Sample WAEC-style Practice Questions (Original Content)
WAEC Style
Question 1
Economics is often defined as the study of how society manages its
A. Unlimited resources
B. Scarcity of wants
C. Scarce resources
D. Abundance of goods
Answer: C. Scarce resources
Explanation: Economics deals with the allocation of limited resources to satisfy unlimited human wants.
Question 2
The value of the next best alternative forgone is known as
A. Variable cost
B. Opportunity cost
C. Fixed cost
D. Average cost
Answer: B. Opportunity cost
Explanation: Opportunity cost is the cost of an alternative that must be forgone in order to pursue a certain action.
Question 3
In a command economy, the basic economic questions are answered by the
A. Price mechanism
B. Government
C. Consumers
D. Market forces
Answer: B. Government
Explanation: In a command or socialist economy, the central authority or government makes all decisions regarding production and distribution.
Question 4
A list of a consumer's wants arranged in order of importance is the
A. Scale of preference
B. Budget line
C. Indifference curve
D. Demand schedule
Answer: A. Scale of preference
Explanation: A scale of preference helps individuals make choices by ranking their needs from the most pressing to the least pressing.
Question 5
Which of the following is a reward for capital as a factor of production?
A. Rent
B. Wages
C. Interest
D. Profit
Answer: C. Interest
Explanation: Rent is for land, wages for labor, profit for entrepreneurship, and interest is the reward for capital.
Question 6
The law of demand states that, all other things being equal, as price increases
A. Demand increases
B. Quantity demanded increases
C. Quantity demanded decreases
D. Supply decreases
Answer: C. Quantity demanded decreases
Explanation: There is an inverse relationship between price and quantity demanded.
Question 7
When the price of a good is below the equilibrium price, there will be a
A. Surplus
B. Shortage
C. Market glut
D. Decrease in demand
Answer: B. Shortage
Explanation: At a price below equilibrium, quantity demanded exceeds quantity supplied, leading to a shortage.
Question 8
An increase in the price of butter may cause the demand for margarine to increase. This means both goods are
A. Complements
B. Substitutes
C. Inferior goods
D. Giffen goods
Answer: B. Substitutes
Explanation: Substitutes are goods that can be used in place of one another.
Question 9
The responsiveness of quantity demanded to a change in price is called
A. Income elasticity
B. Cross elasticity
C. Price elasticity of demand
D. Supply elasticity
Answer: C. Price elasticity of demand
Explanation: Price elasticity of demand measures how much the quantity demanded of a good responds to a change in the price of that good.
Question 10
If the price elasticity of demand is zero, the demand curve is
A. Perfectly elastic
B. Unitary elastic
C. Perfectly inelastic
D. Fairly elastic
Answer: C. Perfectly inelastic
Explanation: A perfectly inelastic demand curve is a vertical line, meaning quantity demanded does not change regardless of price.
Question 11
Which of the following will cause a movement along the demand curve?
A. Change in taste
B. Change in income
C. Change in the price of the good
D. Change in population
Answer: C. Change in the price of the good
Explanation: A change in the price of the good itself causes a movement along the curve, while other factors cause a shift of the curve.
Question 12
The total satisfaction derived from consuming a commodity is called
A. Marginal utility
B. Average utility
C. Total utility
D. Diminishing utility
Answer: C. Total utility
Explanation: Total utility is the overall satisfaction a consumer gets from consuming a specific quantity of a good.
Question 13
The law of diminishing marginal utility states that as more of a good is consumed, the additional satisfaction
A. Increases
B. Decreases
C. Remains constant
D. Becomes zero
Answer: B. Decreases
Explanation: Each extra unit of a good consumed provides less additional satisfaction than the previous unit.
Question 14
A production function shows the relationship between
A. Price and profit
B. Inputs and outputs
C. Demand and supply
D. Income and expenditure
Answer: B. Inputs and outputs
Explanation: A production function expresses the technical relationship between the quantities of physical inputs and the quantity of output of goods.
Question 15
Fixed costs are costs that
A. Vary with the level of output
B. Do not vary with the level of output
C. Increase as more labor is hired
D. Are zero when production starts
Answer: B. Do not vary with the level of output
Explanation: Fixed costs, like rent or insurance, must be paid even if the firm produces nothing.
Question 16
The change in total cost resulting from producing one extra unit of output is
A. Average cost
B. Marginal cost
C. Variable cost
D. Opportunity cost
Answer: B. Marginal cost
Explanation: Marginal cost is the additional cost incurred by producing one more unit of a good.
Question 17
A market structure with many buyers and many sellers selling identical products is
A. Monopoly
B. Oligopoly
C. Perfect competition
D. Monopolistic competition
Answer: C. Perfect competition
Explanation: In perfect competition, products are homogeneous and no single buyer or seller can influence the market price.
Question 18
A single seller of a product that has no close substitutes is a
A. Monopolist
B. Perfect competitor
C. Duopolist
D. Stockbroker
Answer: A. Monopolist
Explanation: A monopoly exists when a single firm is the sole producer of a product with no close substitutes.
Question 19
Which of the following is a function of money?
A. Medium of exchange
B. Source of poverty
C. Barter tool
D. Demand generator
Answer: A. Medium of exchange
Explanation: Money facilitates the exchange of goods and services.
Question 20
Inflation is defined as a persistent increase in the
A. Price of a single good
B. General price level
C. Supply of money only
D. Employment rate
Answer: B. General price level
Explanation: Inflation refers to a sustained rise in the overall level of prices in an economy over a period of time.
Question 21
The total value of all final goods and services produced within a country in a year is the
A. Gross National Product
B. Net National Product
C. Gross Domestic Product
D. Per Capita Income
Answer: C. Gross Domestic Product
Explanation: GDP measures the value of production within a country's borders, regardless of who owns the resources.
Question 22
Direct taxes are levied on
A. Goods and services
B. Income and profits
C. Imports
D. Exports
Answer: B. Income and profits
Explanation: Direct taxes, like income tax, are paid directly by the individual or firm to the government.
Question 23
A budget in which estimated government revenue is equal to estimated expenditure is a
A. Surplus budget
B. Deficit budget
C. Balanced budget
D. Personal budget
Answer: C. Balanced budget
Explanation: A balanced budget occurs when revenue matches spending for the fiscal year.
Question 24
The record of a country's economic transactions with the rest of the world is the
A. Balance of trade
B. Balance of payments
C. Terms of trade
D. Current account
Answer: B. Balance of payments
Explanation: The Balance of Payments (BOP) is a systematic record of all economic transactions between residents of one country and the rest of the world.
Question 25
Commercial banks are primarily set up to
A. Issue currency
B. Make profit
C. Control inflation
D. Formulate monetary policy
Answer: B. Make profit
Explanation: Unlike the Central Bank, commercial banks are private or public financial institutions that aim to generate profit.
Question 26
Which bank acts as the lender of last resort?
A. Commercial bank
B. Merchant bank
C. Central bank
D. Development bank
Answer: C. Central bank
Explanation: The Central Bank provides liquidity to commercial banks when they face financial difficulties.
Question 27
Labor force refers to the population between the ages of
A. 0 and 15 years
B. 18 and 65 years
C. 15 and 60 years
D. 10 and 80 years
Answer: C. 15 and 60 years
Explanation: The labor force generally includes the able-bodied population within the working-age bracket (usually 15 to 60 or 65).
Question 28
The Malthusian theory of population is concerned with the relationship between
A. Population growth and food supply
B. Death rate and birth rate
C. Migration and urbanization
D. Income and saving
Answer: A. Population growth and food supply
Explanation: Malthus argued that population grows geometrically while food supply grows arithmetically.
Question 29
Division of labor leads to
A. Decreased productivity
B. Specialization
C. Higher costs of production
D. Lower quality of goods
Answer: B. Specialization
Explanation: Division of labor involves breaking down a production process into small tasks, leading to workers becoming specialists.
Question 30
A major disadvantage of the barter system is the
A. Use of money
B. Double coincidence of wants
C. High interest rates
D. Ease of storage
Answer: B. Double coincidence of wants
Explanation: Barter requires finding someone who has what you want and wants what you have, which is difficult.
Question 31
If a firm's total revenue is $500 and its total cost is $400, the firm is making a profit of
A. $900
B. $100
C. $400
D. $500
Answer: B. $100
Explanation: Profit is calculated as Total Revenue minus Total Cost ($500 minus $400).
Question 32
A public limited company is owned by
A. The government
B. Shareholders
C. One person
D. Partners
Answer: B. Shareholders
Explanation: Public limited companies issue shares to the general public.
Question 33
The demand for labor is a
A. Competitive demand
B. Derived demand
C. Joint demand
D. Composite demand
Answer: B. Derived demand
Explanation: Labor is demanded because of the demand for the goods and services that labor can produce.
Question 34
Which of the following is an example of an indirect tax?
A. Personal income tax
B. Company tax
C. Excise duty
D. Capital gains tax
Answer: C. Excise duty
Explanation: Indirect taxes are levied on goods and services, not on individuals or firms directly.
Question 35
Deflation is a period of
A. Rising prices
B. Falling prices
C. High employment
D. Economic boom
Answer: B. Falling prices
Explanation: Deflation is the opposite of inflation; it is a general decline in prices.
Question 36
The primary objective of the World Bank is to
A. Provide short term loans
B. Regulate international trade
C. Provide long term loans for development
D. Fix exchange rates
Answer: C. Provide long term loans for development
Explanation: The World Bank focuses on long-term economic development and poverty reduction.
Question 37
A tax system where the rate of tax increases as income increases is
A. Regressive tax
B. Proportional tax
C. Progressive tax
D. Flat tax
Answer: C. Progressive tax
Explanation: In a progressive tax system, high-income earners pay a larger percentage of their income than low-income earners.
Question 38
The price of one currency in terms of another is the
A. Interest rate
B. Exchange rate
C. Discount rate
D. Inflation rate
Answer: B. Exchange rate
Explanation: The exchange rate determines how much one currency is worth in another currency.
Question 39
Utility is best defined as
A. The price of a commodity
B. The satisfaction derived from consumption
C. The quality of a product
D. The usefulness of a product
Answer: B. The satisfaction derived from consumption
Explanation: In economics, utility is a measure of the satisfaction or happiness gained from consuming a good.
Question 40
Which of the following is a component of a country's current account?
A. Foreign direct investment
B. Visible trade
C. Long term loans
D. Portfolio investment
Answer: B. Visible trade
Explanation: The current account includes visible trade (goods) and invisible trade (services).
Question 41
When a country's exports exceed its imports, it has a
A. Trade deficit
B. Trade surplus
C. Balanced trade
D. National debt
Answer: B. Trade surplus
Explanation: A trade surplus occurs when the value of a country's exports is greater than the value of its imports.
Question 42
The study of the economic behavior of individual units like households and firms is
A. Macroeconomics
B. Microeconomics
C. Positive economics
D. Normative economics
Answer: B. Microeconomics
Explanation: Microeconomics focuses on the choices made by individuals and businesses.
Question 43
Which of the following is a middleman in the chain of distribution?
A. Manufacturer
B. Consumer
C. Wholesaler
D. Farmer
Answer: C. Wholesaler
Explanation: Middlemen like wholesalers and retailers connect the producer to the consumer.
Question 44
Price floor is a
A. Maximum price set by the government
B. Minimum price set by the government
C. Price set by market forces
D. Price set by consumers
Answer: B. Minimum price set by the government
Explanation: A price floor is a legally established minimum price that buyers must pay.
Question 45
The total quantity of a good that all sellers are willing to sell at different prices is
A. Individual supply
B. Market supply
C. Market demand
D. Excess supply
Answer: B. Market supply
Explanation: Market supply is the sum of the individual supplies of all producers in the market.
Question 46
A situation where many firms sell slightly different products is
A. Perfect competition
B. Monopolistic competition
C. Monopoly
D. Oligopoly
Answer: B. Monopolistic competition
Explanation: In monopolistic competition, many firms sell products that are differentiated by branding or quality.
Question 47
What is the main reason for international trade?
A. Language differences
B. Uneven distribution of resources
C. Differences in currency
D. Political stability
Answer: B. Uneven distribution of resources
Explanation: Countries trade because they cannot produce everything they need efficiently due to varying natural resources and climates.
Question 48
An example of a transfer payment is
A. Salary of a teacher
B. Profit of a firm
C. Unemployment benefit
D. Rent on land
Answer: C. Unemployment benefit
Explanation: Transfer payments are payments made by the government to individuals without any corresponding exchange of goods or services.
Question 49
The main tool of monetary policy is the
A. Tax rate
B. Government spending
C. Interest rate
D. Public debt
Answer: C. Interest rate
Explanation: Central banks use interest rates and money supply to control the economy through monetary policy.
Question 50
Economic growth is measured by the increase in a country's
A. Population
B. Nominal GDP
C. Real GDP
D. Money supply
Answer: C. Real GDP
Explanation: Economic growth refers to the increase in the capacity of an economy to produce goods and services, compared from one period to another, adjusted for inflation (Real GDP).