💹 Economics — Concepts, Markets and the Nigerian Economy

1. Which of the following best defines economics as a science, according to Lionel Robbins' widely used definition in the UTME syllabus?

1. The study of how government controls the production of goods and services
2. The study of how human behaviour relates ends to scarce means which have alternative uses
3. The study of how banks create and control money supply
4. The study of how firms maximize profit through advertising

Robbins (1932) defined economics as the science that studies human behaviour as a relationship between ends and scarce means having alternative uses, i.e. the study of scarcity and choice. (Lionel Robbins, An Essay on the Nature and Significance of Economic Science (1932); JAMB UTME Economics Syllabus)

2. Opportunity cost is best described as

1. The total money spent on a purchase
2. The tax paid on a good or service
3. The value of the next best alternative given up when a choice is made
4. The profit earned from selling a good

Because resources are scarce, choosing one option means forgoing another; opportunity cost measures the value of that forgone next-best alternative. (JAMB UTME Economics Syllabus (Basic Economic Concepts); Anyaele, Comprehensive Economics)

3. A farmer with one plot of land decides to plant maize instead of beans. If the farmer would have earned ₦40,000 from beans, the opportunity cost of planting maize is

1. The cost of maize seeds bought
2. The ₦40,000 that would have been earned from beans
3. The total revenue earned from maize
4. Zero naira, since the land was already owned

The opportunity cost of a choice is the value of the next best alternative sacrificed, which here is the ₦40,000 forgone from growing beans. (JAMB UTME Economics Syllabus (Basic Economic Concepts))

4. The fundamental economic problem faced by every society arises from

1. Unlimited wants competing for scarce resources
2. Too many goods produced by firms
3. Excessive government regulation of markets
4. Unlimited resources with limited human wants

Scarcity exists because human wants are unlimited while the resources available to satisfy them are limited, forcing societies to make choices. (JAMB UTME Economics Syllabus (Basic Economic Concepts))

5. Because resources are scarce, every society must decide what to produce, how to produce it, and

1. When to close markets for trading
2. For whom to produce
3. Which currency to use
4. How many banks to license

The three basic economic questions arising from scarcity are what, how, and for whom to produce. (JAMB UTME Economics Syllabus (Basic Economic Concepts))

6. A consumer's scale of preference refers to

1. A list of goods and services arranged in order of importance according to the consumer's wants
2. The amount of tax a consumer pays on goods
3. A government list of price-controlled goods
4. The list of firms competing in a market

A scale of preference ranks an individual's wants in order of priority, guiding how limited income is allocated among competing wants. (JAMB UTME Economics Syllabus (Basic Economic Concepts); Anyaele, Comprehensive Economics)

7. Which pair of goods best illustrates the distinction between an economic good and a free good?

1. Sunlight (economic good) and bottled water (free good)
2. Bottled water (economic good) and sunlight (free good)
3. Crude oil (free good) and air in the atmosphere (economic good)
4. Bread (free good) and rainfall (economic good)

An economic good such as bottled water is scarce relative to demand and has a cost, while a free good such as atmospheric sunlight is abundant and has no opportunity cost. (JAMB UTME Economics Syllabus (Basic Economic Concepts))

8. A government that must choose between spending its limited budget on building more schools or importing more military equipment faces a classic example of

1. Inflation
2. Opportunity cost, often illustrated as the 'guns versus butter' trade-off
3. Balance of payments surplus
4. Perfect price elasticity

The guns-versus-butter illustration shows that because resources are scarce, producing more of one good (defence) means producing less of another (education/welfare), which is the essence of opportunity cost. (JAMB UTME Economics Syllabus (Basic Economic Concepts))

9. Which of the following is NOT one of the four traditional factors of production?

1. Land
2. Labour
3. Capital
4. Money supply

The four traditional factors of production are land, labour, capital and entrepreneur (organisation); money supply is a monetary concept, not a factor of production. (JAMB UTME Economics Syllabus (Basic Economic Concepts))

10. The law of demand states that, ceteris paribus,

1. The higher the price of a commodity, the higher the quantity demanded
2. The higher the price of a commodity, the lower the quantity demanded
3. Price and quantity demanded are unrelated
4. Quantity demanded depends only on income

The law of demand states that, all other things being equal, quantity demanded falls as price rises and rises as price falls, reflecting an inverse price-quantity relationship. (JAMB UTME Economics Syllabus (Theory of Demand))

11. If the price of rice rises from ₦500 to ₦700 per cup and, with all other factors unchanged, the quantity demanded falls, this is best explained by

1. The law of supply
2. The law of demand
3. The concept of elasticity of supply
4. The theory of production

This inverse relationship between price and quantity demanded, holding other factors constant, is precisely what the law of demand describes. (JAMB UTME Economics Syllabus (Theory of Demand))

12. The law of supply states that, ceteris paribus, as the price of a commodity rises, the quantity supplied

1. Falls
2. Rises
3. Remains constant
4. Becomes zero

The law of supply shows a direct relationship between price and quantity supplied: producers are willing to supply more at higher prices, other things being equal. (JAMB UTME Economics Syllabus (Theory of Supply))

13. Price elasticity of demand is calculated as

1. Percentage change in price divided by percentage change in income
2. Percentage change in quantity demanded divided by percentage change in price
3. Change in total revenue divided by change in output
4. Percentage change in supply divided by percentage change in demand

Price elasticity of demand (PED) equals the percentage change in quantity demanded divided by the percentage change in price, measuring demand's responsiveness to price changes. (JAMB UTME Economics Syllabus (Elasticity of Demand and Supply); Alfred Marshall, Principles of Economics)

14. Demand for a commodity is said to be unitary elastic when the price elasticity of demand coefficient equals

1. 0
2. Between 0 and 1
3. 1
4. Infinity

Unitary elasticity occurs when the percentage change in quantity demanded exactly equals the percentage change in price, giving a coefficient of exactly 1. (JAMB UTME Economics Syllabus (Elasticity of Demand and Supply))

15. A key feature that distinguishes a perfectly competitive market from other market structures is that

1. A single firm sets the price for the whole industry
2. Firms sell a homogeneous product and each firm is a price taker
3. Only two firms compete for the entire market
4. Firms rely heavily on advertising to differentiate their products

Under perfect competition there are many buyers and sellers of a homogeneous product, so no single firm can influence price and each firm simply accepts the ruling market price. (JAMB UTME Economics Syllabus (Market Structures))

16. A market in which there are many sellers offering slightly differentiated versions of a product, each firm has some control over its own price, and entry into the industry is relatively easy, best describes

1. Perfect competition
2. Monopoly
3. Monopolistic competition
4. Oligopoly

Monopolistic competition features many firms selling differentiated (not identical) products, giving each firm limited price-setting power, alongside relatively free entry and exit, distinguishing it from perfect competition and monopoly. (JAMB UTME Economics Syllabus (Market Structures))

17. A market dominated by a small number of large firms whose pricing decisions are interdependent is called

1. Monopoly
2. Oligopoly
3. Perfect competition
4. Duopoly

Oligopoly is characterised by a few dominant firms, each aware that its price and output decisions affect, and are affected by, its rivals' decisions. (JAMB UTME Economics Syllabus (Market Structures))

18. If the government fixes a maximum price for a commodity below the market equilibrium price, the most likely immediate effect is

1. A surplus of the commodity
2. A shortage, as quantity demanded exceeds quantity supplied at that price
3. An increase in quantity supplied above equilibrium
4. No change in the market, since price ceilings never affect quantity

A price ceiling set below equilibrium encourages more buyers to demand the good while discouraging producers from supplying as much, creating a shortage. (JAMB UTME Economics Syllabus (Price Determination and Control); standard microeconomics texts)

19. Gross Domestic Product (GDP) is best defined as

1. The total value of all final goods and services produced within a country's borders in a given period
2. The total income earned by a country's citizens both at home and abroad
3. The total value of a country's exports minus its imports
4. The total amount of money circulating in an economy

GDP measures the market value of all final goods and services produced within a country's geographical boundaries during a specific period, usually a year. (JAMB UTME Economics Syllabus (National Income Accounting))

20. Gross National Product (GNP) differs from Gross Domestic Product (GDP) mainly because GNP

1. Excludes government spending entirely
2. Adds net factor income from abroad to GDP
3. Is always smaller than GDP for every country
4. Measures only agricultural output

GNP equals GDP plus net factor income from abroad (income earned by citizens abroad minus income earned by foreigners within the country), capturing income earned by a nation's residents wherever it is produced. (JAMB UTME Economics Syllabus (National Income Accounting))

21. National income can be measured using three main approaches, namely the output method, the income method, and the

1. Exchange rate method
2. Expenditure method
3. Taxation method
4. Population method

The three standard approaches to measuring national income are the output (product) method, the income method, and the expenditure method, which should all give the same result. (JAMB UTME Economics Syllabus (National Income Accounting))

22. When measuring national income by the output method, double counting is avoided by

1. Adding up the total sales value of every firm in the economy
2. Summing only the value added at each stage of production
3. Counting only the value of imported goods
4. Multiplying total output by the price level twice

Using value added at each production stage ensures that the cost of intermediate goods already counted at earlier stages is not counted again, preventing double counting. (JAMB UTME Economics Syllabus (National Income Accounting))

23. If a country's total national income is ₦40 trillion and its population is 200 million, the per capita income is

1. ₦2,000
2. ₦20,000
3. ₦200,000
4. ₦2,000,000

Per capita income equals total national income divided by population: ₦40 trillion ÷ 200 million = ₦200,000. (JAMB UTME Economics Syllabus (National Income Accounting))

24. Which of the following is excluded when computing national income because it does not represent payment for a productive service?

1. Wages paid to factory workers
2. Rent paid to landowners
3. Old-age pensions and unemployment benefits (transfer payments)
4. Profit earned by a business owner

Transfer payments such as pensions and unemployment benefits are excluded from national income because they are not rewards for the current production of goods or services. (JAMB UTME Economics Syllabus (National Income Accounting))

25. In the 2014 rebasing of Nigeria's Gross Domestic Product, the National Bureau of Statistics changed the base year from 1990 to

1. 2000
2. 2005
3. 2010
4. 2013

The National Bureau of Statistics rebased Nigeria's GDP in 2014, updating the base year from 1990 to 2010, which raised measured GDP by about 89%. (National Bureau of Statistics (Nigeria), 2014 GDP rebasing release; Africa Check factsheet on Nigeria's GDP rebasing)

26. The main purpose of rebasing a country's GDP, as Nigeria did in 2014, is to

1. Increase the exchange rate of the national currency
2. Reflect current changes in the structure and composition of the economy more accurately
3. Reduce the country's population figures
4. Eliminate the need for national income statistics

Rebasing updates the base year used in GDP calculation so that output weights reflect the current structure of the economy; Nigeria's 2014 rebasing raised its estimated GDP to about ₦80.2 trillion. (National Bureau of Statistics (Nigeria), 2014 GDP rebasing release; Africa Check factsheet on Nigeria's GDP rebasing)

27. Net National Product (NNP) is obtained by

1. Adding depreciation (capital consumption) to Gross National Product
2. Subtracting depreciation (capital consumption) from Gross National Product
3. Subtracting net factor income from abroad from Gross Domestic Product
4. Multiplying Gross National Product by the population growth rate

Net National Product equals Gross National Product minus depreciation (capital consumption allowance), since some output is needed just to replace worn-out capital. (JAMB UTME Economics Syllabus (National Income Accounting); standard macroeconomics texts)

28. Which economist defined economics as 'the science which studies human behaviour as a relationship between ends and scarce means which have alternative uses'?

1. Adam Smith
2. Alfred Marshall
3. Lionel Robbins
4. John Maynard Keynes

This scarcity-based definition of economics was given by Lionel Robbins in his 1932 essay 'An Essay on the Nature and Significance of Economic Science'. (Lionel Robbins, An Essay on the Nature and Significance of Economic Science (1932); JAMB UTME Economics Syllabus.)

29. In economics, the opportunity cost of a chosen alternative is best described as

1. the total money cost of producing the good
2. the value of the next best alternative forgone
3. the market price of the good chosen
4. the profit earned from the choice made

Opportunity cost measures what is sacrificed, that is, the next best alternative, when a choice is made among scarce resources. (JAMB UTME Economics Syllabus (Basic Economic Concepts); Anyaele, Comprehensive Economics.)

30. According to the law of demand, if the price of a commodity rises while all other factors remain constant (ceteris paribus), the quantity demanded will

1. rise
2. fall
3. remain unchanged
4. rise and then fall

The law of demand states that quantity demanded varies inversely with price, holding other factors constant. (JAMB UTME Economics Syllabus (Theory of Demand).)

31. Price elasticity of demand (PED) is correctly calculated as

1. percentage change in price divided by percentage change in quantity demanded
2. percentage change in quantity demanded divided by percentage change in price
3. change in quantity demanded divided by change in consumer income
4. percentage change in quantity supplied divided by percentage change in price

PED = %ΔQd ÷ %ΔP, which measures how responsive quantity demanded is to a change in price. (JAMB UTME Economics Syllabus (Elasticity of Demand and Supply); Alfred Marshall, Principles of Economics.)

32. The price of a commodity rises from ₦20 to ₦25, causing the quantity demanded to fall from 100 units to 75 units. The coefficient of price elasticity of demand (ignoring sign) is

1. 0.5, showing inelastic demand
2. 1.0, showing unitary elastic demand
3. 1.5, showing elastic demand
4. 2.0, showing elastic demand

Both the percentage change in quantity demanded (25%) and the percentage change in price (25%) are equal, giving a coefficient of exactly 1, which is unitary elasticity. (JAMB UTME Economics Syllabus (Elasticity of Demand and Supply).)

33. The equilibrium price of a commodity in a market is the price at which

1. quantity supplied exceeds quantity demanded
2. quantity demanded exceeds quantity supplied
3. quantity demanded equals quantity supplied
4. the government fixes the price by decree

Market equilibrium occurs where the demand and supply curves intersect, so that quantity demanded equals quantity supplied. (JAMB UTME Economics Syllabus (Price Determination).)

34. A bumper harvest of tomatoes shifts the supply curve to the right while demand for tomatoes remains unchanged. This is most likely to cause

1. a rise in equilibrium price and a fall in equilibrium quantity
2. a fall in equilibrium price and a rise in equilibrium quantity
3. no change in either equilibrium price or quantity
4. a fall in both equilibrium price and equilibrium quantity

A rightward shift of supply with demand held constant lowers the equilibrium price while increasing the equilibrium quantity traded. (JAMB UTME Economics Syllabus (Price Determination).)

35. Which of these is a distinguishing feature of a perfectly competitive market?

1. A single seller controls the entire market supply
2. Firms sell differentiated, branded products
3. Firms are price takers selling a homogeneous product
4. There are significant barriers to entry and exit

Under perfect competition, many firms sell identical (homogeneous) products and each firm accepts the ruling market price rather than setting it. (JAMB UTME Economics Syllabus (Market Structures).)