A Trivia Quiz On Principles Of Economics

1. Trade between nations is known as......

Inter-state trade

Domestic trade

International trade

Internal trade

Trade between different countries developed first where one country could produce something desirable which others could not. International Trade, therefore, owes its origin to the varying resources of different regions, so Trade between nations is known as international Trade. Page 74 , Section 1.0

Explanation

Trade between different countries developed first where one country could produce something desirable which others could not. International Trade, therefore, owes its origin to the varying resources of different regions, so Trade between nations is known as international Trade. Page 74 , Section 1.0

2. Economics can be best defined as the study of....

Why resources are scarce

How to find minimum cost of production

How to spend the family income efficiently

How scarce resources can be used efficiently

Economics itself is the study of man making decision in a world where scarcity of resources relative
to human wants makes choice a necessity. Economistshave broadly divided the economy into two related
sectors. i.e.
(a) Private Sector and
(b) Public Sector
Page 95

Explanation

Economics itself is the study of man making decision in a world where scarcity of resources relative
to human wants makes choice a necessity. Economistshave broadly divided the economy into two related
sectors. i.e.
(a) Private Sector and
(b) Public Sector
Page 95

3. Which of these factors influences the location of an industry?

Power supplies

Labour supply

Raw materials

All of the above

Factors influencing the Location of Industry

The main factors that influence the location of industry are:

1. Raw materials: Industries that use large quantities of bulky materials tend to be located near to the source of these materials (see notes on the iron and steel industry, above). The influence of location in raw materials has declined in recent times due to the improvements in transport and efficiencies in their use.

2. Energy: Coalfields were the original energy source that attracted industry. In many cases this has been replaced by hydro-electric power (H.E.P.) and oil, sources that can be distributed more easily. However, some energy-intensive industries such as smelting need to be near cheap and abundant power supplies, e.g., some of the industries using H.E.P. in Norway.

3. Labour force: Early industrial development led to a drift from the land to the cities and this helped build up a large and eventually skilled labour force in the cities of, for example, England. In many cases nowadays, mechanisation has reduced the requirements of a larger skilled workforce. Labour costs are also of great importance and many companies have begun to move production to the cheaper labour markets or Eastern Europe.

4. Transport: All industries require a good transport system to permit the importing of raw materials and the exporting of finished products. Modern developments in transport have made it more efficient and more cost effective. Industrial location has thus dispersed from its traditional locations. This has been important in peripheral areas, e.g., Southern Italy (see notes on Problem Regions in the Regional Geography section.)

5. Access to markets: The EU contains a large market that has high purchasing power. The well-established urban structure enables manufacturers to reach their markets easily. The Ranstad, Paris, London (see Core and Periphery in the Regional Geography section hyperlink are important examples of these large concentrated, wealthy markets.

6. Political influence: The laissez-faire (non-interference) attitude of governments in the past has been replaced by an approach whereby government grants, retraining schemes, etc., are a major influence on the location of industry.

Explanation

Factors influencing the Location of Industry

The main factors that influence the location of industry are:

1. Raw materials: Industries that use large quantities of bulky materials tend to be located near to the source of these materials (see notes on the iron and steel industry, above). The influence of location in raw materials has declined in recent times due to the improvements in transport and efficiencies in their use.

2. Energy: Coalfields were the original energy source that attracted industry. In many cases this has been replaced by hydro-electric power (H.E.P.) and oil, sources that can be distributed more easily. However, some energy-intensive industries such as smelting need to be near cheap and abundant power supplies, e.g., some of the industries using H.E.P. in Norway.

3. Labour force: Early industrial development led to a drift from the land to the cities and this helped build up a large and eventually skilled labour force in the cities of, for example, England. In many cases nowadays, mechanisation has reduced the requirements of a larger skilled workforce. Labour costs are also of great importance and many companies have begun to move production to the cheaper labour markets or Eastern Europe.

4. Transport: All industries require a good transport system to permit the importing of raw materials and the exporting of finished products. Modern developments in transport have made it more efficient and more cost effective. Industrial location has thus dispersed from its traditional locations. This has been important in peripheral areas, e.g., Southern Italy (see notes on Problem Regions in the Regional Geography section.)

5. Access to markets: The EU contains a large market that has high purchasing power. The well-established urban structure enables manufacturers to reach their markets easily. The Ranstad, Paris, London (see Core and Periphery in the Regional Geography section hyperlink are important examples of these large concentrated, wealthy markets.

6. Political influence: The laissez-faire (non-interference) attitude of governments in the past has been replaced by an approach whereby government grants, retraining schemes, etc., are a major influence on the location of industry.

4. Which of the following will ensure efficiency in the industrial sector of your county, Nigeria

Privatization

Liquidation

Indigenization

Nationalization

Privatization refers to the transfer of ownership and control of state-owned enterprises to private individuals or companies. This can lead to increased efficiency in the industrial sector of Nigeria by introducing competition, encouraging innovation, and improving productivity. Privatization allows for better management and decision-making, as private entities are motivated by profit and are typically more efficient in resource allocation. Additionally, privatization can attract foreign investment, technology transfer, and expertise, which can further enhance efficiency in the industrial sector.

Explanation

Privatization refers to the transfer of ownership and control of state-owned enterprises to private individuals or companies. This can lead to increased efficiency in the industrial sector of Nigeria by introducing competition, encouraging innovation, and improving productivity. Privatization allows for better management and decision-making, as private entities are motivated by profit and are typically more efficient in resource allocation. Additionally, privatization can attract foreign investment, technology transfer, and expertise, which can further enhance efficiency in the industrial sector.

5. The quantity theory of money states that......

MT=Pr

M=VT/P

MV=PT

The equation MV=PT represents the quantity theory of money, which states that the total money supply (M) multiplied by the velocity of money (V) is equal to the price level (P) multiplied by the level of transactions (T). This equation suggests that an increase in the money supply or the velocity of money will result in an increase in either prices or the level of transactions. Similarly, a decrease in the money supply or velocity will lead to a decrease in either prices or the level of transactions.

Explanation

The equation MV=PT represents the quantity theory of money, which states that the total money supply (M) multiplied by the velocity of money (V) is equal to the price level (P) multiplied by the level of transactions (T). This equation suggests that an increase in the money supply or the velocity of money will result in an increase in either prices or the level of transactions. Similarly, a decrease in the money supply or velocity will lead to a decrease in either prices or the level of transactions.

6. Type question here

Answer option 1

Answer option 2

Answer option 3

Answer option 4

not-available-via-ai

Explanation

not-available-via-ai

7. Examples of both injection and withdrawal/leakage into the national economy are.....

Taxes and savings

Import and saving

Government spending and taxes

Import and investment

Government spending and taxes are examples of both injection and withdrawal/leakage into the national economy. When the government spends money on goods and services, it injects money into the economy, stimulating economic activity. On the other hand, when taxes are collected, it acts as a withdrawal or leakage from the economy as it takes money out of circulation. Therefore, government spending and taxes have a dual role in influencing the overall economic activity and equilibrium in the national economy.

Explanation

Government spending and taxes are examples of both injection and withdrawal/leakage into the national economy. When the government spends money on goods and services, it injects money into the economy, stimulating economic activity. On the other hand, when taxes are collected, it acts as a withdrawal or leakage from the economy as it takes money out of circulation. Therefore, government spending and taxes have a dual role in influencing the overall economic activity and equilibrium in the national economy.

8. Type question here

Answer option 1

Answer option 2

Answer option 3

Answer option 4

not-available-via-ai

Explanation

not-available-via-ai

9. Which of the following is a reason why government levy tax

All of the above

To redistribute income

To check inflation

To encourage even development

The reason why the government levies taxes is because it serves multiple purposes. Firstly, taxes are used to redistribute income, ensuring that wealth is distributed more evenly among the population. Secondly, taxes are used to check inflation by reducing the amount of money in circulation and controlling the overall demand in the economy. Lastly, taxes are also used to encourage even development by funding infrastructure projects and providing public services in less developed areas. Therefore, all of the given reasons are valid explanations for why the government levies taxes.

Explanation

The reason why the government levies taxes is because it serves multiple purposes. Firstly, taxes are used to redistribute income, ensuring that wealth is distributed more evenly among the population. Secondly, taxes are used to check inflation by reducing the amount of money in circulation and controlling the overall demand in the economy. Lastly, taxes are also used to encourage even development by funding infrastructure projects and providing public services in less developed areas. Therefore, all of the given reasons are valid explanations for why the government levies taxes.

10. The =N= 1,500 which Albert would have used to purchase a BHM 101 course material was used to buy a pair of shoe.This implies that

Albert's opportunity cost is the BHM 101 course material

Albert's opportunity cost is the pair of shoes he bought

Albert's real cost is =N= 1,500

Albert's money cost is also the real cost

The given information states that Albert had the option to use =N= 1,500 to purchase a BHM 101 course material but instead chose to buy a pair of shoes. The concept of opportunity cost refers to the value of the next best alternative that is forgone when making a decision. In this case, the opportunity cost for Albert is the BHM 101 course material, as he chose to buy the shoes instead. Therefore, the correct answer is that Albert's opportunity cost is the BHM 101 course material.

Explanation

The given information states that Albert had the option to use =N= 1,500 to purchase a BHM 101 course material but instead chose to buy a pair of shoes. The concept of opportunity cost refers to the value of the next best alternative that is forgone when making a decision. In this case, the opportunity cost for Albert is the BHM 101 course material, as he chose to buy the shoes instead. Therefore, the correct answer is that Albert's opportunity cost is the BHM 101 course material.

11. Empirical definitions of money is associated with.....

Irvin Fisher

Adam Smith

Alfred Marshall

Milton Friedman

Empirical definitions of money are associated with Milton Friedman. Friedman was an American economist who believed that the quantity of money in an economy had a direct impact on its overall performance. He emphasized the importance of empirical analysis and data in understanding the relationship between money supply and economic variables. Friedman's work on monetary theory and policy greatly influenced the field of economics and his empirical approach to defining money continues to be widely studied and discussed.

Explanation

Empirical definitions of money are associated with Milton Friedman. Friedman was an American economist who believed that the quantity of money in an economy had a direct impact on its overall performance. He emphasized the importance of empirical analysis and data in understanding the relationship between money supply and economic variables. Friedman's work on monetary theory and policy greatly influenced the field of economics and his empirical approach to defining money continues to be widely studied and discussed.

12. All the followings are specific examples of indirect tax except

Poll tax

Purchase tax

Excise duty

Export duty

Direct Taxes

1 . Income Tax: This is the type of tax paid according to one’s income. Companies like human beings are legal beings. Corporations, therefore, pay taxes on their income. Personal taxes are paid on total wages, salaries, profits, interest and rent which a person receives with due allowances for family size, home ownership, insurance contribution and other factors. Company or Corporate Income Tax is paid only on corporate profit.

2 . Poll tax is imposed at a flat rate per head of population: It is a regressive tax because no matter the size of a person’s income, everyone has to pay the same amount. Nigeria has a poll tax for people with low incomes.

3 . Capital Tax: These are taxes imposed on property and other capital assets. For instance, when a person dies his assets are subject to capital tax, in this case the term death duty or estate duty is used.

4 . Capital Gains Tax: This is paid on property, when you buy a property and over time it rises in value, the amount by which it rises over what you paid is capital gain. The tax paid on this gain is called capital gains tax.

5. Petroleum Profit Tax: In Nigeria, a tax is charged, assessed and payable upon the profits of each accounting period of any company engaged in petroleum operations during any such accounting period, usually one year.

Indirect Taxes

These are taxes levied upon persons or groups whom they are not intended to bear the burden or incidence,

but who will shift them to other people. They are normally levied on commodities or services hence their services does not fall directly on the final payers. Ability to pay here is assessed indirectly.

Examples of Indirect are:

Custom Duties – Import and Export duties

a) Import duties are levied on goods coming into the country from abroad.

b) Export Duties: These are taxes levied on goods which are exported or sold to other countries by the home country.

c) .Excise Duties: These are levied on certain goods produced or manufactured locally.

Value – added – Tax (VAT) – This belongs to the family of sales taxes. The valued – added tax is not a tax on the total value of the goods being sold but only on the value added (the difference between the value of factor services and materials that the firm purchases as inputs and the value of its output) the value that a firm adds by the virtue of its own activities to it by the last seller. Thus, the seller is liable to pay a tax on its gross value but net value, that is the gross value minus the value of the services and materials purchased from other firms, etc.

Sales Tax – These are taxes on selected sales transactions but applied at only one stage of business activity.

Stamp Duties: These are taxes on documentary evidence of particular transactions such as transfer or property loans, bonds, mortgages, debentures, bills of exchange, promissory notes, cheques bills of lading, letters of credit, policies of insurance, transfer of shares, proxies and receipts. It is evidence and not the transactions itself that are taxed.

Inheritance Tax – This is tax payable by the recipient or beneficiary of a deceased property.

Explanation

Direct Taxes

1 . Income Tax: This is the type of tax paid according to one’s income. Companies like human beings are legal beings. Corporations, therefore, pay taxes on their income. Personal taxes are paid on total wages, salaries, profits, interest and rent which a person receives with due allowances for family size, home ownership, insurance contribution and other factors. Company or Corporate Income Tax is paid only on corporate profit.

2 . Poll tax is imposed at a flat rate per head of population: It is a regressive tax because no matter the size of a person’s income, everyone has to pay the same amount. Nigeria has a poll tax for people with low incomes.

3 . Capital Tax: These are taxes imposed on property and other capital assets. For instance, when a person dies his assets are subject to capital tax, in this case the term death duty or estate duty is used.

4 . Capital Gains Tax: This is paid on property, when you buy a property and over time it rises in value, the amount by which it rises over what you paid is capital gain. The tax paid on this gain is called capital gains tax.

5. Petroleum Profit Tax: In Nigeria, a tax is charged, assessed and payable upon the profits of each accounting period of any company engaged in petroleum operations during any such accounting period, usually one year.

Indirect Taxes

These are taxes levied upon persons or groups whom they are not intended to bear the burden or incidence,

but who will shift them to other people. They are normally levied on commodities or services hence their services does not fall directly on the final payers. Ability to pay here is assessed indirectly.

Examples of Indirect are:

Custom Duties – Import and Export duties

a) Import duties are levied on goods coming into the country from abroad.

b) Export Duties: These are taxes levied on goods which are exported or sold to other countries by the home country.

c) .Excise Duties: These are levied on certain goods produced or manufactured locally.

Value – added – Tax (VAT) – This belongs to the family of sales taxes. The valued – added tax is not a tax on the total value of the goods being sold but only on the value added (the difference between the value of factor services and materials that the firm purchases as inputs and the value of its output) the value that a firm adds by the virtue of its own activities to it by the last seller. Thus, the seller is liable to pay a tax on its gross value but net value, that is the gross value minus the value of the services and materials purchased from other firms, etc.

Sales Tax – These are taxes on selected sales transactions but applied at only one stage of business activity.

Stamp Duties: These are taxes on documentary evidence of particular transactions such as transfer or property loans, bonds, mortgages, debentures, bills of exchange, promissory notes, cheques bills of lading, letters of credit, policies of insurance, transfer of shares, proxies and receipts. It is evidence and not the transactions itself that are taxed.

Inheritance Tax – This is tax payable by the recipient or beneficiary of a deceased property.

13. Of the three goods, X is a substitute for, and Y complementary to, the third goods Z. A rise in the price of Z following an increase in the cost of production will cause the demand for:

X and Z to fall

Y and Z to fall and leave the demand for X unaffected

X to rise and Y to fall

All three goods to fall

When the price of the third good Z rises due to an increase in production costs, it becomes more expensive for consumers to purchase Z. As a result, consumers will look for substitutes for Z, which is good X. This will cause the demand for X to rise. On the other hand, since Z and Y are complementary goods, a rise in the price of Z will also make Y relatively more expensive. This will lead to a decrease in the demand for Y. Therefore, the correct answer is X to rise and Y to fall.

Explanation

When the price of the third good Z rises due to an increase in production costs, it becomes more expensive for consumers to purchase Z. As a result, consumers will look for substitutes for Z, which is good X. This will cause the demand for X to rise. On the other hand, since Z and Y are complementary goods, a rise in the price of Z will also make Y relatively more expensive. This will lead to a decrease in the demand for Y. Therefore, the correct answer is X to rise and Y to fall.

14. ''Localization of industries''means

The industrialization of a Country

The location of industry in any state in Nigeria

The concentration of industries in one locality

All of the above

Localization of industries can be defined as the process of concentrating industry producing similar goods in a certain or in a particular areas

Localization of an industry may mean indigenization in terms of product and market differentiation

examples of localized industries include the automobile industry

The most important cause of the localization of industry is the ... Availability of means of transport and communication

Explanation

Localization of industries can be defined as the process of concentrating industry producing similar goods in a certain or in a particular areas

Localization of an industry may mean indigenization in terms of product and market differentiation

examples of localized industries include the automobile industry

The most important cause of the localization of industry is the ... Availability of means of transport and communication

15. Market failure as a reason for public finance can be attributed to the following:

Existence of externalities and public goods

(a) and (c)

Taxation of source of government revenue

Market failure as a reason for public finance can be attributed to the following:

Market failure as a reason for public finance can be attributed to taxation of the source of government revenue. This is because when markets fail to allocate resources efficiently, governments may need to intervene and collect taxes in order to generate revenue to provide public goods and services. Taxation is a means to redistribute wealth and fund government activities that aim to correct market failures and ensure economic stability and welfare.

Explanation

Market failure as a reason for public finance can be attributed to taxation of the source of government revenue. This is because when markets fail to allocate resources efficiently, governments may need to intervene and collect taxes in order to generate revenue to provide public goods and services. Taxation is a means to redistribute wealth and fund government activities that aim to correct market failures and ensure economic stability and welfare.

16. The break-even output for a firm is that at which:

Average cost = marginal revenue

Average cost = average revenue

Marginal cost = marginal revenue

Marginal cost = average revenue

The break-even output for a firm is the point at which the firm's total revenue equals its total costs, resulting in zero profit or loss. At this point, the firm is neither making nor losing money. In order to determine the break-even output, the firm needs to equate its marginal cost (the cost of producing one additional unit) with its marginal revenue (the revenue generated from selling one additional unit). This ensures that the firm is maximizing its profits by producing the optimal quantity of output. Therefore, the correct answer is "Marginal cost = marginal revenue."

Explanation

The break-even output for a firm is the point at which the firm's total revenue equals its total costs, resulting in zero profit or loss. At this point, the firm is neither making nor losing money. In order to determine the break-even output, the firm needs to equate its marginal cost (the cost of producing one additional unit) with its marginal revenue (the revenue generated from selling one additional unit). This ensures that the firm is maximizing its profits by producing the optimal quantity of output. Therefore, the correct answer is "Marginal cost = marginal revenue."

17. Government revenue from the groundnut industry is from

Rents

Taxes

Licenses

Royalties

Government revenue from the groundnut industry is generated through royalties. Royalties are payments made by individuals or companies for the use of a particular resource, in this case, the groundnut industry. These payments are typically made based on a percentage of the revenue generated from the use of the resource. Therefore, royalties would be a source of income for the government from the groundnut industry.

Explanation

Government revenue from the groundnut industry is generated through royalties. Royalties are payments made by individuals or companies for the use of a particular resource, in this case, the groundnut industry. These payments are typically made based on a percentage of the revenue generated from the use of the resource. Therefore, royalties would be a source of income for the government from the groundnut industry.

18. The demand for commodity Q can be described as completely price inelastic if:

A rise in the price of commodity P has no effect on the quantity of Q demanded

A rise in the price of Q has no effect on the quantity of Q demanded

A fall in the price of Q leads to a proportionate increase in the quantity of Q demanded

A rise in the price of Q leads to a more proportionate decrease in the quantity of Q demanded

If a rise in the price of Q has no effect on the quantity of Q demanded, it indicates that the demand for commodity Q is completely price inelastic. This means that consumers are not sensitive to changes in the price of Q and will continue to demand the same quantity regardless of price fluctuations. In other words, the demand for Q remains constant even if its price increases.

Explanation

If a rise in the price of Q has no effect on the quantity of Q demanded, it indicates that the demand for commodity Q is completely price inelastic. This means that consumers are not sensitive to changes in the price of Q and will continue to demand the same quantity regardless of price fluctuations. In other words, the demand for Q remains constant even if its price increases.

19. Which of the following describes the possible pricing pattern of firms in perfect competition?

Some firms may sell at a higher price than minimum average cost in the short run

Each firm charges a different price to allow for different transport costs

Some firms may charge less than minimum average cost in the long run

Each firm charges a different price to allow for differences in fixed costs

In perfect competition, firms are price takers, meaning they have no control over the market price. They must accept the prevailing market price. In the long run, if some firms charge less than the minimum average cost, they would be operating at a loss. However, in perfect competition, firms have the freedom to enter or exit the market. If firms are consistently operating at a loss, they will eventually exit the market, leading to a decrease in supply and an increase in price. Therefore, in the long run, some firms may charge less than the minimum average cost as they try to stay competitive, but they cannot sustain this in the long term.

Explanation

In perfect competition, firms are price takers, meaning they have no control over the market price. They must accept the prevailing market price. In the long run, if some firms charge less than the minimum average cost, they would be operating at a loss. However, in perfect competition, firms have the freedom to enter or exit the market. If firms are consistently operating at a loss, they will eventually exit the market, leading to a decrease in supply and an increase in price. Therefore, in the long run, some firms may charge less than the minimum average cost as they try to stay competitive, but they cannot sustain this in the long term.

20. In the short-run under the keynesian macroeconomics.....

MPC is greater than APC

MPC is less than APC

APC is equal to MPC

APC is less than MPC

In Keynesian macroeconomics, the marginal propensity to consume (MPC) refers to the proportion of additional income that individuals spend on consumption. The average propensity to consume (APC) represents the proportion of total income that individuals spend on consumption. If the MPC is less than the APC, it means that individuals are spending a smaller proportion of their additional income on consumption compared to their overall income. This suggests that as income increases, individuals are saving a larger proportion of their income rather than spending it, indicating a lower level of consumption.

Explanation

In Keynesian macroeconomics, the marginal propensity to consume (MPC) refers to the proportion of additional income that individuals spend on consumption. The average propensity to consume (APC) represents the proportion of total income that individuals spend on consumption. If the MPC is less than the APC, it means that individuals are spending a smaller proportion of their additional income on consumption compared to their overall income. This suggests that as income increases, individuals are saving a larger proportion of their income rather than spending it, indicating a lower level of consumption.

21. When marginal costs are below average cost at a given output, one can deduce that, if output increases:

The firm is at optimum size

Variable costs will fall

Average costs will fall

Marginal costs will fall

When marginal costs are below average cost at a given output, it indicates that the average costs will fall if the output increases. This is because when the marginal cost is lower than the average cost, it implies that the additional unit of output is being produced at a lower cost than the average cost of all units produced so far. As a result, when more units are produced, the average cost will decrease as the lower marginal costs bring down the overall average cost.

Explanation

When marginal costs are below average cost at a given output, it indicates that the average costs will fall if the output increases. This is because when the marginal cost is lower than the average cost, it implies that the additional unit of output is being produced at a lower cost than the average cost of all units produced so far. As a result, when more units are produced, the average cost will decrease as the lower marginal costs bring down the overall average cost.