JAMB UTME - Economics - 2001

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In a free market economy, the price system allocates resources to their best alternatives. This means that the forces of supply and demand determine the prices of goods and services, which in turn guide the allocation of resources in the economy. Producers will produce goods and services that are in demand at profitable prices, while consumers will buy goods and services they need or want at prices they are willing to pay. This way, the resources are allocated efficiently to the best use, resulting in the maximum benefit to society. The government's role is usually limited to enforcing property rights and regulating markets to ensure fair competition, but it does not dictate the allocation of resources.

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Economics is regarded as a social science because it adopts the scientific method in the study of human behaviour. Economics is concerned with the study of how humans make choices to allocate scarce resources to meet their unlimited wants and needs. It uses quantitative and qualitative methods to analyze human behavior, social phenomena, and economic problems. As a social science, economics also studies the impact of economic policies on society and how economic systems affect social welfare.

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Concentrating industries in an area can result in environmental pollution. This is because industrial activities tend to generate waste products, such as greenhouse gases, chemicals, and hazardous materials, which can be harmful to the environment and human health. The close proximity of industries in a concentrated area increases the likelihood of pollution incidents and can have a negative impact on air and water quality, soil fertility, and biodiversity. Thus, environmental degradation can be considered as a disadvantage of concentrating industries in an area.

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At the consumer equilibrium, the slope of the indifference curve is equal to the slope of the budget constraint line. The consumer equilibrium is the point where the budget constraint line and the highest possible indifference curve intersect. The budget constraint line represents the different combinations of two goods that a consumer can afford to buy with a given budget, while the indifference curve represents the different combinations of those two goods that provide the same level of satisfaction or utility to the consumer. The slope of the budget constraint line represents the rate at which one good can be exchanged for another good, while the slope of the indifference curve represents the consumer's marginal rate of substitution, or the rate at which the consumer is willing to exchange one good for another while remaining indifferent or equally satisfied. At the consumer equilibrium, the consumer is maximizing their utility subject to their budget constraint, which means that the slope of the indifference curve is equal to the slope of the budget constraint line. Any point above or below this equilibrium point would result in a lower level of utility or affordability, respectively. Therefore, the slope of the indifference curve at the consumer equilibrium is equal to the slope of the budget constraint line.

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The losses suffered by a sole proprietor are not limited to the amount invested. A sole proprietor is personally responsible for all the debts and losses incurred by the business. This means that if the business incurs large losses or debts, the owner's personal assets can be used to cover those losses, even if it means selling personal property or assets. As a result, the sole proprietorship business structure carries a higher degree of risk and personal liability than other types of business structures, such as corporations or limited liability companies (LLCs).

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The distribution channel that contributes most to the cost of production is the one that involves more intermediaries in the chain. The more intermediaries involved, the higher the cost of production due to additional expenses such as transportation, handling, storage, and profits for each intermediary. Therefore, the distribution channel that involves the producer, retailer, wholesaler, and consumer (option D) would contribute the most to the cost of production.

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If the government fixes a price below the equilibrium price, it creates a situation where there is excess demand or shortage in the market. This means that at the fixed price, the quantity demanded will be more than the quantity supplied. In other words, there will be a situation where buyers will be willing to buy more of the product at the fixed price, but suppliers will not be willing to supply as much as buyers want. This is because the price is not high enough to cover their production costs or to make a profit. Therefore, the correct answer is that quantity demanded will increase as consumers respond to the lower price, while quantity supplied will be less than quantity demanded, resulting in a shortage of the product.

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The capital market is a market where long-term financial assets are traded. These assets may include things like stocks, bonds, and other long-term securities. Treasury bills and commercial papers are short-term financial assets and are not generally traded in the capital market. However, bankers' acceptances, which are short-term financial instruments issued by banks, can sometimes be traded in the capital market. Therefore, the financial assets that are traded in the capital market are primarily long-term securities.

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Efficiency of labor refers to how well workers can perform tasks to produce goods or services. To increase efficiency, constant training of workers is necessary to ensure they acquire new skills and knowledge relevant to their tasks. Training can also help workers to learn new methods and techniques that can help them to perform their tasks more effectively and efficiently. Retirement of workers on a regular basis is not necessarily an effective way to increase efficiency of labor, as experienced workers can also be valuable contributors to the organization. Engaging only expatriates can be expensive and may not be a sustainable solution for all organizations, especially those operating in developing countries. Placing an embargo on recruitment can limit the organization's ability to hire new talent and keep up with changing market demands.

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When a generalization is made based on observed facts, it is known as inductive reasoning. Inductive reasoning involves drawing conclusions from specific observations or data points to make a generalization or hypothesis about a larger group or phenomenon. It is commonly used in scientific research and is the opposite of deductive reasoning, which involves starting with a general premise and using it to draw specific conclusions. Inductive reasoning is an important tool for generating new ideas and theories, but it also has limitations as it is not always possible to observe all relevant data points or make accurate generalizations based on limited observations.

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Improved extension services in the agricultural sector refer to the provision of information, training, and assistance to farmers to help them increase their productivity and improve the quality of their products. This includes knowledge of new and innovative techniques, technologies, and practices that can improve their crop yields, reduce crop damage and loss, and improve livestock production. Therefore, the correct answer is that improved extension services facilitate the acquisition of techniques that can be used in agriculture.

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A country can accelerate economic development by pursuing a rational population policy. This involves carefully managing population growth through measures such as family planning, education, and healthcare. Pursuing a high population growth rate may lead to an unsustainable burden on the country's resources and infrastructure, which can hinder economic development. Therefore, a rational population policy that promotes sustainable population growth is crucial for economic development. Pursuing an incremental population policy involves gradually reducing population growth rates to more sustainable levels.

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An industry is a group of firms that produce related commodities or offer related services. The firms in an industry may have similar production processes, use similar inputs, or cater to similar markets. Examples of industries include the automobile industry, the banking industry, and the retail industry. The firms in an industry may compete with one another for market share, and they may also cooperate through joint ventures, strategic alliances, or trade associations to improve their collective bargaining power or to share industry-specific knowledge and resources.

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To facilitate the exportation of crude oil from Nigeria, pipelines were laid to connect the major oil wells to the ports. Pipelines are a common method for transporting oil and gas over long distances. In Nigeria, the major oil wells are located in the Niger Delta region, while the ports are located along the coast. To transport the crude oil from the wells to the ports, pipelines were constructed to connect the two locations. While other methods, such as road, rail or air transportation, could also be used to transport crude oil, pipelines are generally considered to be the most efficient and cost-effective option. Pipelines can transport large quantities of oil over long distances with minimal energy requirements and environmental impact. In summary, to facilitate the exportation of crude oil from Nigeria, pipelines were laid to connect the major oil wells to the ports.

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A change in supply is best described as a shift of the supply curve to the left or to the right. A shift in the supply curve means that at each given price, the quantity supplied by producers changes. This can occur due to various factors such as changes in production costs, technology, taxes, subsidies, or the number of producers in the market. A movement along the supply curve, on the other hand, occurs due to a change in the price of the good, which causes a change in the quantity supplied, but not a shift in the supply curve.

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The reduction of high fertility rate is a measure in population control designed to make the growth in population more sustainable. A high fertility rate means that there is a high number of births per woman in a population, which can result in a rapid increase in population size. This can lead to a strain on resources, such as food, housing, and healthcare, and can make it difficult for governments to provide basic services to their citizens. By reducing fertility rates, population growth can be slowed down, which can help to ensure that resources are used more sustainably and that governments can better provide for their citizens.

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Money may not be accepted as a store of value if its value is unstable. This means that if the value of money keeps fluctuating, people may lose confidence in it as a store of value. Inflation and deflation are examples of factors that can cause the value of money to become unstable. When there is inflation, the value of money decreases, while deflation causes an increase in the value of money. For example, if someone saves money in a currency that experiences hyperinflation, the value of their savings will decrease rapidly over time. As a result, they may choose to save their money in a different currency or invest it in assets that retain their value better. Therefore, the correct answer to the question is: Money may not be accepted as a store of value if its value is unstable.

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The major reason why nations engage in international trade is that they are substantially different in their endowments of economic resources. Some countries may have an abundance of natural resources, while others may have more advanced technology or skilled labor. By engaging in international trade, countries can specialize in producing goods and services that they have a comparative advantage in, and then exchange them with other countries for the goods and services that they do not produce as efficiently. This allows countries to expand their markets, increase productivity, and improve living standards.

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Fixed cost is a type of cost that remains constant, regardless of the level of production or sales. Among the options provided, the example of fixed cost is "Rent on building". This cost does not vary with the level of production or sales, and it is a necessary expense that must be paid even if the business is not generating any revenue. In contrast, the other options provided are examples of variable costs, as they tend to increase or decrease with the level of production or sales.

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A normal good with close substitutes is likely to have its price elasticity of demand greater than unity. This means that a small change in the price of the good will result in a relatively larger change in the quantity demanded. When there are close substitutes for a good, consumers have more options to choose from if the price of the good increases, and therefore the demand for that good becomes more sensitive to price changes. As a result, the price elasticity of demand is likely to be greater than unity.

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The long run is a period of time during which a firm can vary all its inputs, including its plant and equipment, and make any desired adjustments to its production process. In the long run, a firm can enter or exit the market, change the size of its factory, hire or lay off workers, and make changes to its production technology. This allows a firm to fully adapt to changes in the market, and make the necessary adjustments to maximize profits.

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A major advantage of specialization and division of labor is that time wastage will be minimized. When tasks are divided among workers and each worker specializes in a specific task, they become more skilled and efficient in their work. This results in faster production and completion of tasks. Additionally, workers can focus on improving their skills in their specialized area, leading to higher quality work. By minimizing the amount of time wasted on switching between tasks, finding and learning new tools and techniques, and other non-productive activities, more work can be completed in less time. This can lead to increased productivity, lower costs, and higher profits for businesses. Therefore, one of the key advantages of specialization and division of labor is the reduction of time wastage.

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A national debt is an expected outcome of a deficit budget. A deficit budget is when a government's spending exceeds its revenue in a given fiscal year, resulting in a budget deficit. To cover the shortfall, the government will need to borrow money, usually by issuing government bonds, which contributes to the national debt. Therefore, when a government consistently runs a deficit budget, the national debt continues to grow. In contrast, a consolidation budget, balanced budget, or surplus budget means that the government's spending is within its revenue, and there is no need to borrow, thus avoiding adding to the national debt.

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A production function relates the output of a production process to the inputs used in the production process. It shows how much output can be produced from a given set of inputs. In other words, it expresses the relationship between the amount of goods and services produced (output) and the amount of resources such as labor, capital, and materials (inputs) used in the production process. The production function is an important concept in economics and is used to analyze the efficiency of production processes and to determine optimal input combinations for producing a given level of output.

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The fixing of the price of an item above or below the equilibrium price is most likely to take place in a centrally planned economy. In this type of economy, the government sets prices for goods and services, which can lead to price controls and price ceilings or floors. This can result in prices being set either above or below the market equilibrium price, causing either surpluses or shortages of goods and services. In contrast, a free market economy relies on supply and demand to determine prices, and prices tend to gravitate towards the equilibrium price. In a mixed economy, both government intervention and market forces influence prices. Developed economies can have a variety of economic systems, including centrally planned, free market, and mixed economies, so it is not necessarily true that fixing prices above or below equilibrium is more likely to occur in a developed economy.

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The loans from the World Bank to developing countries are mainly to support infrastructural investments. This means that the World Bank loans are geared towards supporting the development of basic infrastructure such as transportation, water supply, power supply, telecommunications, and other public utilities. The main objective of these investments is to help the developing countries build a strong foundation for economic growth and development, which will eventually lead to poverty reduction and better living conditions for the citizens. Infrastructural investments are also key in promoting economic activities and increasing productivity in the developing countries, which can help to attract foreign investments and create more job opportunities.

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National Income Accounting is a way of measuring a country's economic performance. GNP (Gross National Product) is the total value of all goods and services produced by a country's residents and businesses, including those produced abroad, during a specified period. NNP (Net National Product) is derived by subtracting the depreciation or capital consumption of fixed assets from GNP. In other words, it represents the value of goods and services produced by a country's residents and businesses, minus the amount of capital that has been used up in the process of producing them. This subtraction accounts for the amount of wear and tear on the machinery, buildings, and other assets that were used to produce the goods and services. Therefore, the correct answer to the question is "capital consumption."

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The equilibrium price is the price at which the quantity demanded of a product is equal to the quantity supplied. From the table, we can see that at a price of N80, the quantity demanded by consumers and the quantity supplied by producers are both 100 crates. This means that the market is in equilibrium at a price of N80. Therefore, the answer is N80.

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A major problem facing all economies is how to allocate scarce resources. This means that every economy has limited resources such as land, labour, and capital, but unlimited wants and needs. Therefore, they must make choices on how to allocate these resources efficiently in order to produce the goods and services that will satisfy the needs and wants of their population. This is a fundamental economic problem faced by all economies, whether they are developed or developing, and it is the basis for the study of economics.

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A tax that increases at a higher percentage as income increases is called a "progressive tax". In this type of tax, as income increases, the percentage of income paid as tax also increases. This means that those with higher incomes pay a larger share of their income in taxes compared to those with lower incomes. The idea behind a progressive tax is to distribute the tax burden more fairly, so that those who can afford to pay more, do so.

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In Nigeria, revenue sharing from the Federation Account is between the federal, state, and local governments. The Federation Account is a special account where all revenue collected by the Federal Government is deposited, and then shared among the three tiers of government based on a formula. This formula is determined by the Revenue Mobilization Allocation and Fiscal Commission (RMAFC), which takes into consideration factors such as population, equality, land mass, and revenue generation capacity. The federal government receives the largest share, followed by the state governments, and then the local governments. This revenue sharing arrangement is aimed at promoting equitable distribution of resources and promoting development at all levels of government.

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The raising of funds by selling stocks to the public is called equity financing. This is a process where a company issues stocks to the public, which represents ownership in the company. Investors who purchase these stocks become shareholders and are entitled to a share of the company's profits in the form of dividends. Equity financing is a common way for companies to raise capital without incurring debt. It can also provide benefits such as increased publicity and credibility for the company.

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A vertical supply curve indicates that the same fixed quantity will be supplied no matter the price. In economics, the supply curve represents the relationship between the quantity of a good that producers are willing to supply and the price of that good. A vertical supply curve means that at every possible price, the quantity of the good supplied will be the same. This situation typically arises when the production of the good is fixed and cannot be increased or decreased in response to changes in price. For example, a rare vintage wine that is no longer being produced may have a vertical supply curve, since there is a fixed quantity of that wine available, and no amount of price change can increase the supply. Another example could be a limited edition collector's item, where the number produced is fixed and cannot be increased in response to changes in demand or price. It's worth noting that a vertical supply curve is rare in most markets, as producers are usually able to adjust their output in response to changes in price. In most cases, the supply curve is upward sloping, indicating that as the price of a good increases, producers are willing to supply more of it.

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An increase in the price of a commodity will result in an increase in the quantity supplied. This is because, as the price of a commodity rises, suppliers are willing to produce and supply more of it to the market in order to take advantage of the higher price and earn more profit. This relationship between price and quantity supplied is known as the law of supply, which states that there is a positive relationship between price and quantity supplied, ceteris paribus (i.e., assuming all other factors remain constant). Therefore, when the price of a commodity increases, suppliers are incentivized to produce and sell more of it, resulting in an increase in the quantity supplied.

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An imperfect market exists where the location of some sellers gives them an advantage over others. In an imperfect market, there are conditions that prevent the market from being efficient, such as barriers to entry, a lack of perfect information, or the presence of market power among buyers or sellers. As a result, the market may not reach an optimal level of output or price, and some market participants may be able to gain an advantage over others. In the case of location-based advantages, sellers in certain areas may be better positioned to attract customers or face lower costs, giving them an advantage over competitors in other areas.

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The correct answer is "wages rate." The wages rate is the price paid for labor services. It is the amount of money that employers pay to workers in exchange for the labor services they provide. This is usually expressed in terms of an hourly, daily, weekly, or monthly rate of pay.

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An important feature of perfect competition is that there is adequate knowledge of existing prices. In perfect competition, there are many buyers and sellers of a homogeneous product, and no single buyer or seller can influence the price. This means that prices are determined by market forces, which requires that both buyers and sellers have perfect knowledge of the market, including prices. This allows for efficient allocation of resources and promotes consumer welfare.