JAMB UTME - Economics - 1992

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The situation that can give rise to economic problems is limited means available for satisfying unlimited human wants. Simply put, human wants are infinite, but resources to satisfy these wants are limited. This creates scarcity, which leads to economic problems such as the need to make choices, competition for resources, and the potential for inequitable distribution of goods and services. The other options may contribute to economic issues, but the fundamental cause of economic problems is the scarcity of resources relative to unlimited human wants.

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A firm with marginal cost equals to its marginal revenue will produce the equilibrium output in a pure competition market. In pure competition, the firms are price takers and have no market power to influence the price. The equilibrium is reached when the market price equals the marginal cost of production. Therefore, the firm maximizes its profit by producing at the level where the marginal cost equals the marginal revenue. In other types of markets, the firm may have market power and can influence the price, thus changing the equilibrium output level.

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The correct equation that relates variable cost (VC) to total cost (TC) and fixed cost (FC) is: VC = TC - FC This means that variable cost is the difference between total cost and fixed cost. In other words, it is the cost that varies depending on the level of production or output. Fixed cost, on the other hand, remains constant regardless of the level of output. For example, let's say a company has a total cost of $10,000 to produce 100 units of a product. Of this cost, $5,000 is fixed cost (such as rent or salaries), and $5,000 is variable cost (such as raw materials and labor). If the company decides to increase production to 200 units, the variable cost will increase, but the fixed cost will remain the same. The new total cost will be $15,000 ($5,000 fixed cost + $10,000 variable cost). Therefore, the equation VC = TC - FC helps to understand how costs change with changes in the level of production.

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When the economy experiences high inflation, the value of money decreases, and prices of goods and services increase significantly. To reduce this situation, the government can implement a contractionary fiscal policy, which involves increasing taxes and decreasing government spending. This policy can be achieved by increasing taxes and reducing government spending, which will decrease the amount of money in circulation and reduce demand for goods and services. The reduction in demand will lead to a decrease in prices and ultimately lead to a reduction in the inflation rate. Therefore, the answer is to increase taxes and have a budget surplus.

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The main handicap of sole proprietorship is inadequate capital. This is because the sole proprietor has to provide all the capital for the business from their personal savings or borrowings, which may not be sufficient for the growth and expansion of the business. The business is also limited in its ability to raise additional capital since it cannot issue shares of stock to the public like a corporation can. As a result, the business may not be able to take advantage of growth opportunities or compete effectively with larger businesses.

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Aggregate saving in national income accounting is defined as all disposable income not spent on consumption. In simpler terms, it is the amount of money that individuals and households save instead of spending on goods and services. This includes income that is saved in bank accounts, investment accounts, or any other financial instrument that is not spent on consumption. Saving is an important economic indicator because it contributes to investment, which can stimulate economic growth.

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The price mechanism is more effective in achieving efficient performance of the economy than the planning mechanism because of the role of supply and demand. In a market economy, the price mechanism allows the forces of supply and demand to determine prices and allocate resources. This helps to ensure that resources are used efficiently and that goods and services are produced at the lowest possible cost. On the other hand, in a planned economy, prices are often set by government officials and resources are allocated based on directives rather than market signals. This can lead to inefficiencies and misallocation of resources. Thus, the price mechanism is considered more effective in achieving efficient performance because it allows the market to adjust and respond to changes in supply and demand, leading to a more efficient allocation of resources.

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The type of business organization mostly used for producing public goods in Nigeria is Statutory Corporations. This is because public goods are typically non-excludable and non-rival, and therefore cannot be efficiently provided by private firms seeking to make a profit. Instead, the government or statutory corporations are better positioned to produce and provide public goods, such as public infrastructure, healthcare, and education. Statutory corporations are created by Acts of Parliament and are usually established to provide specific public services or to undertake specific projects on behalf of the government. Examples of statutory corporations in Nigeria include the Nigerian National Petroleum Corporation (NNPC) and the Nigerian Ports Authority (NPA).

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Scale of preference refers to the list of goods and services in order of priority that a consumer has when making choices based on their limited resources. It is an individual's ranking of wants and needs in order of importance, which guides decision making on how to allocate scarce resources. For instance, when a consumer wants to buy goods but is unable to afford all of them at once, they use their scale of preference to decide which goods to purchase first based on their level of importance. The list helps the consumer to prioritize their needs, allocate their resources efficiently, and satisfy their most urgent wants first.

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Farmers' income may fall if they produce more cash crops for export because of foreign demand inelasticity. In other words, if the demand for the cash crops they produce for export is relatively insensitive to changes in price, an increase in the quantity supplied may not necessarily result in a proportional increase in revenue. This is because the increase in supply will likely cause a decline in the price of the cash crops, which could lead to a fall in the farmers' income. Additionally, the production of cash crops for export may divert resources from the production of food crops for local consumption, leading to food insecurity and a reduction in farmers' income.

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The remaining 2% of the annual growth rate of 5% is generally attributed to technical progress. This refers to advancements in technology and knowledge that contribute to the increase in productivity and efficiency of labor and capital. Technical progress can result from various factors, such as research and development, innovation, and improvements in infrastructure and education. It allows an economy to produce more output using the same or fewer inputs, which leads to economic growth and increased standards of living.

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The account from which allocations are made to the three tiers of government in Nigeria is called the "Federation account." It is a special account created by the Nigerian government where all revenues generated from natural resources, taxes, and other sources are deposited. The funds in the account are then shared among the Federal, State, and Local Governments based on a formula agreed upon by all the parties involved.

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The combination that is a veritable set of development indicators is "Low infant mortality and high per capita income and literacy rates". These indicators are generally used to measure the level of development of a country. A low infant mortality rate indicates that the country has a good healthcare system, while a high per capita income and literacy rates suggest that the country has a well-educated population and a strong economy. Therefore, this combination is a better representation of a country's overall level of development than the other options.

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In a wholly capitalist economy, the price mechanism allocates resources. This means that the forces of supply and demand determine the prices of goods and services, and producers and consumers are free to make their own choices. The market regulates itself without any significant government intervention. Therefore, options 1 and 4 are not applicable in a wholly capitalist economy. In such an economy, the consumer is sovereign because producers respond to consumers' preferences and demands, making false.

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Terms of trade (TOT) refers to the relative price of exports in terms of imports and is defined as the ratio of export prices to import prices.

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If a country has a balance of payment crisis, the best measure to bring about an improvement in the short run is large-scale export of locally made goods abroad. This is because the country can earn more foreign exchange by exporting its goods to other countries, which can be used to pay for its imports and improve its balance of payments position. The other options listed may not be effective in the short run as they may take time to yield positive results or may even exacerbate the balance of payments crisis.

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The real cost of producing a commodity refers to the opportunity cost, which is the value of the next best alternative foregone. In this case, the real cost of the quantity of X produced can be measured by the total amount of Y that the economy could have produced with the same resources used to produce X. This means that producing X comes at the cost of the forgone production of Y, and the real cost of X is the amount of Y that could have been produced instead. Therefore, the answer is "total amount of Y it could have produced."

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The consumer-goods industry is dominant in the industrial sector of the Nigerian economy because of the availability of the market and most of the raw materials required. Nigeria has a large population with a growing middle class, which provides a significant market for consumer goods. Additionally, many of the raw materials required for the production of consumer goods are available in the country, such as agricultural products, which makes it easier and more cost-effective to produce consumer goods locally. Therefore, the availability of the market and raw materials is a major factor that has contributed to the dominance of the consumer-goods industry in the Nigerian economy.

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The Nigerian Trust Fund is managed on behalf of Nigeria by the African Development Bank.

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The total amount of money in circulation includes cash, and current account balances owned by banks and non-bank public. In other words, it refers to the sum of all physical currency and bank account balances, including checking and savings accounts, that are available in an economy at a given time. This includes money owned by banks, the government, and the non-bank public.

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Nigeria is a major oil-producing country, and as a result, earns a significant amount of foreign exchange from the export of crude oil. The forward linkage effects refer to the various economic activities that result from the production and export of oil, such as job creation, infrastructure development, and technological advancements. Because most of Nigeria's crude oil is exported, it means that the foreign exchange earnings are high. However, the forward linkage effects may not be as high as they could be, since much of the oil production is controlled by multinational corporations rather than local Nigerian companies. Therefore, the answer is "respectively high and low."

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Land reform is the process of redistributing land from the wealthy to the poor in order to promote equity and economic growth. However, land reform faces several obstacles in developing countries, and one of the primary barriers is the opposition by landlords. These landlords often hold large tracts of land and are not willing to give them up. They may also use their political influence to prevent any changes to the status quo. Other factors such as fear of reduced output levels, concerns about peasant access to credit, and general contentment with the current arrangement can also pose obstacles to land reform, but opposition from landlords is often the main barrier.

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To calculate GNP per head of the population, we need to divide the GNP by the population. For Year 1: GNP per head = GNP/Population = N200,000/N200 = N1000.00 For Year 2: GNP per head = GNP/Population = N225,000/N200 = N1125.00 Therefore, the GNP per head for Year 1 is N1000.00 and for Year 2 is N1125.00. The answer is option D: N1000.00; N1125.00.

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Under the Nigerian Structural Adjustment Programme (SAP), the marketing of agricultural commodities in Nigeria has been placed under private investors and individuals. This means that the government has allowed the private sector to take control of the marketing of agricultural produce instead of the traditional marketing boards and commodity boards that were previously in charge. This was done to promote efficiency and competition in the marketing of agricultural commodities, and to reduce government expenditure. The private sector is expected to bring in the much-needed investments and technology to help modernize the agricultural sector and make it more profitable.

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The objective of public finance is to promote full employment, national income, and price stability. Public finance is concerned with how the government manages its revenue and expenditure to achieve economic stability and growth. The government's revenue comes from taxes, duties, fees, and other sources, and it is used to provide public goods and services, such as education, healthcare, infrastructure, and defense. The government's expenditure should be carefully planned and managed to achieve its economic objectives, including the promotion of full employment, the increase of national income, and the maintenance of price stability. By achieving these objectives, public finance can contribute to the overall economic well-being of the country.

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To reduce the supply of money in the economy, the best option is to increase the liquidity ratio. The liquidity ratio refers to the percentage of a bank's assets that must be held in cash or other highly liquid assets, such as government securities. By increasing the liquidity ratio, banks are required to hold more money in reserve, which means they have less money to lend out to customers. This decrease in lending will lead to a reduction in the supply of money in the economy. The other options listed are likely to increase the supply of money in the economy, as they involve increasing the availability of credit or decreasing government securities.

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The main reason for the current programme of privatization and commercialization of public enterprises in Nigeria is to encourage efficiency in the performance of such enterprises. Privatization involves the transfer of ownership and control of public enterprises from the government to private individuals or corporations. Commercialization, on the other hand, involves the operation of government-owned enterprises on a commercial basis, with the aim of making them more efficient and profitable. By transferring ownership and control to private individuals or corporations, the government hopes to improve the performance and profitability of these enterprises. This can lead to increased productivity, job creation, and ultimately, economic growth.

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The significant effect of the growth of the oil sector in Nigeria has been to diminish the percentage contribution of the agricultural sector to GNP. This is because the oil sector became the dominant sector in the Nigerian economy and attracted more investment, resources and attention than the agricultural sector. As a result, there was less emphasis on agricultural development and less investment in the sector, leading to a decline in its contribution to Gross National Product (GNP). This phenomenon is known as the "Dutch Disease," where the abundance of natural resources, particularly oil, leads to the neglect of other sectors of the economy.