All 50 questions from the West African Examinations Council (WAEC) Economics 2016 Objective paper, with the correct answer and a full explanation for each. Free, no signup needed.
1. Human wants are insatiable because wants are (a) limited while means are scarce (b) unlimited and means are also unlimited (c) limited and means are also unlimited (d) unlimited while means are scarce
A. limited while means are scarce
B. unlimited and means are also unlimited
C. limited and means are also unlimited
D. unlimited while means are scarceCorrect
Explanation
Human wants are unlimited but the resources (money) to satisfy the wants are scarce (limited).
2. Scale of preference is important for the following except in (a) satisfying wants (b) making rational choice (c) making optimum allocation of resources (d) using scarce resources efficiently
A. satisfying wantsCorrect
B. making rational choice
C. making optimum allocation of resources
D. using scarce resources efficiently
Explanation
A scale of preference does not satisfy wants but is helpful in making efficient decisions.
3. In a socialist economy, prices of commodities are determined by (a) forces of demand and supply (b) producers of the commodities (c) the central planning authority (d) consumers who are sovereign
A. forces of demand and supply
B. producers of the commodities
C. the central planning authorityCorrect
D. consumers who are sovereign
Explanation
A socialist economy is an economy in which the means of production is owned and controlled by the government. The central planning authority decides the prices of goods.
4. Which of the following cannot be classified as land in economics? (a) Bauxite deposit in the ground (b) a lake used for irrigation (c) A bulldozer for clearing farm land (d) Grazing field for cattle
A. Bauxite deposit in the ground
B. a lake used for irrigation
C. A bulldozer for clearing farm landCorrect
D. Grazing field for cattle
Explanation
Bulldozer is a machine, thus, can be classified as capital in factors of production.
5. A country's budget allocation to various sectors of the economy is shown in the pie chart below. Use it to answer questions 5 and 6. If the budget of the country was $7,200.00, how much was allocated to Education? (a) $2,400.00 (b) $2,000.00 (c) $1,200.00 (d) $1,000.00
8. What effect will an increase in price have on the total revenue of a firm whose product has inelastic demand? Total revenue will (a) increase (b) fall (c) fluctuate (d) remain unchanged
A. increaseCorrect
B. fall
C. fluctuate
D. remain unchanged
Explanation
An increase in the price of a firm whose product has an inelastic demand will increase its total revenue because only very little buyers will stop or reduce their purchase.
9. If the quantity of men's hat demanded per week is represented by the function Qd = 20 - (1/3)P, where P is price, how many hats are demanded when the price is $9.00? (a) 11 (b) 17 (c) 23 (d) 47
11. Price elasticity of supply measures how responsive (a) consumers are to a change in price (b) sellers are to a change in buyers' income (c) sellers are to a change in price (d) buyers are to a change in income
A. consumers are to a change in price
B. sellers are to a change in buyers' income
C. sellers are to a change in priceCorrect
D. buyers are to a change in income
Explanation
Price elasticity of supply is the degree of responsiveness of quantity supplied to changes in price.
12. The tendency for workers to value their leisure hours more than hours of work as wage rate increases gives rise to (a) positively sloping supply curve (b) perfectly elastic supply curve (c) backward bending supply curve (d) perfectly inelastic supply curve
A. positively sloping supply curve
B. perfectly elastic supply curve
C. backward bending supply curveCorrect
D. perfectly inelastic supply curve
Explanation
If the wage rate increases to a certain level, workers will prefer to play than to work. This will result in a backward sloping labour supply curve.
13. The supply of rice in tons is given by the function Qs - 80 - 0.7P = 0 Where Qs = quantity supplied P = price in Dollars ($) Find Qs, when P = $40 (a) 108 tons (b) 52 tons (c) -52 tons (d) -108 tons
14. How does producers' expectation of a price fall affect the supply curve of a product? There will be (a) a movement along the curve (b) a leftward shift (c) no shift of the supply curve (d) a shift to the right
A. a movement along the curve
B. a leftward shiftCorrect
C. no shift of the supply curve
D. a shift to the right
Explanation
Producer's expectation of price fall will cause the supply curve to shift from S0S0 to S1S1. This will result in a decrease in quantity supplied.
15. One relationship between marginal utility and total utility is that when total utility is (a) rising, marginal utility is negative (b) falling, marginal utility is negative (c) maximum, marginal utility is maximum (d) falling, marginal utility is rising
A. rising, marginal utility is negative
B. falling, marginal utility is negativeCorrect
C. maximum, marginal utility is maximum
D. falling, marginal utility is rising
Explanation
When total utility is falling, marginal utility is negative.
16. A shift in the supply curve to the right while demand curve remains the same will cause equilibrium price (a) and quantity to fall (b) and quantity to rise (c) to rise and quantity to fall (d) to fall and quantity to rise
A. and quantity to fall
B. and quantity to rise
C. to rise and quantity to fall
D. to fall and quantity to riseCorrect
Explanation
A rightward shift of supply with demand constant causes equilibrium price to fall while equilibrium quantity rises (p̄ falls while q̄ rises).
18. An entrepreneur is encouraged to adopt division of labour in production because it (a) provides more employment opportunities (b) leads to increased output and lower cost of production (c) brings about equal cost and employment opportunities (d) leads to increased cost of production and lower output
A. provides more employment opportunities
B. leads to increased output and lower cost of productionCorrect
C. brings about equal cost and employment opportunities
D. leads to increased cost of production and lower output
Explanation
The essence of division of labour is to improve the level of output at a reduced cost.
19. The long run is a period when (a) only the variable factors can be altered (b) all factors become variable (c) the firm will cease to exist (d) only fixed factors can be altered
A. only the variable factors can be altered
B. all factors become variableCorrect
C. the firm will cease to exist
D. only fixed factors can be altered
Explanation
Short-term is a period of time in which at least one factor is fixed while long run is a period of time in which all factors are variable.
20. The necessary condition for a firm to be in equilibrium is that marginal revenue is (a) greater than marginal cost (b) equal to marginal cost (c) less than average revenue (d) equal to average cost
A. greater than marginal cost
B. equal to marginal costCorrect
C. less than average revenue
D. equal to average cost
Explanation
The equilibrium condition of a firm is achieved where MR = MC.
22. Charging different prices for the same commodity is a feature of (a) a perfect competition (b) commodity market (c) monopolistic competition (d) monopoly market
A. a perfect competition
B. commodity market
C. monopolistic competition
D. monopoly marketCorrect
Explanation
A discriminating monopoly is the monopoly which charges different prices in different markets.
23. In a partnership, the conduct of members is guided by (a) a memorandum of understanding (b) the articles of partnership (c) an article of association (d) a partnership constitution
A. a memorandum of understanding
B. the articles of partnershipCorrect
C. an article of association
D. a partnership constitution
Explanation
The articles of partnership guide the operation of partners in partnership business.
24. Indigenization policy is a measure aimed at (a) privatizing the existing businesses owned by the state (b) commercializing state-owned by the state (c) reducing foreign economic domination (d) making the indigenes managing directors of businesses
A. privatizing the existing businesses owned by the state
B. commercializing state-owned by the state
C. reducing foreign economic dominationCorrect
D. making the indigenes managing directors of businesses
Explanation
Indigenization of policy is a deliberate effort by the government to encourage citizens' participation in the economy so as to reduce foreign dominance.
25. Which of the following measures will hinder efficient distribution of goods in West Africa? (a) Improving road networks (b) Provision of adequate storage facilities (c) Instituting price control (d) Formation of producers' co-operative societies
A. Improving road networks
B. Provision of adequate storage facilities
C. Instituting price controlCorrect
D. Formation of producers' co-operative societies
Explanation
Price control will hinder distribution because if the minimum price is not reached then the goods cannot be sold; also if maximum price is not reached, the goods cannot be sold.
26. The type of unemployment that occurs as a result of physical or mental disability of labour is known as (a) frictional unemployment (b) structural unemployment (c) cyclical unemployment (d) residual unemployment
A. frictional unemployment
B. structural unemployment
C. cyclical unemployment
D. residual unemploymentCorrect
Explanation
Residual unemployment is caused by the fact that some people are willing to work but are unable to do so due to mental or physical illness.
27. One feature of a growing population is (a) increase in the number of young people (b) decrease in the number of old people (c) decrease in the dependent population (d) decrease in the life expectancy
A. increase in the number of young peopleCorrect
B. decrease in the number of old people
C. decrease in the dependent population
D. decrease in the life expectancy
Explanation
An increasing population will result in a high number of young people in the economy.
28. Efficiency of labour in a country is determined by the following factors except the (a) social attitude to work (b) education and training (c) working conditions of workers (d) total population
A. social attitude to work
B. education and training
C. working conditions of workers
D. total populationCorrect
Explanation
Total population does not determine efficiency rather will determine labour force.
29. Which of the following will encourage cash intensive farming? (a) Encouraging communal system of land ownership (b) Adopting policies that will encourage rural-urban migration (c) Provision of subsidies on equipment (d) Restrictive lending policies by banks
A. Encouraging communal system of land ownership
B. Adopting policies that will encourage rural-urban migration
C. Provision of subsidies on equipmentCorrect
D. Restrictive lending policies by banks
Explanation
If equipment are subsidized, then the farmers can access the machines and this may lead to capital intensive farming.
30. Which of the following best explains why more foreign investments are not attracted to West Africa? (a) Small population size (b) Small sizes of market places (c) Instability in political and industrial policies (d) Lack of manpower needed to work in industries
A. Small population size
B. Small sizes of market places
C. Instability in political and industrial policiesCorrect
D. Lack of manpower needed to work in industries
Explanation
The instability in politics affects business operation. Thus, the foreigners will not be encouraged to come in.
31. Location of firms in rural areas may (a) enable the firms to enjoy existing infrastructural facilities (b) make finance readily available (c) enhance even or balanced development (d) make such firms enjoy external economies of scale
A. enable the firms to enjoy existing infrastructural facilities
B. make finance readily available
C. enhance even or balanced developmentCorrect
D. make such firms enjoy external economies of scale
Explanation
If firms are located in rural areas there will be balanced development in the country as people will move to rural areas again.
32. In national income accounting, double counting occurs when (a) intermediate goods are counted twice (b) intermediate goods are counted with the final goods (c) final goods are counted more than once (d) different people count the products
A. intermediate goods are counted twice
B. intermediate goods are counted with the final goodsCorrect
C. final goods are counted more than once
D. different people count the products
Explanation
Intermediate goods are like raw materials, so if counted along with final goods, double counting has occurred.
33. The difference between GDP and GNP is (a) consumption of fixed capital (b) indirect business tax (c) net factor income from abroad (d) public transfer payments
A. consumption of fixed capital
B. indirect business tax
C. net factor income from abroadCorrect
D. public transfer payments
Explanation
GNP = GDP + FIFAn, where FIFAn = Net factor income from abroad.
34. Which of the following items is not included in the measurement of the national income using the income approach? (a) Wages and salaries (b) Government purchases (c) Interest (d) Dividend
A. Wages and salaries
B. Government purchasesCorrect
C. Interest
D. Dividend
Explanation
Government purchases is included in the expenditure approach, not the income approach; also, dividend is a transfer payment whose inclusion would cause double counting, but among the listed options Government purchases is the correct exclusion from the income approach.
35. A bank note is said to have a legal tender because it is (a) printed by government (b) a store of value (c) signed by the head of state (d) backed by law
A. printed by government
B. a store of value
C. signed by the head of state
D. backed by lawCorrect
Explanation
A bank note is said to have a legal tender because it is backed by law.
37. Cost-push inflation is likely to arise when (a) there is an increase in bank lending (b) there is an increase in subsidies (c) demand for higher wages is granted (d) there is a decrease in bank lending
A. there is an increase in bank lending
B. there is an increase in subsidies
C. demand for higher wages is grantedCorrect
D. there is a decrease in bank lending
Explanation
When demand for higher wages is granted, the cost of production will increase and this will lead to cost-push inflation.
38. Which of the following financial institutions cannot be found on the capital market of a country? (a) Commercial bank (b) Mortgage bank (c) Stock exchange (d) Agricultural bank
A. Commercial bankCorrect
B. Mortgage bank
C. Stock exchange
D. Agricultural bank
Explanation
Commercial banks are a part of the money market, not the capital market.
40. Indirect taxes are generally (a) progressive (b) regressive (c) equitable (d) proportionate
A. progressive
B. regressiveCorrect
C. equitable
D. proportionate
Explanation
Indirect tax is regressive because the rate paid as tax, by consumers, decreases as income increases; the poor pay a higher proportion of income in tax than the rich.
41. Fiscal policy that can control inflation will include the use of (a) balanced budgeting (b) tax holidays (c) budget deficit (d) budget surplus
A. balanced budgeting
B. tax holidays
C. budget deficit
D. budget surplusCorrect
Explanation
Budget surplus is a situation in which expenditure is less than revenue. This means the government withdraws more money from the economy than it injects, reducing inflation.
42. Which of the following is a cause of under-development in West Africa? (a) Availability of manpower (b) Increasing population (c) High rate of capital formation (d) large size of market places
A. Availability of manpower
B. Increasing populationCorrect
C. High rate of capital formation
D. large size of market places
Explanation
The increasing population makes development plans quickly go out of data, affecting development in West African countries.
43. Which of the following is not a major problem of development planning? (a) Shortage of skilled manpower (b) Inadequate data for planning (c) Political instability (d) Poor identification of projects
A. Shortage of skilled manpower
B. Inadequate data for planning
C. Political instability
D. Poor identification of projectsCorrect
Explanation
Projects are poorly identified and are not properly executed is a listed problem, but 'Poor identification of projects' as phrased overlaps with option (b); per the answer key the correct response is (d).
45. The rate at which a country's exports is exchanged for her imports is (a) trade balance (b) balance of payments (c) terms of trade (d) balance on current account
A. trade balance
B. balance of payments
C. terms of tradeCorrect
D. balance on current account
Explanation
Terms of trade = Index price of exports / Index price of imports.
46. Balance of payments surplus implies that receipts for exports are (a) at par with payments for imports (b) greater than payments for imports (c) less than payments for imports (d) proportional to payments for imports
A. at par with payments for imports
B. greater than payments for importsCorrect
C. less than payments for imports
D. proportional to payments for imports
Explanation
Balance of payments is the equality of receipts on exports and payments for imports. If receipts are greater than payment, then it is favourable or surplus.
47. When the international value of a country's currency rises, other things being equal, the country's (a) net exports tend to increase (b) imports tend to increase (c) net exports tend to decrease (d) exports tend to be stable
A. net exports tend to increase
B. imports tend to increase
C. net exports tend to decreaseCorrect
D. exports tend to be stable
Explanation
When the value of a country's currency rises (appreciates), exports become more expensive while imports become cheaper. This results in a decrease in net exports.
48. One of the physical measures that can be used to reduce the volume of imports is the (a) reduction of personal income tax (b) removal of import duties (c) use of foreign exchange control (d) liberalization of credit for importers
A. reduction of personal income tax
B. removal of import duties
C. use of foreign exchange controlCorrect
D. liberalization of credit for importers
Explanation
If the government wishes to regulate import, foreign exchange can be regulated. For instance, they determine which product gets forex and which gets not.
49. When a number of countries agree to remove all trade barriers among themselves and at the same time charge a common tariff against non-member countries, it is known as (a) free trade area (b) common market (c) customs union (d) economic community
A. free trade area
B. common market
C. customs unionCorrect
D. economic community
Explanation
A customs union is a union of countries who decide to remove all barriers among members and charge non-members tariffs.
50. Which of the following international organizations is concerned with the stabilization of the balance of payments? The (a) International Monetary Fund (IMF) (b) World bank (IBRD) (c) United Nations Organisation (UNO) (d) Economic Commission for Africa (ECA)
A. International Monetary Fund (IMF)Correct
B. World bank (IBRD)
C. United Nations Organisation (UNO)
D. Economic Commission for Africa (ECA)
Explanation
One of the functions of IMF is to help finance balance of payments problems.
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