JAMB UTME - Economics - 1991

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Economic goods are termed scarce goods when they are not available in sufficient quantities to satisfy all wants for them. This means that the demand for the goods exceeds the available supply, and as a result, people must make choices and trade-offs regarding how they allocate and use the available quantity of the goods. The concept of scarcity is a fundamental concept in economics because it forces people to make choices about how to allocate their limited resources to satisfy their unlimited wants and needs. Therefore, scarcity drives economic decision-making at both the individual and societal levels.

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One of the advantages of international trade is that it increases world output. International trade is the exchange of goods and services across national borders. One of the most important benefits of international trade is that it allows countries to specialize in the production of goods and services in which they have a comparative advantage. This means that they can produce certain goods more efficiently and at a lower cost than other countries. When countries specialize in producing goods and services in which they have a comparative advantage, they can trade with other countries to obtain goods and services that they cannot produce as efficiently or cost-effectively. This leads to an increase in world output because each country is able to produce more of the goods and services that it is best at producing, and trade for other goods and services it needs. As a result of international trade, countries can access a wider variety of goods and services, including raw materials, finished products, and services that are not available in their domestic markets. This can lead to lower prices for consumers and businesses, and it can also promote innovation and the spread of knowledge and technology. In summary, one of the advantages of international trade is that it increases world output by allowing countries to specialize in the production of goods and services in which they have a comparative advantage and to trade for other goods and services they need.

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If a society is operating on the production possibility curve, this implies that the resources are fully and efficiently utilized. The production possibility curve shows the maximum amount of goods that a society can produce with its given resources and technology. Any point on the curve represents the most efficient use of the society's resources. Therefore, if a society is operating on the production possibility curve, it is using all of its resources to their fullest potential and producing the maximum amount of goods that it can with its available resources and technology.

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A disadvantage of a joint-stock company is the potential loss of controlling interest. This means that as more investors buy shares in the company, the original founders or shareholders may lose their ability to make decisions and control the direction of the company. This can be particularly problematic if new shareholders have different goals or ideas for the company than the original founders or shareholders. As a result, the company may end up pursuing strategies that are not in the best interest of its original founders or shareholders.

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At any given level of output, a firm's total variable cost is the total cost of producing its output that varies with the level of production. This means that the cost is directly proportional to the quantity produced. Therefore, the correct option is "total cost less total fixed costs". Total variable cost excludes fixed costs, which are the costs that do not vary with output level, such as rent or lease payments.

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The age distribution of a country's population is of economic importance because it affects the pattern of expenditure. The age distribution of a population can influence how people spend their money, which can in turn affect the demand for different goods and services. For example, a population with a large number of young people may have a higher demand for goods and services related to childcare, education, and entertainment. On the other hand, a population with a large number of elderly people may have a higher demand for healthcare, retirement services, and other goods and services that cater to the needs of older adults. The age distribution of a population can also have an impact on the labor force and productivity. A country with a large population of working-age individuals can potentially have a larger labor force, which can lead to higher levels of productivity and economic growth. Conversely, a population with a large number of dependents, such as children and elderly people, may have a smaller labor force and lower levels of productivity. In summary, the age distribution of a country's population is an important economic factor because it can affect the demand for goods and services, the size and productivity of the labor force, and overall economic growth.

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The average tax rate is the ratio of the total amount of taxes paid by an individual or a company to their total income. For example, if an individual earns $50,000 and pays $10,000 in taxes, their average tax rate would be 20% ($10,000/$50,000). It represents the overall tax burden on the taxpayer, and is often used to compare tax rates across different income levels and tax jurisdictions.

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Budget deficit is the amount by which total expenditure exceeds revenue. A budget is a financial plan that outlines the expected revenue and expenditure of a government or organization over a specific period of time. A budget deficit occurs when the total expenditure of the government or organization is higher than its total revenue. Total expenditure includes both recurrent expenditure, which is the regular, ongoing expenditure such as salaries, wages, and interest payments, as well as capital expenditure, which is spending on assets such as infrastructure, buildings, and equipment. Revenue refers to the money received by the government or organization, such as taxes, fees, and grants. When revenue is less than total expenditure, it results in a budget deficit. Budget deficits can have significant implications for the economy, such as an increase in government debt, inflation, and a decrease in confidence from investors. In contrast, a budget surplus occurs when revenue exceeds total expenditure, which can help to reduce government debt and increase confidence from investors. In summary, a budget deficit occurs when total expenditure exceeds revenue, which can have significant implications for the economy and government finances.

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The comparison of the price and output decisions of a perfectly competitive firm with those of a monopolist shows that the perfect competitor charges a lower price and produces a larger output than the monopolist. This is because in a perfectly competitive market, there are many firms producing identical goods and services and no individual firm has control over the market price. Therefore, a perfectly competitive firm must accept the market price and produce at the level where its marginal cost equals the market price. On the other hand, a monopolist is the sole producer of a particular good or service and has significant control over the market price. As a result, a monopolist can charge a higher price and produce a lower output compared to a perfectly competitive firm. This is because a monopolist can restrict output to increase price and profit. Thus, the comparison shows that perfect competition results in lower prices and larger outputs compared to monopoly.

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The real cost of the book is the opportunity cost of choosing to buy the book instead of the mirror. Opportunity cost is the cost of the next best alternative that must be forgone in order to pursue a certain action. In this case, since the girl cannot pay for both the book and mirror, she has to choose between them. By choosing to buy the book, the opportunity cost is the value of the mirror which she could have purchased instead. Therefore, the real cost of her book is the value of the mirror which is also five naira.

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Based on the information given, it is not possible to determine the market structure of the firm portrayed. The statement does not provide any specific information about the characteristics of the market in which the firm operates. It only mentions that the firm is selling something, but it does not give any details about the product, its price, or the behavior of buyers and sellers in the market. Therefore, it is not possible to determine whether the firm is operating in a purely competitive market, an imperfectly competitive market, a market in which demand is elastic at all prices, or a market in which companies produce homogeneous commodities.

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An effect of inflation is that it favors debtors at the expense of creditors. Inflation is the persistent increase in the general price level of goods and services in an economy over time. It erodes the purchasing power of money, which means that the same amount of money can buy fewer goods and services than before. As a result, inflation affects different groups of people in different ways. One of the effects of inflation is that it favors debtors at the expense of creditors. When there is inflation, the value of money decreases over time. This means that the value of the debt also decreases over time, making it easier for debtors to pay off their debts with money that is worth less than when they borrowed it. On the other hand, creditors are at a disadvantage because they receive back money that has less purchasing power than when they lent it out. For example, if a person borrowed N100,000 at the start of the year with an interest rate of 10%, and there was no inflation, the borrower would have to pay back N110,000 at the end of the year. However, if there was inflation of 5% during the year, the borrower would have to pay back N105,000 in real terms. This means that the borrower is paying back less in real terms than they borrowed, while the creditor is receiving less in real terms than they lent out. In summary, one of the effects of inflation is that it favors debtors at the expense of creditors, as the value of money decreases over time, making it easier for debtors to pay off their debts with money that is worth less than when they borrowed it, while creditors receive back money that has less purchasing power than when they lent it out.

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If W stands for wages/salaries, P for profit, R for interest, and Z for rent on land real estate, then national income is the sum of all these components. Therefore, the correct answer is: W + P + R + Z This formula represents the total income earned by all individuals and businesses within a country's borders over a specified period. It includes all income generated from labor (wages and salaries), capital (profit and interest), and natural resources (rent on land real estate). National income is an important measure of a country's economic activity and is used to track changes in economic growth and development over time. By tracking changes in national income, policymakers can make informed decisions about fiscal and monetary policies to promote economic growth and stability.

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When units of a variable factor, such as labor or raw materials, are added to a fixed factor, such as capital or land, and the marginal physical product (MPP) of the variable factor keeps increasing, then production is said to be taking place under conditions of increasing returns to the variable factor. This means that as more units of the variable factor are added, the total output produced increases at an increasing rate. This is because the additional units of the variable factor are able to use the fixed factor more efficiently and productively, resulting in higher MPP. This is also referred to as the law of diminishing marginal returns, which states that as more units of a variable factor are added to a fixed factor, the marginal product of the variable factor will eventually decrease. In contrast, increasing returns to scale refer to a situation where all inputs are increased in the same proportion and output increases at a greater rate than the increase in inputs. Constant returns to the variable factor occur when the increase in output is proportional to the increase in input, and external economies of scale occur when the growth of an industry leads to lower costs for all firms in the industry due to shared infrastructure or resources.

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One of the functions of Development Banks is to provide medium and long-term finance for the development of the economy. Development Banks are financial institutions that are established with the specific purpose of promoting economic development in a country. They provide funding for various development projects that are aimed at improving the infrastructure, industry, and overall economic growth of a country. Unlike commercial banks, which primarily provide short-term loans, Development Banks provide medium and long-term finance that can be used for a wide range of development projects. These can include funding for infrastructure projects such as roads, bridges, and power plants, as well as financing for small and medium-sized enterprises (SMEs) and other businesses that are involved in economic development. Development Banks typically have a mandate to promote sustainable development and may focus on areas such as renewable energy, environmental protection, and social development. They may also provide technical assistance and other support to help ensure the success of the projects they fund. In summary, one of the main functions of Development Banks is to provide medium and long-term finance for the development of the economy, which can help to promote economic growth and improve the standard of living for people in a country.

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If the price of a ballpoint pen falls from N1.00 to N0.60 and the quantity demanded increases from 200 to 300, the point elasticity of demand is equal to 1.25. Elasticity of demand measures how responsive the quantity demanded of a good is to changes in its price. When the price of a good falls, we would expect people to buy more of it, and vice versa. The point elasticity of demand is a measure of the responsiveness of the quantity demanded to a change in price at a specific point. To calculate the point elasticity of demand, we use the formula: % change in quantity demanded / % change in price In this case, the price has fallen by 40% (from N1.00 to N0.60), and the quantity demanded has increased by 50% (from 200 to 300). Plugging these values into the formula gives: % change in quantity demanded = (300-200) / 200 x 100% = 50% % change in price = (0.60-1.00) / 1.00 x 100% = -40% So the point elasticity of demand is: -50% / -40% = 1.25 In other words, the quantity demanded is very responsive to changes in price, and a 40% decrease in price has led to a 50% increase in quantity demanded. In summary, if the price of a ballpoint pen falls from N1.00 to N0.60 and the quantity demanded increases from 200 to 300, the point elasticity of demand is equal to 1.25, which indicates a high level of responsiveness of the quantity demanded to changes in price.

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In a perfectly competitive market, the firm is in long-run equilibrium at the output where the average cost is minimum. This is because in the long run, firms can adjust their production levels and there are no barriers to entry or exit from the market. As a result, firms can produce at the lowest possible average cost. At this point, the firm is producing at the most efficient level and is earning normal profits. If the firm were to produce more or less than this output level, it would not be able to minimize its average cost and would either make losses or miss out on potential profits.

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A debenture is a type of long-term debt instrument issued by a company or government to raise funds. One characteristic of a debenture is that its yield is a fixed rate of interest, which is paid to the debenture holder at regular intervals until the maturity date of the debenture. This means that the investor knows exactly how much interest they will receive, and when they will receive it, providing them with a predictable income stream. Unlike equity, debenture holders do not have any voting rights in the company. Additionally, debentures typically have a redemption date, which is the date when the company is required to repay the principal amount of the debenture to the investor.

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Measuring the National Income of a country is important because it is a major determinant of the standard of living. The National Income reflects the total value of goods and services produced by a country in a given period, and it provides an indication of the economic performance of the country. By knowing the National Income, policymakers can determine the level of economic growth, the distribution of wealth, and the effectiveness of policies. This information helps in planning for economic development, assessing the impact of economic policies and programs, and measuring the progress of a country towards its economic goals.

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Trade by barter is a system of exchange where goods are directly exchanged for other goods without the use of money. One disadvantage of trade by barter is that the person wishing to buy good X may not have the specific good Y which is what the other party wants. This creates a problem of a double coincidence of wants, which means that both parties must have what the other wants. In this case, the transaction cannot be completed, and trade cannot take place. Hence, trade by barter is not as efficient as using money as a medium of exchange.

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Under flexible exchange rates, a deficit could be corrected by an appreciation of the currency relative to other currencies. A deficit occurs when a country's imports exceed its exports, which can lead to a decrease in the value of its currency relative to other currencies. This can make imports more expensive and exports cheaper, which can help to correct the deficit. Under flexible exchange rates, the value of a country's currency is determined by the market forces of supply and demand. If there is an excess supply of a currency, its value will decrease, while a shortage of a currency will cause its value to increase. Therefore, if a country has a deficit, its currency will likely decrease in value relative to other currencies, which can help to correct the deficit by making its exports cheaper and imports more expensive. This can lead to an increase in demand for its exports and a decrease in demand for its imports, which can help to balance its trade. In summary, under flexible exchange rates, a deficit can be corrected by an appreciation of the currency relative to other currencies, which can help to balance a country's trade by making its exports more competitive and its imports less attractive.

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Personal distribution of income implies the way in which income is distributed among specific households or spending units. Personal distribution of income is a measure of how much income is earned by different households or individuals in an economy. It refers to the way in which income is distributed across households, and can be measured using various statistical indicators such as the Gini coefficient or the share of income earned by different percentiles of the population. In other words, personal distribution of income measures how much income is earned by individuals or households in different parts of the income distribution. This is important because it can affect the overall level of economic inequality in a society, as well as people's standards of living and their ability to participate fully in the economy. In summary, personal distribution of income refers to the way in which income is distributed among specific households or spending units, and is an important measure of economic inequality and people's standard of living.

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A possible factor which limits the extent of growth of a firm is the unwillingness to share ownership and control. When a firm is experiencing growth, it may require additional capital, expertise, and other resources to continue expanding. One way to access these resources is through sharing ownership and control with other investors or partners. However, some firms may be reluctant to share ownership and control due to concerns about losing autonomy or diluting their ownership stake. This can limit their ability to access the resources necessary for further growth. Alternatively, firms may seek to finance their growth through debt or other means, but this can also have limitations. Excessive debt can increase financial risk and make it difficult to obtain additional financing in the future. In summary, the unwillingness to share ownership and control can limit the extent of growth of a firm, as it may limit access to the resources necessary for continued expansion.

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For money to perform its function as a store of wealth and standard for deferred payment, it must be stable in value. Money is a medium of exchange, a unit of account, a store of wealth, and a standard for deferred payment. When people hold money as a store of wealth, they want to be confident that the value of their money will remain relatively stable over time. If the value of money were to fluctuate widely and unpredictably, people would be less willing to hold it as a store of wealth. This would reduce the effectiveness of money as a medium of exchange and a standard for deferred payment. Therefore, for money to serve as a reliable store of wealth and standard for deferred payment, it must have a stable value. In summary, the stability of value is essential for money to serve as a store of wealth and standard for deferred payment. While the other options, such as being portable and in an attractive form, may be important, they are not as critical as stability in value.

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One major obstacle to economic development is low productivity. When workers are not producing enough goods or services, it can lead to a decrease in overall economic output and growth. This can be caused by a variety of factors such as inadequate infrastructure, lack of access to education or technology, poor working conditions, or insufficient investment in research and development. In order for an economy to grow and develop, it is essential for productivity to increase over time.

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The higher the dependency ratio, the smaller the proportion of the active labor force relative to the inactive. The dependency ratio is the number of dependents (people who are too young or too old to work) compared to the number of people who are of working age and potentially able to work. A high dependency ratio means that there are more dependents relative to the working-age population, which can create economic challenges for a country or region. When the dependency ratio is high, it means there are fewer people of working age to support those who are too young or too old to work. This can lead to higher levels of unemployment and lower levels of economic output. In turn, this can reduce the overall economic prosperity of a country or region. In summary, the higher the dependency ratio, the smaller the proportion of the active labor force relative to the inactive. This can create economic challenges and reduce overall economic prosperity.

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The Gross Domestic Product (GDP) is a measure of a country's economic activity. It represents the total value of all final goods and services produced within a country's borders during a specific period, usually a year. In other words, it's the sum of all the income earned by individuals and businesses in that country. GDP includes goods like cars, food, and clothing, as well as services like healthcare, education, and entertainment. It's an important measure of a country's economic health, as it helps policymakers understand the overall size and growth of the economy.

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The ordinary partner in a partnership has unlimited liability in case of business failure. A partnership is a business owned and operated by two or more people. In a partnership, each partner contributes to the business and shares in the profits and losses. There are different types of partners in a partnership, including ordinary partners and limited partners. An ordinary partner, also known as a general partner, is actively involved in the management of the business. They share in the profits and losses of the business, and they also have unlimited liability for the debts and obligations of the partnership. This means that if the business fails, the ordinary partner's personal assets may be used to pay off the debts and obligations of the partnership. In contrast, a limited partner is not actively involved in the management of the business and has limited liability. Limited partners are only liable for the debts and obligations of the partnership up to the amount of their investment in the business. Therefore, the ordinary partner in a partnership has unlimited liability in case of business failure, and this is one of the risks associated with being an active participant in the management of a partnership.

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Macroeconomics is a study of economics science from the point of view of the aggregate or general economy. This means that macroeconomics focuses on the overall behavior and performance of the economy as a whole, rather than on individual producers, consumers, or companies. Macroeconomists study things like national income, unemployment rates, inflation, and economic growth, and analyze how government policies can affect these factors. In essence, macroeconomics is concerned with the big picture of how the economy functions and how it can be improved to benefit society as a whole.

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Banks aid economic expansion and development by mobilizing savings for investment lending. When people deposit their money in banks, the banks are able to use those deposits to make loans to individuals and businesses. These loans can be used to finance various types of economic activities, such as starting or expanding a business, building new infrastructure, or purchasing equipment. By providing access to credit, banks help to facilitate economic growth and development. Furthermore, banks provide financial services such as payment processing, money transfer, and foreign exchange services that make it easier for individuals and businesses to engage in economic activity. Banks also pay interest on deposit accounts, which incentivizes people to save their money and provides a source of funding for banks to use in lending. Therefore, by mobilizing savings for investment lending, banks play a crucial role in promoting economic expansion and development.

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Industries tend to be located closer to market centers than to the sources of major raw materials if the products are relatively more expensive to transport than the major raw materials. This is because the cost of transportation is a major factor in the overall cost of production. If raw materials are bulky or expensive to transport, it may be more cost-effective to locate the industry closer to the market centers where the finished products can be sold. In this way, the cost of transporting finished products is minimized, and the industry can remain competitive. Additionally, if raw materials can be easily imported, it may make more economic sense to import them rather than sourcing them locally.

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One of the most outstanding disadvantages of co-operative societies as a business organization is that it is poorly financed. A co-operative society is a type of business organization that is owned and operated by its members for their mutual benefit. Members pool their resources together to establish the business and share the profits and losses equally. However, raising enough capital to start and sustain the business can be a challenge. Unlike other business organizations that can secure funding from investors or financial institutions, co-operative societies rely solely on their members' contributions. This can limit the amount of capital available for investment and expansion. Furthermore, since co-operative societies operate on a democratic principle where every member has an equal say in decision-making, it can be challenging to make quick and effective decisions that benefit the business. The true spirit of co-operation can also be marred by delegated authority, as some members may use their positions to advance their personal interests, rather than the collective interest of the society. In summary, while co-operative societies have several advantages, such as promoting unity and self-reliance, their main disadvantage is poor financing, which can limit their growth and success.