, jewelry $3. We need the opportunity cost of buying the shoes, which is the next best alternative given up.

    Concept: Opportunity cost is the value of the next best alternative forgone when a choice is made. Because the consumer's income is limited, choosing one item means giving up other things the same money could have bought.

    Step-by-step solution:

    1. The shoes cost $10, which uses up the whole budget.
    2. The dress costs $20, so it is not affordable. It cannot be an alternative.
    3. What else could $10 buy instead of the shoes? • Handbag ($7) + Jewelry ($3) = $10, which fits the budget exactly. • Dress ($20) + Jewelry ($3) = $23, which is not affordable.
    4. So by buying the shoes, the consumer gives up the handbag and jewelry combination.

    Answer: The opportunity cost of buying the shoes is the handbag and jewelry, which is option C.

    Tip: In opportunity cost questions with a budget, first remove items you cannot afford. Then find the combination that uses the same amount of money as the chosen item. Items costing more than the budget (like the $20 dress) are never valid alternatives.

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48. 48.

    Records of a country's invisible trade are recorded in her_____________-

    1. A.Trade account.
    2. B.Capital account.
    3. C.Current account
    4. D.Financial account.

    Show answer

    Answer: C. Current account

    AI explanation

    Analyze the question The question asks where a country records its invisible trade in the balance of payments.

    Explain the concept

    • Visible trade means the export and import of physical goods, such as cocoa, crude oil and cars. These go in the balance of trade (trade account).
    • Invisible trade means the export and import of services and income flows, such as banking, insurance, shipping, tourism, transport, remittances, interest, dividends and transfers.
    • In the balance of payments, the current account records both visible trade (goods) and invisible trade (services, income and current transfers).
    • The capital account records capital transfers, such as debt forgiveness and the sale of non-produced assets.
    • The financial account records investment flows, such as FDI, portfolio investment and loans.

    Solution

    1. Invisible trade covers services, income and transfers.
    2. Services, income and transfers are all current transactions.
    3. Current transactions are recorded in the current account.
    4. The trade account (A) holds only visible items (goods), so it is not the answer.
    5. The capital account (B) and the financial account (D) hold capital and investment flows, not services.

    Answer: The current account, option C.

    Exam tip Remember: Current account = Goods + Services + Income + Transfers. If a question mentions "invisibles", think "current account". If it mentions "visibles only", think "trade account" or "balance of trade".

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49. 49.

    People who dispose of their assets are expected to pay ______________

    1. A.value added tax
    2. B.capital gains tax
    3. C.expenditure tax
    4. D.sales tax

    Show answer

    Answer: B. capital gains tax

    AI explanation

    Step 1: Analyze the question The question asks which tax is charged on people who dispose of their assets (for example, selling land, shares, or a building).

    Step 2: Explain the concept Capital gains tax is a tax on the profit (gain) made when a capital asset is sold or otherwise disposed of for more than its purchase price. In Nigeria, it is charged under the Capital Gains Tax Act.

    Formula: Capital gain = Disposal price − Cost of acquisition (and related costs)

    Step 3: Check each option

    • A. Value added tax (VAT): This is charged on the consumption of goods and services at each stage of supply. It is not specific to asset disposal.
    • B. Capital gains tax: This is charged on gains from the sale or disposal of assets such as land, buildings, and shares. ✔
    • C. Expenditure tax: This is a tax on what people spend, not on selling assets.
    • D. Sales tax: This is a tax on the sale of goods to consumers, charged on the retail price of goods.

    Step 4: Answer Someone who sells a plot of land for ₦5,000,000 after buying it for ₦3,000,000 has made a gain of ₦2,000,000, and capital gains tax applies to that gain. The correct answer is **B.

    Exam tip: Link the key word to the tax. "Dispose of assets" or "sale of capital items" points to capital gains. "Consumption of goods and services" points to VAT. "Income or profit from work or business" points to income tax or company income tax.

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50. 50.

    The study of economics IS Important to every society because it______

    1. A.Enables individuals to satisfy all their wants
    2. B.Helps in the utilization of scarce resources.
    3. C.Helps producers to know what to produce.
    4. D.Restores equilibrium between producers and consumers

    Show answer

    Answer: B. Helps in the utilization of scarce resources.

    AI explanation

    Step 1: Analyze the question The question asks why economics is important to every society. We need the option that describes the most basic and universal reason for studying it.

    Step 2: Explain the concept Economics is the study of how people and societies use scarce resources to satisfy unlimited wants. Scarcity is the central problem of every society, rich or poor. So economics matters because it guides us in choosing how best to allocate and use limited resources.

    Step 3: Evaluate each option

    • A. Enables individuals to satisfy all their wants. Wrong. Human wants are unlimited and resources are limited, so economics can never let anyone satisfy all their wants. The word "all" makes this option false.
    • B. Helps in the utilization of scarce resources. Correct. This captures the core purpose of economics: guiding choice and the efficient use of limited resources in any society.
    • C. Helps producers to know what to produce. This is only partly true. It concerns producers alone, while the question asks about the importance to every society. It is too narrow.
    • D. Restores equilibrium between producers and consumers. Wrong. Economics as a study does not "restore" anything. Equilibrium is a market outcome created by demand and supply forces.

    Step 4: Answer The correct option is B.

    Tip: When you see "importance of economics," think scarcity and choice. Be careful with options containing absolute words like "all" or "every." They are often traps, since economics deals with limited resources and unlimited wants.

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