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2020 WAEC Possible Economics Questions and Answers

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1. Economic problem arise in all society because?

A. resources are mismanaged by leaders

B. there is no proper planning

C. resources are not in adequate supply

D. the services of economist are not employed

Correct Answer: Option C


Goods and services that satisfy human wants are produced with the help of resources such as land, labour, capital and enterprise. These resources are scarce while wants are unlimited. Due to scarcity of these resources, an economy cannot produce all that goods and services as required by its citizens.

2. Which of the following is not emphasized in a production possibility curve

A. scarcity of resources

B. economic development

C. inefficiency in the use of resources

D. unemployment of labour

Correct Answer: Option B


In short, production possibility curve is a curve which shows all possible combinations of two goods that can be produced by making full use of given resources and technology in an economy.

A production possibility curve measures the maximum output of two goods using a fixed amount of input. The input is any combination of the four factors of production. Each point on the curve shows how much of each good will be produced when resources shift from making more of one good and less of the other.

3. The organisation of productive factors is the responsibility of the?

A. management

B. entrepreneur

C. production manager

D. labour union

Correct Answer: Option B


Entrepreneur is a person who sets up a business or businesses, taking on financial risks in the hope of profit. “one who organizes, manages, and assumes the risks of a business or enterprise and manages the various production factors

4. Producers operating in a free market economy are more efficient as a resulf of?

A. the existence of competition

B. the very few number of participants

C. the commitment of the shareholders

D. government regulation of their activities

Correct Answer: Option A


Competition leads to efficiency because businesses that have fewer costs are more competitive and make more money. Innovation is encouraged because it provides a competitive edge and increases the chance for wealth.

5. A downward sloping demand curve means that?

A. total revenue declines as price is lowered

B. demand falls as output rises

C. demand falls as output falls

D. price must be lowered to sell more

Correct Answer: Option B


Downward sloping demand curve means a rational consumer will demand more of a commodity when its price falls. Some of the reasons for the phenomenon would be:

Income Effect : When price of a commodity falls, consumer’s real income rises that is he can now purchase more of the commodity with the same income.

6. If the price of commodity X rises and consumers shift to commodity Y, then commodity X and Y are?

A. substitutes

B. complements

C. inferior goods

D. bought goods

Correct Answer: Option A


Substitute goods or substitutes are at least two products that could be used for the same purpose by the same consumers. If the price of one of the products rises or falls, then demand for the substitute goods or substitute good (if there is just one other) is likely to increase or decline.

7. Goods whose demand vary directly with money income are called?

A. inferior goods

B. complementary goods

C. substitutes

D. normal goods

Correct Answer: Option D


Normal goods are a type of goods whose demand shows a direct relationship with a consumer’s income.

8. An exceptional demand curve can result from?

A. increase in prices of raw materials

B. increase in the size of the population

C. expectation of future price increase

D. change in taste of the consumer

Correct Answer: Option C


A normal demand curve (which when graphed goes down and to the right) shows that when prices go up, the amount of a good that is demanded goes down. Examples are when the price of gas goes up, people buy less of it and do less driving

9. Palm oil and palm kernel are in

A. joint supply

B. competitive demand

C. competitive supply

D. complementary demand

Correct Answer: Option A


Joint supply is an economic term referring to a product or process that can yield two or more outputs. Common examples occur within the livestock industry: cows can be utilized for milk, beef and hide; sheep can be utilized for meat, milk products, wool and sheepskin

10. Which of the following is true about supply of land?

A. its higher in the urban than rural areas

B. varies with time

C. rises with demand

D. is fixed

Correct Answer: Option D


Fixed supply: The total land area of earth (in the sense of the surface area available to men) is fixed. First, supply of land is fixed or inelastic from society’s point of view.

11. The backward bending supply curve of labour indicates?

A. an abnormal supply situation

B. the law of supply

C. that labour supply and wage are directly related

D. that the elasticity of supply is uniform

Correct Answer: Option C


The reason is that there are two effects related to determining supply. The substitution effect states that a higher wage makes work more attractive than leisure. The income effect states that a higher wage means workers can achieve a target income by working fewer hours.

Backward bending supply curve is the normal case for most workers. Most economists agree that a worker’s supply curve for labor slopes upward at lower wages and bends backward at higher wages

12. A supply curve parallel to the X- axis indicates?

A. fairly elastic supply

B. infinitely elastic supply

C. fairly inelastic supply

D. perfectly inelastic

Correct Answer: Option B


Infinitely elastic supply, by definition, means that any decrease in the product price would immediately cause thesupply to shift to zero

13. If the marginal utility of a commodity is equal to its price then

A. the consumer is in equilibrium

B. more of the commodity can be consumed

C. total utility is also equal to its price

D. the market is not in equilibrium

Correct Answer: Option C


The price a consumer is willing to pay for a good depends on his marginal utility, the marginal utility declines with each additional unit of consumption, according to the law of diminishing marginal utility. Therefore, the price is equal to the marginal utility

14. A price floor is usually fixed

A. at the equilibrium and causes shortage

B. above the equilibrium and causes shortage

C. below the equilibrium and causes shortage

D. above the equilibrium and causes surplus

Correct Answer: Option D


A price floor is a government- or group-imposed price control or limit on how low a price can be charged for a product, good, commodity, or service.

For a price floor to be effective, it must be set above the equilibrium price.

15. A market is in equilibrium when?

A. there is no government intervention

B. the demand is the same as the supply

C. buyers and sellers are free to sell more goods

D. there is no free entry and exit

Correct Answer: Option B


Market equilibrium is a market state where the supply in the market is equal to the demand in the market.

16. A firm’s average cost decreases in the longrun because?

A. increasing returns to scale

B. diminishing average returns

C. decreasing marginal returns

D. decreasing average fixed cost

Correct Answer: Option C


In the long run, when all inputs under the control of the firm are variable, there is no fixed cost and thus no average fixed cost. Instead long-run average cost is affected by increasing and decreasing returns to scale, which translates into economies of scale and diseconomies of scale

17. “The larger a firm, the lower its cost of production”. This statement explains the

A. law of diminishing marginal returns

B. concept of economies of scale

C. law of comparative cost advantage

D. theory of division of labour

Correct Answer: Option A


Diminishing returns, also called law of diminishing returns or principle of diminishing marginal productivity, economic law stating that if one input in the production of a commodity is increased while all other inputs are held fixed, a point will eventually be reached at which additions of the input yield progressively smaller, or diminishing, increases in output.

18. In the the long-run, a firm must shut down if its average revenue is?

A. greater than average cost

B. less than average variable cost

C. equal to the minimum average cost

D. equal to the average cost

Correct Answer: Option B


A firm will choose to implement a shutdown of production when the revenue received from the sale of the goods or services produced cannot even cover the variable costs of production. In that situation, the firm will experience a higher loss when it produces, compared to not producing at all.

Technically, shutdown occurs if average revenue is below average variable cost at the profit-maximizing positive level of output.

19. Public limited liability companies are democratic in nature because?

A. government appointees are members of the board

B. they are run by elected public officers

C. electoral principles are adopted in the day-to-day management

D. shareholders elect the board of directors

Correct Answer: Option D


The directors could not dictate the decisions in the company as the rights in decision making process also vest in the hands of shareholders. Thus democracy is maintained well

20. In the event of bankruptcy owners of joint-stock companies lose?

A. their private properties

B. both company and private properties

C. only the capital invested

D. only their dividends

Correct Answer: Option C


Joint stock company is a company whose stock is owned jointly by the shareholders.

In the event that a joint stock company declares bankruptcy, the company’s shareholders may be entitled to a portion of the liquidated assets, depending on which shares they hold and how much liquid assets are left over. Bankruptcy, a firm will be required to sell all of its assets and pay off all debts.

21. Wholesalers play an important role in the distribution of goods and services because they?

A. are located very close to consumers

B. finance both producers and retailers

C. pass information on from retailers to consumers

D. sell in small units to consumers

Correct Answer: Option B


Wholesalers either take title to the goods they purchase, or they own the goods they purchase. If there is a significant change in the value of the products between the time of the purchase from the producer and the sale to the retailer, the wholesaler will absorb that profit or loss.

22. If workers at the school canteen sell during the holidays, this is an example of?

A. structural unemployment

B. frictional unemployment

C. seasonal unemployment

D. residual unemployment

Correct Answer: Option C

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Seasonal unemployment occurs when people are unemployed at certain times of the year, because they work in industries where they are not needed all year round.

23. Positive checks as envisaged by Thamos Malthus can be prevented if

A. date rate is reduced

B. marriage is abolished

C. more hospitals are built

D. more restraint is adopted

Correct Answer: Option D


Positive checks are those, according to Thomas Malthus, that increase the death rate. These include disease, war, disaster, and finally when other checks don’t reduce the population, famine. Malthus felt that the fear of famine or the development of famine was also a major impetus to reduce the birth rate.

24. Which of the following factors is not a reason for farmer’s unstable incomes

A. dependence on too many crops

B. poor storage facilities

C. adverse weather condition

D. recession in the world economy

Correct Answer: Option A

25. Local firms can help in reducing unemployment in a country when?

A. land acquisition becomes centralized

B. imports of substitutes are reduced

C. waste in the firm is eliminated

D. subsidies to firms are decreased

Correct Answer: Option B


Import substitution is a trade and economic policy which advocates replacing foreign imports with domestic production, it is based on the premise that a country should attempt to reduce its foreign dependency through the local production of industrialized products.

26. An industry is described as a group of firms

A. that provides jobs for many people

B. which uses advance technology in production

C. which produces similar products

D. that provides jobs for few people

Correct Answer: Option C


An industry is a group of manufacturers or businesses that produce a particular kind of goods or services.

27. The largest component of national income in developing countries consist of?

A. profits

B. profit and rent

C. rent

D. wages and salaries

Correct Answer: Option D


The largest component of national income is: compensation of employees(wages and salaries).

28. A baker bought flour and other ingredients for $250.00, spent $52.00 on distribution, sold the bread for $320.00. the value added by the baker is?

A. $302.00

B. $52.00

C. $18.00

D. $622.00

Correct Answer: Option C


floor = $250

distribution cost = $52

250 + 52 = 302

selling price $320 – $302 = $18

29. In a country with large population of full-time housewives, national income

A. will be composed of goods produced by women

B. figures will be grossly over-stated

C. statistics will be difficult to calculate

D. figures will be grossly under-stated

Correct Answer: Option D


National income of a country can be defined as the total market value of all final goods and services produced in the economy in a year.

The income of a housewife is not counted in the National Income or the Gross National Product of the country. This will make the national income under stated

30. Demand pull inflation is likely to be caused by?

A. an increase in the cost of factors inputs

B. increase in the income tax rate

C. increase in bank lending rates

D. increasingly large budget deficit

Correct Answer: Option A


There are five causes for demand-pull inflation:

-A growing economy: When consumers feel confident, they will spend more, take on more debt by borrowing more. This leads to a steady increase in demand, which means higher prices.

-Asset inflation: a sudden rise in exports, which translates to an undervaluation of the involved currencies

-Government spending: When the government opens up its pocketbooks, it drives up prices. Military spending prices may go up when the government starts to buy more military equipment.

-Inflation expectations: forecasts and expectations of inflation, where companies increase their prices to go with the flow of the expected rise

-More money in the system: demand-pull inflation is produced by an excess in monetary growth or an expansion of the money supply. Too much money in an economic system with too few goods makes prices increase.

31. Holding money to take care of contingencies is?

A. a speculative motive

B. a transaction motive

C. a precautionary motive

D. an expansionary motive

Correct Answer: Option C


Precautionary Motive: A desire to hold cash in order to be able to deal effectively with unexpected events that require cash outlay.

32. If a housewife has meat and tomatoes, she must find someone who wants meat and has tomatoes to give. this concept is described as?

A. opportunity cost

B. scale of preference

C. complementary demand

D. double of coincidence of wants

Correct Answer: Option D


This occurs when two people have goods they are both happy to swap in exchange. i.e. a perfect barter exchange. A requirement that must be met before a trade can be made. It specifies that a trader must find another trader who is willing to trade what the first trader wants and at the same time wants what the first trader has.

33. The stock exchange is an example of the?

A. labour market

B. money market

C. commodity market

D. capital market

Correct Answer: Option D


A capital market is a financial market in which long-term debt (over a year) or equity-backed securities are bought and sold.

34. What happens when the central bank increases bank rate in an economy

A. borrowing is discouraged

B. customers increase their borrowing

C. banks can increase their lending

D. money supply increases

Correct Answer: Option A


When the central bank increases the bank rate , the banks and individuals are discouraged from borrowing money because of increase in interest rates.

35. Income is redistributed when the rich are progressively taxed and?

A. more private schools are established

B. subsidy is provided on petroleum products

C. more public goods are provided

D. farmers are given guaranteed prices

Correct Answer: Option C


Income Redistribution is an economic practice which is aimed at leveling the distribution of wealth or income in a society through a direct or indirect transfer of income from the rich to the poor.

36. In order to increase revenue, government should tax commodities for which demand is?

A. perfectly price inelastic

B. price inelastic

C. price elastic

D. unitary elastic

Correct Answer: Option A


An economic situation in which the price of a product will have no effect on the supply. In a perfectly inelastic situation regardless of the amount of a product on the market, the price of the product remains the same.

37. Which of the following activities will not lead to economic growth?

A. massive importation of capital goods

B. intensive capital formation locally

C. use of modern technology

D. massive importation of consumer goods

Correct Answer: Option D


Activities that lead to economic growth includes

-Natural Resources. The discovery of more natural resources like oil, or mineral deposits may boost economic growth as this shifts or increases the country’s Production Possibility Curve.

-Physical Capital or Infrastructure.

-Population or Labor.

-Human Capital.



38. The poorer the country, the larger the percentage of labour force engaged in?

A. Agricultural

B. mining

C. trading

D. manufacturing

Correct Answer: Option A

39. Which of the following measure can be adopted to stabilize the external value of the local currency?

A. reduce the volume of export

B. increase the demand for imports

C. increase domestic money supply

D. reduce the demand for imports

Correct Answer: Option D


A rise in imports has a negative effect on the balance of trade, that is, it will tend to increase the trade deficit or reduce the trade surplus.

40. Which of the following is not a measure for reducing balance of payments deficits?

A. export drive

B. reducing tarriffs

C. adding to export goods

D. increasing local production

Correct Answer: Option B


Tariffs are duties (taxes) imposed on imports. When tariffs are imposed, the prices of imports would increase to the extent of tariff. The increased prices will reduced the demand for imported goods and at the same time induce domestic producers to produce more of import substitutes.

41. Nations engage in international trade because of difference in?

A. absolute cost

B. comparative cost

C. fixed cost

D. variable cost

Correct Answer: Option B


The principle of comparative cost states that;

international trade takes place between two countries when the ratios of comparative cost of producing goods differ, and each country would specialise in producing that commodity in which it has a comparative advantage.

42. One advantage of international trade is that

A. prices of goods become stable

B. countries become self-sufficient

C. goods consumed are produced at a very high cost

D. it makes possible the consumption of variety of goods

Correct Answer: Option D


International Trade promotes economic growth, efficiency, technological progress, and what ultimately matters the most, consumer welfare.

43. Which of the following forms of economic integration is a member nation free to impose duty against

A. custom union

B. free trade area

C. common market

D. economic community

Correct Answer: Option D


An economic community can be understood as any economic and/or political alliance which is specifically designed to foster trade and cooperation among its member countries. It’s underlying purpose is to reduce trade barriers and increase cooperation among its members.

44. The International bank for reconstruction and development (IBRD) performs the following functions except?

A. granting long-term loans

B. assisting with technical expertise

C. reducing tariff among members

D. developing human resource

Correct Answer: Option C


The International bank for reconstruction and development (IBRD), now known as The World Bank provides low-interest loans, interest-free credit, and grants. It focuses on improving education, health, and infrastructure. It also uses funds to modernize a country’s financial sector, agriculture, and natural resources management.

45. An electrical engineer who is teaching physics in a secondary school is said to be

A. under-employed

B. unemployed

C. fully employed

D. technically unemployed

Correct Answer: Option A


under-employed is : the condition in which people in a labor force are employed at less than full-time or regular jobs or at jobs inadequate with respect to their training or economic needs. In one usage, underemployment describes the employment of workers with high skill levels and post-secondary education who are working in relatively low-skilled, low-wage jobs. For example, someone with a college degree may be tending bar, or working as a factory assembly line worker(of a person) not having enough paid work or not doing work that makes full use of their skills and abilities.

46. One benefit a country can derive from the extraction of crude oil is increase in?

A. population

B. employment

C. money

D. demand for imports

Correct Answer: Option B


The extraction of crude oil in a country will lead to a correspondent increase in the manpower / labour required.

47. Which of the following cannot be classified as a natural resource

A. iron rod

B. wild life

C. solar energy

D. gold

Correct Answer: Option C


solar energy is man made which has the sun as its basic source of energy

Use the table below to answer questions 48 and 49

48. The total fixed cost is?

A. $7.00

B. $30.00

C. $20.00

D. $135.00

Correct Answer: Option C

49. At output level 5, the total variable cost is?

A. $5.00

B. $20,00

C. $55.00

D. $35.00

Correct Answer: Option D

50. In a pie chart, the population of a city is represented by a sector 45°. If the country has a population of 10 million people, then the city’s population is

A. 0.0045 million

B. 4.5 million

C. 1.25 million

D. 16 million

Correct answer: Option C

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2 Comments on 2020 WAEC Possible Economics Questions and Answers

  1. Fuck shit


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