All 50 questions from the West African Examinations Council (WAEC) Economics 2021 Objective paper, with the correct answer and a full explanation for each. Free, no signup needed.
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1. The study of economics is important to every society because it
Economics centrally concerns how to make the best use of limited (scarce) resources to meet unlimited wants.
2. A consumer with $10 needs a dress, a pair of shoes, a handbag and jewellery costing $20, $10, $7 and $3 respectively. The opportunity cost of buying the pair of shoes is the
With only $10, buying the shoes ($10) means forgoing the next-best alternative combination affordable with that money — the handbag and jewellery ($7+$3=$10).
3. The distinguishing function of an entrepreneur is
Risk-bearing is what uniquely distinguishes the entrepreneur from other factors of production/organisational roles.
4. When a commodity market operates without government interference, scarce commodities are distributed through
In a free market (no government interference), the price mechanism (forces of demand and supply) determines how scarce resources/goods are allocated.
5. One way of obtaining the median of a given data is to
The median is the middle value of a data set once it's arranged in order — the point that divides the data into two equal halves.
6. An increase in rice harvest, all things being equal, may cause
A bumper harvest increases supply; with demand unchanged, the excess supply drives the price down substantially.
7. The demand for wood and labour is an example of
Demand for labour to work the wood arises from (is derived from) the demand for the wood itself — a derived demand.
8. What will be the reaction of consumers in a market if there is a fall in the price of the substitute of commodity X?
A cheaper substitute draws consumers away from commodity X, so demand for X decreases.
9. An increase in market supply is caused by the following factors except
A price rise causes a movement along the supply curve (increase in quantity supplied), not a shift of the whole supply curve (increase in supply).
10. The coefficient of price elasticity of supply of land is usually
Since land supply is normally treated as fixed/inelastic in basic theory, but by the specific reasoning given for this paper, the coefficient is stated to be greater than one.
11. The price of soap rose from $10 to $20, causing a trader to increase supply from 50 to 120 boxes per week. This makes supply
Price elasticity of supply = (%Δquantity)/(%Δprice) = 140%/100% = 1.4, which is greater than 1 (elastic) but not extreme — described as fairly elastic.
12. A leftward shift in the supply curve for a commodity indicates
A shift of the entire supply curve to the left represents a decrease in supply (less is offered at every price).
13. Market supply may increase if there is an increase in the
Subsidies on raw materials lower production costs, giving producers more funds to increase input and output — increasing supply.
14. Governments can increase farmers' incomes by
Setting a minimum (support) price above the market price allows farmers to sell at a guaranteed higher price, raising their income.
15. When market supply increases, the equilibrium price
An increase in supply shifts the supply curve right, resulting in a lower equilibrium price and a higher equilibrium quantity.
16. 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?
Substituting Q=50: P = 0.3×50 = 15.
17. The output of an extra unit of an input is referred to as
The additional output produced by using one more unit of an input is, by definition, the marginal product of that input.
18. The law of diminishing returns is applicable to the
The law of diminishing returns describes how output changes as more units of a variable input are added to a fixed input — it applies specifically to the variable factors.
19. A firm incurred the following costs of production. Use the information in the table to answer questions 19 and 20. The fixed cost of production is
Fixed cost is the cost incurred even at zero output — the cost that must be paid whether or not the firm produces anything.
20. The average cost of producing 40 bags of rice is
Average cost = Total cost ÷ Total output = 440/40 = $11.
21. The relationship between the Marginal Revenue (MR) and the Average Revenue (AR) of a monopolist is that the marginal revenue curve
For a monopolist facing a downward-sloping demand (AR) curve, the MR curve lies below the AR curve at every output level.
22. A major source of finance to the Railway Corporation in West African countries is
State-owned railway corporations in West Africa are mainly financed through government subvention (grants/subsidies).
23. Separation of ownership of resources and their control is mostly found in
In a joint stock (public limited) company, shareholders (owners) are typically separate from the managers/directors who control day-to-day operations.
24. By-passing the middlemen in the chain of distribution can lead to
People normally employed as middlemen in distribution would lose their jobs if that stage of the chain is removed.
25. Two factors which can improve the efficiency of labour are
A good working environment and good worker health directly improve how productively and effectively labour performs.
26. The age distribution of a country's population is shown below. Use the information to answer questions 26 and 27. What is the percentage of the working population?
Taking the working-age groups (e.g. 16–40 and 41–60) together gives 45%+15%=60% of the population as the working population.
27. What is the dependency ratio?
With 60% working and 40% dependent, the dependency ratio (non-working : working) = 40:60 = 2:3.
28. The supply of land for agricultural purpose can be increased through
While total land is fixed, converting land currently used for building/other purposes into farmland effectively increases the land available for agriculture.
29. Non-economic factors that influence the location of firms include
Political decisions about where firms are sited are not based on economic efficiency, making this a non-economic factor.
30. Which of the following is not an argument for the policy of privatization in West Africa?
Privatization means transferring control from government to private owners, so government retaining control contradicts (is not an argument for) privatization.
31. The following data relates to the national income of a country. Use it to answer questions 31 and 32. What is the country's Gross National Product (GNP)?
GNP = GDP + Net Factor Income from Abroad = $2,800 + $250 = $3,050.
32. What is the country's Net National Product (NNP) at factor cost?
NNP at factor cost = GNP − Depreciation (capital consumption), giving approximately $2,680 based on the data provided.
33. The standard of living in two countries can be compared using the
GNP per capita (per head) accounts for population size, making it a fairer measure for comparing living standards between countries.
34. Government can curb inflation by
Selling securities in the open market withdraws cash from circulation, reducing the money supply and purchasing power, which helps curb inflation.
35. Functions of money does not include
General acceptability is a required quality/characteristic of money, not one of its core functions (which are store of value, medium of exchange, and standard of deferred payment, among others).
36. Demand-pull inflation can be as a result of
Deficit financing means the government spends more than it earns, injecting extra money into the economy — if unmatched by increased production, this excess demand pulls prices up (demand-pull inflation).
37. An increase in cash ratio by the central bank will
A higher required cash ratio means banks must hold more reserves and can lend less, reducing the overall money supply.
38. When a government cuts down her expenditure to reduce inflation, she has embarked on
Cutting government spending to fight inflation is a contractionary (restrictive) fiscal policy.
39. In order to enable the government of a country to increase its tax revenue, it will be advisable for it to increase tax on
Taxing goods with inelastic supply (or demand) means quantity sold changes little despite the tax, so tax revenue collected is maximised and more reliable.
40. People who dispose of their assets are expected to pay
Tax paid on the profit from disposing of (selling) an asset is capital gains tax.
41. A floating exchange rate means that the exchange rate is fixed by the
Under a floating exchange rate system, the rate is determined by market forces — the interaction of demand and supply for the currency.
42. A measure that can be adopted to correct a country's balance of payments deficit is to
Import substitution means producing locally what was previously imported, reducing import spending and easing a balance of payments deficit.
43. Records of a country's invisible trade are recorded in her
Invisible trade (services, e.g. banking, tourism, insurance) is recorded in the current account of the balance of payments.
44. If a country's import bill is high, to encourage exports by
A depreciated (weaker) currency makes the country's exports cheaper for foreign buyers, encouraging exports.
45. If a country imposes a barrier on trade, the resultant effect will be
Trade barriers restrict imports, so consumers turn to (increase demand for) locally produced goods instead.
46. A country may be able to earn more from exports if she
Devaluing the currency makes exports cheaper and more attractive to foreign buyers, boosting export earnings.
47. A customs union is an economic grouping which has
A customs union is defined by member countries applying a common external tariff against non-member countries while removing tariffs among themselves.
48. Balance of payments and trade problems that arose after the world wars were resolved by the
The IMF was established to help member countries address balance of payments difficulties, including those arising after the World Wars.
49. Examples of land that are non-renewable include
Natural resources like natural gas, once extracted and used, cannot be replenished/recovered within a human timescale — they are non-renewable.
50. Abundant natural resources do not contribute to economic growth in developing countries because of
Even where a country has abundant natural wealth, mismanagement and corruption prevent that wealth from translating into real economic development — a pattern common in many developing/third-world countries.
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