Sample WAEC-style Practice Questions (Original Content)
WAEC Style
Question 1
A producer is said to be efficient if he can produce a given level of output with
A. Maximum resources
B. Minimum resources
C. Infinite resources
D. Zero resources
Answer: B. Minimum resources
Explanation: Economic efficiency involves producing the greatest possible output from the least amount of inputs.
Question 2
Which of the following is an example of a derived demand?
A. Demand for bread
B. Demand for taxi drivers
C. Demand for a television
D. Demand for a school bag
Answer: B. Demand for taxi drivers
Explanation: The demand for labor is derived because it depends on the demand for the service the labor provides.
Question 3
The main reason for the downward slope of the demand curve is the
A. Law of increasing returns
B. Law of diminishing marginal utility
C. Rise in production cost
D. Fixed nature of supply
Answer: B. Law of diminishing marginal utility
Explanation: Consumers are only willing to buy more units of a good if the price falls because the extra satisfaction from each unit decreases.
Question 4
A shift in the supply curve to the left while demand remains constant will lead to
A. A decrease in price
B. An increase in price
C. No change in price
D. A decrease in production cost
Answer: B. An increase in price
Explanation: A leftward shift in supply indicates a shortage at the old price which causes the market price to rise.
Question 5
If the income of a consumer increases and the demand for a good stays the same, the good is a
A. Luxury good
B. Necessity
C. Giffen good
D. Inferior good
Answer: B. Necessity
Explanation: Necessities are goods that people must consume in fixed amounts regardless of income level changes.
Question 6
The coefficient of price elasticity of demand for a perfectly elastic demand is
A. Zero
B. One
C. Infinity
D. Less than one
Answer: C. Infinity
Explanation: Perfectly elastic demand means that a tiny change in price leads to an infinite change in quantity demanded.
Question 7
The reward for an entrepreneur is
A. Wages
B. Interest
C. Profit
D. Salary
Answer: C. Profit
Explanation: Profit is the payment the entrepreneur receives for taking the risks of the business.
Question 8
One of the problems of a barter system is the difficulty in
A. Spending money
B. Storing wealth
C. Finding a bank
D. Paying taxes
Answer: B. Storing wealth
Explanation: Perishable goods used in barter cannot be stored for long periods to serve as a store of value.
Question 9
In a public limited company, the board of directors is elected by the
A. Government
B. Shareholders
C. Workers
D. Customers
Answer: B. Shareholders
Explanation: Shareholders are the owners of the company and they exercise their power by voting for directors at the annual general meeting.
Question 10
Economic rent is defined as the payment to a factor of production
A. Above its transfer earnings
B. Below its transfer earnings
C. Equal to its transfer earnings
D. To cover its depreciation
Answer: A. Above its transfer earnings
Explanation: Economic rent is the surplus earned by a factor over and above the minimum amount required to keep it in its current use.
Question 11
The price of a product is $50 and the quantity demanded is 100 units. If the price increases to $60 and quantity remains 100 units, demand is
A. Perfectly elastic
B. Unitary elastic
C. Perfectly inelastic
D. Relatively elastic
Answer: C. Perfectly inelastic
Explanation: When the quantity demanded does not change despite a change in price, the elasticity is zero.
Question 12
Which of the following is a primary industry?
A. Textile manufacturing
B. Fishing
C. Banking
D. Construction
Answer: B. Fishing
Explanation: Primary industries involve the extraction of natural resources from the earth or sea.
Question 13
When marginal product is zero, total product is
A. At its minimum
B. At its maximum
C. Rising
D. Falling
Answer: B. At its maximum
Explanation: Total product stops increasing when the addition to the total (marginal product) is zero.
Question 14
If a firm doubles its inputs and its output increases by more than double, the firm is experiencing
A. Decreasing returns to scale
B. Constant returns to scale
C. Increasing returns to scale
D. Diminishing marginal returns
Answer: C. Increasing returns to scale
Explanation: This occurs in the long run when the scale of production becomes more efficient as it grows.
Question 15
A market where there is only one buyer and many sellers is a
A. Monopoly
B. Monopsony
C. Oligopoly
D. Duopoly
Answer: B. Monopsony
Explanation: In a monopsony, the single buyer has significant power to influence the price of the product or service.
Question 16
The process of money creation is carried out by
A. The Central Bank only
B. Commercial banks
C. Insurance companies
D. The Stock Exchange
Answer: B. Commercial banks
Explanation: Commercial banks create money through the process of lending out a portion of the deposits they receive.
Question 17
An example of a contractionary monetary policy is
A. Reducing the bank rate
B. Buying securities in the open market
C. Increasing the cash reserve ratio
D. Reducing taxes
Answer: C. Increasing the cash reserve ratio
Explanation: By increasing the reserve ratio, the central bank reduces the amount of money commercial banks can lend.
Question 18
Inflation caused by an increase in the price of imported raw materials is
A. Demand pull inflation
B. Cost push inflation
C. Hyperinflation
D. Internal inflation
Answer: B. Cost push inflation
Explanation: When the cost of production rises due to more expensive inputs, producers pass the cost to consumers.
Question 19
The total value of output produced by citizens of a country regardless of where they live is the
A. Gross Domestic Product
B. Gross National Product
C. Net Domestic Product
D. Personal Income
Answer: B. Gross National Product
Explanation: GNP focuses on the nationality of the owners of the factors of production.
Question 20
Which of the following is an example of an indirect tax?
A. Company income tax
B. Capital gains tax
C. Value Added Tax
D. Personal income tax
Answer: C. Value Added Tax
Explanation: VAT is an indirect tax because it is levied on goods and services and paid by consumers through the seller.
Question 21
A budget deficit occurs when the government
A. Revenue is more than expenditure
B. Revenue is less than expenditure
C. Revenue equals expenditure
D. External debt is paid
Answer: B. Revenue is less than expenditure
Explanation: A deficit means the government must borrow to cover its spending for the year.
Question 22
The age structure of a population is the distribution of the population by
A. Gender
B. Occupation
C. Age groups
D. Income levels
Answer: C. Age groups
Explanation: It helps the government understand the number of dependents and the size of the labor force.
Question 23
Malthus suggested that population can be checked by "preventive checks" which include
A. Famine
B. War
C. Late marriage
D. Disease
Answer: C. Late marriage
Explanation: Preventive checks are voluntary actions taken by people to reduce the birth rate.
Question 24
The comparative advantage theory was propounded by
A. Adam Smith
B. David Ricardo
C. Alfred Marshall
D. John Keynes
Answer: B. David Ricardo
Explanation: Ricardo argued that trade is beneficial even if one country is better at producing everything, as long as opportunity costs differ.
Question 25
A country has a favorable balance of trade when its
A. Visible exports exceed visible imports
B. Visible imports exceed visible exports
C. Total exports equal total imports
D. Invisible exports exceed invisible imports
Answer: A. Visible exports exceed visible imports
Explanation: Balance of trade refers specifically to the trade of physical goods.
Question 26
The main objective of a tariff is to
A. Encourage imports
B. Protect infant industries
C. Decrease government revenue
D. Reduce the price of goods
Answer: B. Protect infant industries
Explanation: By making foreign goods more expensive, tariffs help local companies grow without being crushed by competition.
Question 27
Foreign exchange refers to the
A. Trade between two countries
B. Currencies of other countries
C. Exchange of goods for goods
D. Movement of people across borders
Answer: B. Currencies of other countries
Explanation: Countries need foreign exchange to pay for the goods and services they buy from abroad.
Question 28
Which of the following is a problem faced by the Economic Community of West African States?
A. Using a single currency
B. Political instability
C. Too much food production
D. Absence of tariffs
Answer: B. Political instability
Explanation: Frequent changes in government and civil unrest in some member states hinder economic cooperation.
Question 29
Economic growth is a prerequisite for
A. Economic development
B. Economic recession
C. Deflation
D. Underpopulation
Answer: A. Economic development
Explanation: Without an increase in the production of goods and services (growth), it is difficult to improve the quality of life (development).
Question 30
The most important factor influencing the demand for a product is its
A. Size
B. Color
C. Price
D. Weight
Answer: C. Price
Explanation: According to the law of demand, price is the primary variable that determines the quantity people are willing to buy.
Question 31
If the price of butter rises and the demand for margarine increases, the two goods are
A. Complements
B. Substitutes
C. Inferior
D. Independent
Answer: B. Substitutes
Explanation: Substitutes are goods that can be used in place of one another.
Question 32
Supply of a commodity is the quantity that a producer is
A. Able to produce
B. Willing and able to offer for sale at a price
C. Storing in the warehouse
D. Using for himself
Answer: B. Willing and able to offer for sale at a price
Explanation: Supply is not just the total production but what is actually brought to the market.
Question 33
A price ceiling is usually set by the government to protect
A. Producers
B. Consumers
C. The rich
D. Foreigners
Answer: B. Consumers
Explanation: A price ceiling prevents the price from rising too high, making essential goods affordable.
Question 34
Capital as a factor of production refers to
A. Money in the bank only
B. Man made assets used for further production
C. Natural resources
D. Human skills
Answer: B. Man made assets used for further production
Explanation: Capital includes machines, buildings, and tools that help produce other goods.
Question 35
Which of the following is a function of the retailer?
A. Breaking bulk
B. Manufacturing goods
C. Selling in large units
D. Granting loans to manufacturers
Answer: A. Breaking bulk
Explanation: Retailers buy in relatively large quantities from wholesalers and sell in tiny units to final consumers.
Question 36
The difference between a country's total export value and total import value is the
A. Balance of payments
B. Balance of trade
C. Terms of trade
D. Foreign exchange rate
Answer: B. Balance of trade
Explanation: It tracks the difference between the monetary value of a nation's exports and imports.
Question 37
What is the main source of income for a commercial bank?
A. Printing of money
B. Interest on loans
C. Government grants
D. Selling of shares
Answer: B. Interest on loans
Explanation: Banks make a profit by charging higher interest on loans than they pay on deposits.
Question 38
The value of a commodity expressed in terms of money is its
A. Utility
B. Price
C. Cost
D. Supply
Answer: B. Price
Explanation: Price is the monetary exchange value of a good or service.
Question 39
A firm's break even point is the level of output where
A. Total revenue exceeds total cost
B. Total revenue equals total cost
C. Total cost exceeds total revenue
D. Marginal revenue is zero
Answer: B. Total revenue equals total cost
Explanation: At this point, the firm is making zero economic profit and zero loss.
Question 40
An example of a government transfer payment is
A. Salary for teachers
B. Payment for building a road
C. Pension for the elderly
D. Purchase of military equipment
Answer: C. Pension for the elderly
Explanation: Transfer payments are redistributions of income for which no good or service is provided in return.
Question 41
Economic problems arise because
A. Human wants are limited
B. Resources are unlimited
C. Resources are scarce
D. Money is available
Answer: C. Resources are scarce
Explanation: If resources were not scarce, there would be no need to make choices or study Economics.
Question 42
The curve that shows all the possible combinations of two goods a consumer can buy with a given income is the
A. Demand curve
B. Supply curve
C. Budget line
D. Indifference curve
Answer: C. Budget line
Explanation: The budget line represents the consumer's income constraint.
Question 43
If the price of a good falls and the total expenditure on it remains the same, the elasticity of demand is
A. Greater than one
B. Less than one
C. Equal to one
D. Zero
Answer: C. Equal to one
Explanation: This is unitary elasticity where the percentage change in price and quantity exactly offset each other.
Question 44
The difference between direct and indirect taxes is that
A. Direct taxes are on goods while indirect are on income
B. Direct taxes can be shifted while indirect cannot
C. Direct taxes are on income while indirect are on goods
D. Indirect taxes are only paid by the rich
Answer: C. Direct taxes are on income while indirect are on goods
Explanation: This is the fundamental distinction in how these taxes are levied.
Question 45
One of the functions of the Central Bank of Nigeria is to
A. Provide personal loans
B. Print currency
C. Build houses for citizens
D. Sell clothes to the public
Answer: B. Print currency
Explanation: The Central Bank has the sole authority to issue legal tender in the country.
Question 46
A population that is too small to make full use of the country's resources is
A. Overpopulated
B. Underpopulated
C. Optimum population
D. Declining population
Answer: B. Underpopulated
Explanation: In this situation, the country could support more people and increase income per head.
Question 47
The specialization of a worker in a specific part of the production process is
A. Large scale production
B. Division of labor
C. Vertical integration
D. Nationalization
Answer: B. Division of labor
Explanation: It leads to greater efficiency and faster production.
Question 48
The value of the goods and services that a unit of money can buy is its
A. Face value
B. Purchasing power
C. Intrinsic value
D. Legal tender
Answer: B. Purchasing power
Explanation: Purchasing power decreases when prices go up (inflation).
Question 49
What type of unemployment occurs when workers are between jobs?
A. Structural unemployment
B. Frictional unemployment
C. Seasonal unemployment
D. Cyclical unemployment
Answer: B. Frictional unemployment
Explanation: It is temporary and happens as workers search for new positions.
Question 50
A country that can produce a good at a lower opportunity cost than another has a
A. Absolute advantage
B. Comparative advantage
C. Natural advantage
D. Strategic advantage
Answer: B. Comparative advantage
Explanation: This is the basis for most modern theories of international trade.