Economics Exam Questions for SS3 First Term with Answers

You’re welcome to our school exams series where we provide you with termly examination questions in different subjects. In today’s post, we will focus on Economics exam questions. We will cover Economics exam questions for SS3 First term with answers. This means that we’ll be providing you with answers to the questions at the end. Also, you will get a few success tips on how to pass Economics examinations with flying colors. Remember to use the comments sections if you have questions, and don’t forget to join our Free Online Tutorial Classes on YouTube. (Subscribe to the Channel)

Introduction to Economics as a School Subject

Before we venture into Past Economics Exam Questions for SS3 First term, here’s a brief introduction to the subject:

Economics is a school subject that teaches students how people, businesses, and governments make choices about using limited resources to satisfy their needs and wants. It helps learners understand important ideas like demand and supply, production, consumption, money, and trade. By studying Economics, students learn how the economy works and how to make wise financial and business decisions in everyday life.

Economics Exam Questions for SS3 First Term

Economics Exam Questions for SS3 First Term are divided into three sections:

• Sections A and B
• Section C

The first section, namely, Section C is the objective test, and students are expected to attempt all questions in the section. Sections A and B are the theory part, and students are expected to follow specific instruction and answer the required number of questions.

Note that what you have below are SS3 Economics First Term Exam Past Questions made available to assist students in their revision for 1st term examinations and also teachers in structuring standard examinations.

SECTION A: Theory / Essay

Answer ONE question only from this section. Show all workings where required. Use a graph sheet where a graph is requested.

1. The table below shows output (in bags) and costs for rice production. Use the table to answer all parts.

Output of rice (bags): 1, 2, 3, 4, 5
Total variable cost (TVC) (N): 0, 5, 7, 10, 20
Total cost (TC) (N): 7, 12, 14, 17, 27

(a) Calculate the Average Fixed Cost (AFC) at output levels 1, 2 and 4.
(b) Calculate the Marginal Cost (MC) at all output levels.
(c) If the price per bag of rice is N10, calculate the profit or loss at each output level.
(d) At what output level(s) is profit maximized? Explain.
(e) Draw and label the Marginal Cost curve and Average Total Cost curve. (Graph paper required.)

2. A student, Mr. Smith, has a disposable income of N7.00 and the following price list:

Item — Price (N): Textbook 5.00; Shirts 2.00; Shoes 3.00; Trousers 3.00; Notebook 1.00; School fees 7.00; Mattress 10.00.

(a) Using the principle of scale of preference, state and explain what Mr. Smith will buy with N7.00.
(b) What is the opportunity cost of his decision in (a)? Explain.
(c) If his disposable income increases to N10.00, state what he will buy using the principle of scale of preference and give the opportunity cost.
(d) Define “scale of preference” and “opportunity cost.”
(e) State and explain two importance(s) of a scale of preference to consumers.

SECTION B: Theory / Essay

INSTRUCTION: Answer any FOUR questions from this section.

3. (a) Define peasant farming and commercial farming.
(b) Explain five ways in which agriculture contributes to the economic development of your country, giving specific examples.

4. (a) Distinguish between small-scale production and large-scale production.
(b) Describe five internal economies of large-scale production and explain how each reduces cost per unit.

5. (a) Explain four benefits of industrial development to an economy.
(b) Outline four measures that a government can adopt to encourage industrial growth and explain how each measure helps.

6. (a) Differentiate between direct and indirect taxation, giving one example of each.
(b) Highlight five advantages of indirect taxation, particularly for developing countries.

7. (a) Distinguish between location of industries and localization of industries (localization economies).
(b) Describe three advantages and two disadvantages of locating industries in rural areas.

8. (a) What is the incidence of taxation?
(b) Explain four principles of taxation and illustrate how each principle affects tax policy.

9. (a) Explain the functions of money as (i) a measure of value and (ii) a store of value.
(b) Show how inflation affects these two functions of money, giving examples.

10. (a) What is a commercial bank?
(b) Describe four ways by which the Central Bank controls the amount of credit granted by commercial banks.

11. Explain five objectives of the Economic Community of West African States (ECOWAS). For each objective, give one example of a programme or policy that supports it.

12. (a) Outline three problems faced by the Organization of the Petroleum Exporting Countries (OPEC).
(b) Discuss remedies or policies that have been adopted to address any two of those problems.

Read Also: Economics Exam Questions for SS2 First Term with Answers

SECTION C: Objective Test

Instruction: Answer all questions in this section by choosing from the options lettered A—D. Each question carries equal marks.

1. Which of the following is an economic activity?
A. Attending a town meeting
B. Visiting a stadium for leisure
C. Payment of school fees
D. Arresting a petty thief

2. The reward for land as a factor of production is called:
A. Interest        B. Rent
C. Wages          D. Dividend

3. The three broad categories of production are:
A. Primary, secondary and tertiary
B. Direct, secondary and extrusive
C. Primary, tertiary and direct
D. Secondary, primary and indirect

4. Which of the following items would be consumer goods for a carpenter? I. 1 kg of rice II. 3 screwdrivers III. 4 pairs of socks IV. 3 pairs of shoes
A. I and IV only
B. I, II, III and IV
C. I, II and IV only
D. I, II and III only

5. In a capitalist system, the means of production are mainly owned by:
A. The government
B. Politicians
C. Private individuals
D. The workers

6. A mixed economy is one in which the means of production are controlled by:
A. Private enterprise and the government
B. Private individuals only
C. The government only
D. Workers and businessmen

7. An economic good is best described as a good which:
A. Yields utility and commands a price
B. Is useful and occupies space
C. Is in high demand and transferable
D. Has unlimited supply

8. The concept of opportunity cost guides firms because it:
A. Determines the price of the firm’s products
B. Increases the level of output of the firm
C. Helps the firm allocate scarce resources among alternatives
D. Ensures maximum satisfaction of consumers

9. As a firm expands, it may enjoy cost advantages known as:
A. Variable proportions
B. Diminishing marginal returns
C. Internal economies of scale
D. Decreasing returns to scale

10. Division of labour is limited primarily by the:
A. Size of the market
B. Productivity of capital
C. Cost of production
D. Availability of factors of production

11. An entrepreneur is more likely to make higher profit when:
A. Expenditure exceeds revenue
B. Competition charges lower prices
C. Cost per unit of output falls
D. Quality of output reduces

12. Natural growth rate of population is defined as:
A. Birth rate minus death rate
B. Death rate minus migration
C. Death rate plus birth rate
D. Birth rate plus migration

13. A major economic effect of an ageing population is:
A. Reduced labour force
B. Rise in commodity prices
C. Reduced infrastructure
D. Neglect of agriculture

14. One problem associated with middlemen in distribution is that they sometimes:
A. Buy in large quantities
B. Hoard goods to create artificial scarcity
C. Grant credit to retailers
D. Sell a variety of goods

15. Distribution of goods is complete when they reach the:
A. Wholesalers
B. Consumer
C. Retailer
D. Manufacturer

16. The area between the demand and supply curves below equilibrium price indicates:
A. Excess demand
B. Excess supply
C. Equilibrium quantity
D. Equilibrium price

17. Demand for inferior goods as income rises is an example of:
A. Expansion of demand
B. Contraction of demand
C. An abnormal demand response
D. A change in consumer preference

18. When quantity demanded does not change as price changes, price elasticity of demand is:
A. Fairly inelastic
B. Perfectly inelastic
C. Infinitely elastic
D. Unitary elastic

Use the table below to answer questions 19–21.

Price (N): 5 → 3
Quantity supplied (units): 60 → 30

19. The percentage change in supply (quantity supplied) from 60 to 30 is:
A. 20%        B. 30%
C. 50%        D. 40%

20. The percentage change in price from N5 to N3 is:
A. 10%        B. 20%
C. 40%        D. 30%

21. Using the percentage changes above, the price elasticity of supply (in absolute value) is:
A. 0.75         B. 1.25
C. 1.00         D. 0.50

22. Which cost curve is NOT U-shaped?
A. Marginal cost curve
B. Average fixed cost curve
C. Average total cost curve
D. Average variable cost curve

23. For both a monopolist and a perfectly competitive firm, profit-maximizing output occurs where:
A. Marginal cost equals marginal revenue
B. Marginal revenue equals average revenue
C. Marginal cost intersects the X-axis
D. Marginal revenue intersects the Y-axis

24. The market structure in which many firms exist and none can influence price is known as:
A. Imperfect market
B. Perfect competition
C. Oligopolistic market
D. Monopoly

25. One main advantage of a partnership is:
A. The possibility of raising funds on the stock exchange
B. The ability to attract twenty or more members easily
C. Members can specialize in various business functions
D. It enjoys a separate legal personality distinct from members

26. A joint venture usually involves:
A. The poor and the rich
B. Employers and workers
C. Government and private investors partnering on a project
D. Multinationals and individuals acting as sole owners

27. The value or purchasing power of money is best measured by:
A. Input–output ratio
B. The amount of goods and services it can buy (purchasing power)
C. The importance people attach to money
D. Economies of scale

28. Which group benefits from inflation (all else equal)?
A. Wage earners with fixed nominal wages
B. Lenders of long-term fixed loans
C. Money lenders with fixed loan contracts
D. Borrowers of money with fixed-rate loans

29. A government action that can reduce inflationary pressure is:
A. Printing more money
B. Reducing tax rates
C. Reducing the level of government expenditure
D. Establishing more commercial banks

30. The market where currencies are bought and sold is the:
A. Capital market
B. Foreign exchange market
C. Commodity market
D. Stock market

31. Open market operations (OMO) by the Central Bank refer to:
A. Provision of credit by commercial banks
B. Provision of credit by mortgage banks
C. Buying and selling of government securities by the Central Bank
D. The procedure for establishing commercial banks

32. One advantage of localization of industry (industrial clustering) is:
A. Development of subsidiary firms and suppliers
B. Creation of parallel markets in urban slums
C. Development of slums near factories
D. Attraction of foreign capital only

33. Which policy is most likely to improve efficiency in the industrial sector?
A. Indigenization
B. Privatization of loss-making public enterprises
C. Nationalization of all foreign firms
D. Liquidation of industries

34. The number of people qualified to work and available for employment is called the:
A. Migrant labour
B. Working population (labour force)
C. Labour turnover
D. Mobile labour

35. Given the national income multiplier k = 1 / (1 − MPC). If MPC = 0.75 and government expenditure increases from N20 billion to N35 billion, the change in national income is:
A. N140 billion
B. N80 billion
C. N75 billion
D. N60 billion

36. The correct formula for the price index (simple relative price) is:
A. (Current price / Base year price) × 100
B. (Base year price / Current price) × 100
C. (Current price × Base year price) × 100
D. (Current price / Weighted price) × 100

37. When the general price level persistently falls (deflation), the rate of unemployment tends to:
A. Rise
B. Stagnate
C. Rapidly reduce
D. Equal the natural growth rate

38. Taxes levied on commodities (such as VAT) are called:
A. Direct taxes
B. Indirect taxes
C. Poll taxes
D. Investment taxes

39. Selling goods in foreign markets at prices below domestic prices is called:
A. Exchange
B. Dumping
C. Specialization
D. Exporting

40. One disadvantage of direct taxes is that they may:
A. Reduce government revenue
B. Reduce prices of essential commodities
C. Discourage people from working additional hours
D. Increase firm profits

41. International trade is based on the principle of:
A. Industrial production
B. Mass production
C. Regional production
D. Comparative advantage

42. Trade among West African countries is often limited because:
A. Countries are self-sufficient
B. Communication links and transport infrastructure are weak
C. The number of banks is insufficient
D. People are not enterprising

43. A policy that restricts the amount of foreign currency that can be bought and sold is called:
A. Devaluation
B. Credit control
C. Exchange control (foreign exchange control)
D. Export promotion

44. Which of the following is recorded under the capital account of the balance of payments?
A. Repayment of foreign loans (capital transactions)
B. Visible imports of goods
C. Invisible exports (services)
D. Cocoa exports (visible exports)

45. Development planning that takes an overall view of the economy is described as:
A. Aggregate economic planning
B. Disaggregate economic planning
C. Sectoral economic planning
D. Systems economic planning

46. The national income of a country can be estimated by the:
A. Cost–benefit method
B. Distribution method (income approach)
C. Expenditure method
D. Consumption method only

47. The difference between Gross Domestic Product (GDP) and Gross National Product (GNP) is mainly:
A. Depreciation
B. Domestic investment abroad and foreign income at home (net factor income from abroad)
C. Domestic investment abroad only
D. Net income from abroad

48. Which of the following is excluded when estimating national income (GDP)?
A. Dividends from productive activity
B. Wages and salaries
C. Transfer payments (e.g., pensions, social grants)
D. Corporate profits from production

49. One reason ECOWAS has been slow in achieving some objectives is:
A. Political instability in member states
B. Activities of multinationals
C. Inadequate personnel at the secretariat
D. Inadequate international support

50. One major achievement attributed to OPEC is that:
A. Crude oil prices have at times increased significantly due to coordinated production decisions
B. Petroleum product prices have remained low worldwide
C. Oil supply has been deregulated globally
D. OPEC eliminated price fluctuations completely

51. A perfectly competitive firm is a price taker because:
A. It sells a unique product with strong brand loyalty
B. There are many buyers and sellers and products are homogeneous
C. It faces no competition in the market
D. It can influence market price through advertising

52. If marginal cost (MC) is below average cost (AC), then:
A. AC is falling
B. AC is rising
C. AC equals MC
D. AC is constant

53. A tariff is:
A. A tax on income
B. A tax on imported goods
C. A subsidy on exports
D. A direct tax on domestic producers

54. Which of the following best describes fiscal policy?
A. Central Bank operations to control liquidity
B. Government use of revenue collection and spending to influence the economy
C. Policies to regulate business prices directly
D. Government ownership of private firms

55. The Phillips Curve shows the relationship between:
A. Inflation and economic growth
B. Unemployment and inflation (inverse relationship)
C. Aggregate demand and supply
D. Money supply and interest rate

56. Privatization is the process of:
A. Government taking over private firms
B. Selling government-owned enterprises to private investors
C. Nationalizing foreign companies
D. Liquidating all public enterprises

57. Which of the following is a merit good that governments often provide or subsidize?
A. Cigarettes
B. Education and health care
C. Luxury cars
D. Alcoholic beverages

58. What is meant by “crowding out” in macroeconomics?
A. Increased private investment due to higher public investment
B. Reduction in private investment due to higher government borrowing raising interest rates
C. Government providing free public services
D. Excess liquidity in the financial system

59. The law of diminishing marginal returns applies when:
A. Inputs are increased in the long run with all factors variable
B. One factor is increased while other factors are held constant, eventually adding less extra output
C. Returns to scale increase proportionately
D. Production is always constant as inputs rise

60. A country that exports more than it imports in value terms has:
A. A trade deficit
B. A trade surplus
C. A balanced trade account
D. A current account deficit

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Answers to Economics Exam Questions for SS3 First Term

Answers to Sections A and B (Theory)

1. Cost and Output Relationship in Rice Production

(a) Average Fixed Cost (AFC) = TFC / Output
TFC = TC – TVC
At output 1: TFC = 7 – 0 = 7 → AFC = 7 / 1 = 7
Ät output 2: TFC = 12 – 5 = 7 → AFC = 7 / 2 = 3.5
At output 4: TFC = 17 – 10 = 7 → AFC = 7 / 4 = 1.75

(b) Marginal Cost (MC) = ΔTC / ΔOutput
Between 1 and 2 bags: (12 – 7) / (2 – 1) = 5
Bëtween 2 and 3 bags: (14 – 12) / (3 – 2) = 2
Between 3 and 4 bags: (17 – 14) / (4 – 3) = 3
Between 4 and 5 bags: (27 – 17) / (5 – 4) = 10

(c) Profit or Loss = Total Revenue (TR) – Total Cost (TC)
TR = Price × Quantity = 10 × Output
At 1: TR = 10, Profit = 10 – 7 = 3
At 2: TR = 20, Profit = 20 – 12 = 8
Ät 3: TR = 30, Profit = 30 – 14 = 16
At 4: TR = 40, Profit = 40 – 17 = 23
At 5: TR = 50, Profit = 50 – 27 = 23

(d) Profit is maximized at outputs 4 and 5 where profit = N23.
Explanation: Profit increases as output increases, but no further rise after output 5, showing the profit-maximizing level.

(e) Graph required: The MC curve first falls, then rises; the ATC curve is U-shaped.

2. Scale of Preference and Opportunity Cost

(a) With N7.00, Mr. Smith will buy items that give him the highest satisfaction based on his preferences.
If his scale of preference ranks as: Textbook → Shoes → Shirts → Notebook → Trousers → School fees → Mattress.
He will buy one textbook (N5) and one notebook (N1), totaling N6, leaving N1 to save or use later.

(b) Opportunity cost: The next best alternative forgone, which is a pair of shoes (N3) he could not buy.

(c) With N10.00, Mr. Smith can buy a textbook (N5), shoes (N3), and a notebook (N1) = N9.
Opportunity cost: Trousers or another desired item not purchased.

(d) Scale of preference is a list of wants arranged in order of importance.
Opportunity cost is the next best alternative forgone when a choice is made.

(e) Importance:
1. Helps consumers allocate income efficiently among competing wants.
2. Enables decision-making under scarcity to maximize satisfaction.

3. Peasant and Commercial Farming

(a) Peasant farming involves small-scale farming using simple tools mainly for family consumption.
Commercial farming is large-scale farming using modern equipment aimed at profit-making.

(b) Contributions of agriculture to economic development:
1. Provides food for the population.
2. Supplies raw materials to industries.
3. Provides employment opportunities.
4. Earns foreign exchange through exports.
5. Contributes to national income and rural development.

4. Small-scale and Large-scale Production

(a) Small-scale production involves limited capital, small output, and few workers.
Large-scale production uses heavy capital, modern technology, and mass output.

(b) Internal economies of scale:
1. Technical economies – use of efficient machines lowers unit cost.
2. Managerial economies – specialization improves efficiency.
3. Marketing economies – bulk buying reduces cost per unit.
4. Financial economies – large firms access cheaper loans.
5. Risk-bearing economies – diversification spreads risks.

5. Industrial Development

(a) Benefits:
1. Creates employment opportunities.
2. Encourages use of local raw materials.
3. Increases GDP and standard of living.
4. Promotes technological advancement.

(b) Government measures:
1. Provision of infrastructure – lowers production cost.
2. Tax incentives – encourage investors.
3. Import restrictions – protect local industries.
4. Establishment of industrial banks – provide finance.

6. Direct and Indirect Taxation

(a) Direct tax: paid directly by individuals, e.g., income tax.
Indirect tax: paid through goods/services, e.g., VAT.

(b) Advantages of indirect tax:
1. Easy to collect.
2. Encourages savings.
3. Reduces consumption of harmful goods.
4. Provides steady revenue.
5. Paid gradually through spending.

7. Location and Localization of Industries

(a) Location refers to the site chosen for an industry.
Localization means the concentration of similar industries in one area.

(b) Advantages of rural industrial location:
1. Availability of cheap land and labour.
2. Decongestion of urban centers.
3. Balanced regional development.
Disadvantages:
1. Poor infrastructure.
2. Limited skilled labour.

8. Incidence and Principles of Taxation

(a) Incidence of taxation is the final burden of a tax—who actually bears it.

(b) Principles:
1. Equity – citizens pay according to ability.
2. Certainty – amount and time of payment should be clear.
3. Convenience – should be easy to pay.
4. Economy – cost of collection should be minimal.

9. Functions of Money and Inflation Effects

(a) Measure of value: Money expresses the value of goods and services in prices.
Store of value: Money retains value for future use.

(b) Inflation reduces purchasing power, so money can no longer measure or store value accurately.

10. Commercial and Central Banks

(a) A commercial bank is a financial institution that accepts deposits and grants loans for profit.

(b) Central Bank controls credit by:
1. Open Market Operations.
2. Cash Reserve Ratio.
3. Bank Rate Policy.
4. Moral Suasion.

11. Objectives of ECOWAS

1. Promote regional trade – through removal of tariffs.
2. Ensure free movement – ECOWAS passport system.
3. Encourage peace and security – ECOWAS Monitoring Group (ECOMOG).
4. Develop infrastructure – joint road and energy projects.
5. Promote cultural and social integration.

12. Problems and Remedies of OPEC

(a) Problems:
1. Falling oil prices due to global oversupply.
2. Non-member countries undermining OPEC policies.
3. Political instability among member nations.

(b) Remedies:
1. Production quotas to stabilize prices.
2. Cooperation with non-member oil producers to manage supply.

Answers to Section A (Objective Test)

The following table gives the correct answers to the objective section of Economics exam questions for SS3 First term. If you are using a mobile device, hold the table and scroll to the right or left for a complete view.

So here you have the answers to the objective section of Economics Exam Questions for SS3 First term. Use the comments section to let me know if you have any questions you would want me to clarify or discuss further.

How to Pass Economics Exam Questions for SS3 First Term

Passing your Economics exam questions for SS3 First term requires a combination of preparation, understanding, and strategy. Here are actionable tips to help you excel:

1. Know the syllabus.List all topics set for the term. Focus your study on those topics first. Do not waste time on off-syllabus items.
2. Master the basics.Make sure you understand key terms: demand, supply, elasticity, cost, revenue, profit, tax, money, GDP, etc. A weak foundation makes harder questions harder.
3. Use past questions and practice regularly.Work past SS3 term papers and similar WAEC/NECO style questions. Time yourself. Mark your answers and learn from mistakes.
4. Practice calculations and graphs.Do cost and revenue problems until you can calculate quickly and without panic. Draw neat supply and demand curves and label axes. Practice reading and using tables.
5. Plan answers for essay questions.Before writing, spend 2–3 minutes planning. Write a short outline with an introduction, main points and conclusion. This keeps your answer focused and complete.
6. Answer the question asked.Read each question twice. Underline action words like “explain”, “define”, “outline”, “distinguish”. Do not write everything you know—write what is required.
7. Show your workings.For calculations, show steps. Examiners award marks for correct methods even if the final number is wrong. Neat workings win marks.
8. Keep answers short and clear.Use short sentences and numbered points. Avoid long, vague paragraphs. Bullet or number points for clarity where allowed.
9. Manage your time in the exam.Allocate time: e.g., 50 minutes for objectives, 2 hours for essays. Stick to the plan. Move on if you get stuck and return later.
10. Use simple diagrams and labels.A small neat diagram can earn marks quickly. Label axes, curves and equilibrium points. Write a one-line explanation under the diagram.
11. Keep a tidy answer script.Write legibly. Number answers clearly. Cross out mistakes neatly and write corrections beside them. Examiners prefer neat scripts.
12. Revise smartly before the exam.Two days before, do light revision. Rework tough problems and memorise key definitions and formulas. Rest well the night before.
13. Stay calm and focused on exam day.Read instructions on the question paper. Start with the section you know best to build confidence. Breathe. Work steadily.

It’s a wrap!

If you need more clarification on SS3 First Term Questions on Economics, you can use the comments box below. We’ll be there to answer you asap. Don’t forget to join our Free Online Tutorial Classes on YouTube. (Subscribe to the Channel)

Best wishes…