PROFESSIONAL EXAMINATIONS

MARCH 2024
CIPM/INT/002: FUNDAMENTALS OF ECONOMICS

Instruction to Candidates:
There are 50 multiple choice questions in this examination with options of four possible
answers. Choose the most correct answer by clicking on the button beside it. Answer all
Questions. When you are completely done click submit.

Time Allowed: 1 hour

1 Which of the following is not related to basic concepts of Economics?

[A] Human wants are limited
[B] The means to satisfy human wants are limited
[C] The limited resources may be alternatively used
[D] One has to choose the want to satisfy first and by which means

[REC]
2. The Nigerian economy can be classified into the following major sectors, except……..
sector.
]A] agricultural
[B] processing
[C] tertiary
[D] basic

[REC]
3. Which of the following does not describe Positive Economics? Positive Economics ……..
[A]. is devoid of value judgment.
[B] deals with ‘what is’.
[C.] deals with matters as they ‘ought to be’.
[D ] centers on objective matters.
[COM]

4 Which of the following options best describes Macroeconomics? Macroeconomics is……

[A] the study of aggregate units of the economy.
[B] about how monopoly leads to misallocation of resources.
[C] about how goods and services produced are distributed through price mechanism.
[D] the analysis of small individual units of the economy.
[COM]

5. The importance of economics includes the following, except…..

[A] price determination of goods and services.

[B] understanding the economic policies of the country and the global world.

[C] sub-optimisation of the limited resources for all economic units.

[D] measurement of economic growth and development of a country.

[REC]

6. The basic economic problem of any country is that resources are scarce relative to the
…………..

[A] needs of the citizenry

[B] demand to the demand for them

[C] choice of individuals

[D] scale of preference

[REC]
7. Which of the following could be responsible for the outward shift of the production
possibility curve?
[A] Decrease in money supply
[B] Increase in money demand
[C] Fiscal policy
[D] Economic growth
[REC]

8. An economic system in which the public ownership of means of production and

distribution is vested in the state is…….
]A] socialism
[B] mixed economy
[C] capitalism
[D] traditional economy

[REC]

Use the table to answer the questions below:

POINT QUANTITY TOTAL AVERAGE MARGINAL
CONSUMED UTILITY UTILITY UTILITY
OF ORANGES FROM FROM FROM
ORANGES ORANGES ORANGES
A 1 400 400
B 2 640
C 3 700
D 4 700

9. Calculate the Average Utility at point B.

[A] 320
[B ] 300
[C ] 280
[D] 240

[APP]
 Use the table to answer the questions below:
POINT QUANTITY TOTAL AVERAGE MARGINAL
CONSUMED UTILITY UTILITY UTILITY
OF ORANGES FROM FROM FROM
ORANGES ORANGES ORANGES
A 1 400 400
B 2 640
C 3 700
D 4 700

10. Calculate the Marginal Utility at point C.

[A] 330
[B ] 140
[C ] 130
[D] 120
[APP]

Use the table to answer the questions below:

POINT QUANTITY TOTAL AVERAGE MARGINAL
CONSUMED UTILITY UTILITY UTILITY
OF ORANGES FROM FROM FROM
ORANGES ORANGES ORANGES
A 1 400 400
B 2 640
C 3 700
D 4 700

11. Calculate the Marginal utility at point D.

[A] 1
[B] 0
[C] -2
[D -4
[APP]

12. Which of the following indicates the satisfaction a consumer derives from the
consumption of a commodity?
[A] Isoquant
[B] Utility
[C] Indifference curve
[D] Isocost
COM
13 Which of the following is the ranking method used in measuring satisfaction?
[A] Ordinal utility
[B] Cardinal Utility
C] Ordinary utility
[D] Total Utility

[REC]

14. Assuming the demand for Lipton tea and Milk are complementary, a rise in tariff of Lipton
tea would……to/for Milk.
[A] result to an increase in demand
[B] result to a decrease in demand
[C] not affect the demand
[D] lead to a decrease in price
[COM]

15. What causes a change in quantity of a product supplied?

[A] Price of the product
[B] Prices of related goods
[C] Weather
[D] Nature of goods

[REC]

16. The indifferent curve analysis is based on the …..

[A] Law of marginal rate of substitution
[B] Budget line
[C] Average utility.
[D] Total utility
[REC]

17. Which one of the following is not a function of price mechanism? It……
[A] enhances distribution of scarce resources.
[B] increases national income.
[C] induces supply of goods and services.
[D] maximizes individual freedom.
[COM]
18 Suppose the demand and supply functions of a commodity are given as Qd = 700-40p
and
Qs = 10p respectively. Where Qd and Qs are quantity demanded and supplied respectively
and p is price (in naira). Calculate the equilibrium price.

[A] ₦15

[B] ₦14

[C] ₦13

[D] ₦12

[APP]

19. Suppose the demand and supply functions of a commodity are given as Qd = 700-40p and
Qs = 10p respectively. Where Qd and Qs are the quantity demanded and supplied
respectively and p is the price (in naira). Calculate the equilibrium quantity.

[A] 140 units

[B] 135 units

[C] 130units

[D] 120 units

[APP]

20. Price control cannot lead to …….

[A] a rise supply of goods.

[B] preferential treatment.
[C] black market.
[D] hoarding.

[COM]
 21 Maximum wage occurs when the wage rate is fixed … the equilibrium wage rate.
[A] below
[B] above
[C] at par with
[D] at variance

[COM]

22 Two goods, X and Y, with negative cross elasticity of demand are……… goods.
[A] substitutes
[B] both inferior
[C] complementary
[D] both superior

[COM]

23. Inelastic demand is a situation where the change in demand is……….

[A] less than the proportionate change in supply

[B] more than the proportionate change in price and coefficient is more than
one
[C] equal to the proportionate change in price and the coefficient of inelastic
demand is equal to one
[D] less than the proportionate change in price and coefficient of inelastic
demand. Is less than one

[COM]

24. Which of the following is a determinant of price elasticity of demand?

[A] Availability of substitute
[B] Price of a related good
[C] Population
[D] Taste of the consumer

[REC]

25. Short-run Production function occurs when at least one factor of production is fixed, ….
[A] while others vary with the level of output.
[B] while others vary with the level of sales.
[C] while one varies with the level of costs.
[D] none of the options is correct.
[REC]
26. Which of the following holds when the marginal product of a commodity begins to fall?
The law of ………
[A] increasing returns
[B] diminishing returns
[C] diminishing marginal utility
[D] increasing returns
[REC]

27. An Isoquant is a…………variable inputs to produce a given unit of output.

[A] curve that shows the combination of three

[B] curve that shows the combination of many
[C] concave curve that shows the combination of two
[D] convex curve that shows the combination of two
[COM]

28 Which of the following is true of demand forecasting? It is used to forecast………

activities.
[A] short run relative to long run
[B] quarterly production
[C] distant future
[D] long run relative to short run
[COM]

29 Which of the following is an attribute of the Complete Enumeration Method? It is………

[A] used only in the public sector.

[B] useful in dispersed market
[C] useful in a concentrated market
[D] used only in the private sector.
[COM]

30. Suppose that the cost function of a firm is given as: TC =600+70Q, where TC is the
total cost and Q is the quantity produced by the firm. The Average cost of the firm
is………..
[A] 600 + 70/q
[B] 600/q - 70
[C] 600 - 70/q
[D] 600/q + 70
[APP]
31. Suppose that the cost function of a firm is given as: TC = 600+70Q, where TC is the total
cost and Q is the quantity produced by the firm.
The Marginal cost is………
[A] 70
[B] 60
[C] 50
[D] 30
[APP]

32 Suppose the cost function of a firm is given as TC= 4,900 +100q2 . Determine the optimum
plant size of the firm.

[A] 8 units of output level

[B] 7 units of output level
[C] 6 units of output level
[D] 5 units of output level

[APP]

33 Operations of Oil companies in the Niger Delta of Nigeria usually create…….

[A] private costs only
[B] external costs only
[C] externalities
[D] inputs costs only
[REC]

34. The Break-even point of a firm is that level of output when…………..

[A] there is zero economic loss
[B] Total revenue is greater than total loss
[C] total revenue is less than total loss
[D] total revenue is equal to total loss
[COM]

35. Given the average cost function of a firm as AC= -50 +16q-6q2 and the price function
P=60 +20q -8q2 Calculate the total revenue.

[A] 65q +22q2 -8q3

[B] 60q +20q2 -8q3
[C] 55q +20q2 -8q3
[D] 60q +22q2 -8q3
[APP]
36. Given the average cost function of a firm as AC= -50 +16q-6q2 and price function as
P=60 +20q -8q2. Calculate the marginal revenue.

[A] 68 +43q -24q2

[B] 60 +40q -24q2
[C] 50 +40q -24q2
[D] 40 +40q -24q2
[APP]

37. A firm sells every unit of its output for ₦20 up to 20,000 units if the fixed cost is N20,000
and the variable cost is ₦4 each. Calculate the firm’s gain at the sales of 5,000 units

[A] 80,000
[B] 70,000
[C] 60,000
[D] 50,000
[APP]

38 Given that the total variable cost of producing 10 units is N50,000 and the total fixed
cost of producing 1 unit is ₦40,000. What is the total cost of producing 10 units?
[A] ₦100,000
[B] ₦90.000
[C] ₦80,000
[D] ₦40,000
[APP]
39 A monopolistic competitive firm will earn short-run profit at a point where………. revenue.
]A] marginal cost is equal to marginal
[B] marginal cost is less than marginal
[C] marginal cost is greater than marginal
[ D] total cost is equal to total
[COM]

40 In Collusive Oligopoly, firms in the industry………..

[A] fight over price fixing.
[B\ set price jointly.
[C] demand for inputs jointly.
[D] divide the market among themselves.
[COM]
41 Inefficiency in market failure includes which of the following?
[A] Presence of property rights
[B] Private goods
[C] Information Symmetries
[D] Externalities
[COM]

42 Which of the following policy measures do governments in developing countries use to solve
the problem of market failure?
[A] Internal costs
[B] Qualitative monetary approach
[C] Quality goods
[D] Taxes and subsidies
[COM]

43. Bearing the effect of tax by consumers in a country depends on the……………..

[A] degree of the price elasticity.
[B] location of commodities
[C] producers of the commodities
[D] income
[COM]

44 Who plays a dominant role in decision-making in a capitalist economy?

[A] Government
[B] Managers
[C] Private sector
[D] Consumers

[REC]

45 Demand for labour is the total number of workers………….. at a particular time and a
given wage rate.
[A] employers are willing and ready to employ
[B] the government is willing and ready to employ
[C] the private sector is willing and ready to employ
[D] that are ready to work in an economy
[REC]
46 Which of these best describes the efficiency of labour? Achieving an increase in
output……
[A] within a shorter period.
[B] within a specified period
[C] at short time regardless of quality
[D]within a shorter period with good quality.
[REC]
47 The following is not an intelligent interactive device in E-banking?

[A] Automated security window

[B] Personal computer
[C] Touch-tone telephone
[D] Personal digit assistant
[REC]

48 Which of the following weapons can the management use to prevent the union
from demanding too much concession?

[A] Picketing
[B] Injunction
[C] Primary boycott
[D] Strike
[COM]
Use the table to answer the questions below.

Category of No. of workers Transfer Payment Economic rent

workers earnings received N’000
N’000 N’000
1 60 250 300
2 140 220 300
3 120 210 300
4 50 200 300
49. The economic rent for category 2 workers is………

[A] ₦80,000

[B] ₦70,000

[C] ₦50,000

[D] ₦40,000

[APP]

Use the table below to answer the question that follows

50. Compute the Gross Domestic Product (GDP) at market prices using the expenditure
approach.

[A] 2,500 billion

[B] 2,400 billion
[C] 2,300 billion
[D] 2,000 billion
[APP]
Use the table below to answer the question that follows

51. Compute the Net National Product (NNP) using the expenditure approach.
[A] ₦1,950 billion
[B] ₦2,300 billion
[C] ₦2,400 billion
[D] ₦2,800 billion
[APP]

Use the table below to answer the question that follows

52. Compute National Income at factor cost

[A] ₦2,300 billion
[B] ₦2,150 billion
[C] ₦2,050 billion
[D] ₦2,000 billion
[APP]
Use the table below to answer the question that follows

53. Compute per capita Gross National Product (GNP)

[A] ₦71,000 per capita
[B] ₦61,000 per capita
[C] ₦51,000 per capita
[D] ₦46,000 per capita
[APP]

54 Which of the following does not determine the level of investment in an economy?

[A] National income

[B] Size of social services

[C] Cost of funds

[D] Fiscal policy

[REC]

55. Which of the following is an attribute of Business Cycles? Business Cycles……….

[A] are not internationally infectious

[B] show the same regularity

[C] are recurrent

[D] are not cumulative

[REC]
56. Given the following Consumption and Investment functions of a national economy,

C = 800 + 0.3Y, I = ₦55b, G =₦40b X = ₦45b and M = ₦35b.

Where, C=Consumption, Y= Income, I= Investment, G=Government expenditure, E= Export

and M=Import. Determine the Marginal Propensity to save {MPS}

[A] 0.9
[B] 0.8
[C] 0.7
[D] 0.6
[APP]

57. Given the following Consumption and Investment functions of a national economy,

C = 800 + 0.3Y, I = ₦55b, G =₦40b X = ₦45b and M = ₦35b.

Where, C=Consumption, Y= Income, I= Investment, G=Government expenditure, E= Export

and M=Import. Determine the Marginal Propensity to save {MPS}. Determine the equilibrium
income.

[A] 900 billion

[B] 890 billion
[C] 880 billion
[D] 850 billion
[APP]

58. A country has a working population of 150 million out of which 50 million people are
employed, calculate the unemployment rate of the country.

[A] 50%
[B] 66.67%
[C] 67.66%
[D] 65.50%
59. Money market is a market for…………………..
[A] long term funds
[B] medium and long-term funds
[C] short term funds
[D] short and long-term funds
[REC]

60. Instruments used in Capital Market are…………………

[A] Treasury bills
[B] Stocks and shares
[C] Bills of exchange
[D] Call money funds
[COM]