JAMB UTME - Economics - 1990

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The law of diminishing marginal utility states that as a consumer continues to increase their consumption of a commodity, the additional satisfaction or utility they receive from each additional unit consumed eventually begins to decrease. Therefore, if a consumer increases their consumption of a commodity continuously, their marginal utility must fall. This means that the additional satisfaction or utility gained from each additional unit consumed will decrease over time. However, it is important to note that their total utility may still be increasing, even though their marginal utility is falling, until it eventually reaches a maximum point and then begins to decline as well.

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A firm achieves least-cost in production by substituting factors of production until the ratio of their marginal physical products equals the ratio of their prices. Marginal physical product (MPP) refers to the additional output produced by adding one unit of a factor of production while holding other factors constant. A firm can minimize its cost of production by substituting factors until the ratio of their marginal physical products equals the ratio of their prices. In other words, a firm should allocate its resources in a way that maximizes its productivity for every dollar spent. This means that the firm should use more of the cheaper factor and less of the expensive factor, as long as the marginal physical product of each factor is proportional to its price. For example, if labor is cheaper than capital, a firm should use more labor and less capital until the ratio of their marginal physical products equals the ratio of their prices. If the marginal physical product of labor is higher than the marginal physical product of capital, then the firm should use more labor and less capital to achieve the least-cost production. Therefore, a firm achieves least-cost in production by substituting factors until the ratio of their marginal physical products equals the ratio of their prices.

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The opportunity cost of something is the value of the next best alternative that must be given up in order to choose that thing. In this case, the opportunity cost of one kilogram of beef is the number of oranges that could have been purchased with the same amount of money that was spent on the beef. Given that one orange costs 20k, the cost of 50 oranges would be N10.00 (50 x 20k = N10.00), which is the same as the cost of one kilogram of beef. Therefore, the opportunity cost of one kilogram of beef is 50 oranges. To put it simply, if you spend N10.00 on one kilogram of beef, you could have bought 50 oranges with that same amount of money. So, the opportunity cost of one kilogram of beef is 50 oranges.

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If birth rate is constant and death rate declines, the population will expand. This is because the number of births remains constant, meaning new individuals are constantly added to the population, while the number of deaths decreases, meaning fewer individuals are leaving the population. As a result, the population grows at a faster rate. However, if the birth rate and death rate both decline, the population will eventually stabilize because the number of individuals entering and leaving the population will become more balanced.

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If an increase in income induces a reduction in the demand for beans, beans can be referred to as an inferior good. This is because the increase in income would lead to a decrease in demand for the inferior good, as consumers switch to higher-priced alternatives. Inferior goods are those whose demand decreases as consumers' income increases. These goods are typically of lower quality or less desirable than other goods and are often associated with lower-income consumers. Examples of inferior goods include lower-quality food items, discount clothing, and used cars.

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The most common index used for measuring development is per capita income. Per capita income is the average income earned per person in a given area or country. It is calculated by dividing the total income of a region or country by its population. Per capita income is widely used as a measure of a country's economic development and standard of living. A higher per capita income generally indicates that a country is more developed and has a higher standard of living than a country with a lower per capita income. Therefore, is the correct answer: the most common index used for measuring development is per capita income.

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If only economic factors are allowed to determine the location of industries in Nigeria, there will likely be an unbalanced spread in the distribution of industries. This is because economic factors such as access to markets, raw materials, and skilled labor are not evenly distributed across the country. Some regions may have more favorable economic conditions for industrial development, such as proximity to ports or natural resources, while other regions may lack these advantages. As a result, if only economic factors are considered, industries will naturally gravitate towards regions with the most favorable economic conditions, leading to an unbalanced distribution of industries. This may result in some regions becoming industrial hubs, while others are left behind. However, it is possible that allowing only economic factors to determine the location of industries could lead to the less developed parts of the country being able to attract more industries. This could happen if these regions have untapped economic potential, such as natural resources or a large labor force, that makes them attractive to investors. In terms of financing, it is not necessarily the case that only the government will be able to finance the establishment of industries. Private investors may also be willing to finance industrial development if they see the potential for a profitable return on their investment.

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Disposable income is the income that a person has available for spending and saving after taxes and other mandatory deductions have been taken out of their gross income. In other words, it is the amount of money that a person has left over to spend or save as they see fit. Disposable income is calculated by subtracting taxes and other mandatory deductions from gross income. Therefore, is the correct answer: disposable income is the income which is available for consumption and savings after taxes and other mandatory deductions have been taken out of gross income.

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The tailoring services industry is competitive partly because it consists of a large number of small-scale enterprises. This means that there are many small businesses offering similar services, and they compete with each other to attract customers. As a result, these businesses must strive to differentiate themselves from their competitors by offering unique products, exceptional customer service, and competitive pricing. The sheer number of small-scale tailoring businesses also means that there are many options available to customers, which further drives competition in the industry.

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A tariff is a tax on imported goods. When a government imposes a tariff, it increases the price of the imported goods, making them less competitive in the domestic market. The purpose of a tariff is often to protect domestic industries by making foreign goods more expensive and encouraging consumers to buy domestic products instead. A limit on the amount of goods that can be imported is known as an import quota, not a tariff. An interest rate on foreign loans is simply the cost of borrowing money from a foreign source and is not related to the trade of goods. A government payment to domestic producers for exports is known as an export subsidy, which is a form of financial assistance given to domestic companies to encourage them to sell their products in foreign markets. Therefore, the correct answer is "tax on imported goods."

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The marginal propensity to consume (MPC) is the fraction of each additional unit of income that is consumed. In this case, the MPC is 0.75, meaning that for every additional N1 of income, 0.75kobo will be spent. So, when the government invests N1,000,000.00, the initial increase in income will be: N1,000,000.00 x 1 = N1,000,000.00 Now, using the MPC, we can calculate the total change in income by multiplying the initial increase by 1/MPC: N1,000,000.00 ÷ (1 - 0.75) = N4,000,000.00 Therefore, the change in income is N4,000,000.00.

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Wages increase is likely to be inflationary. When wages increase, businesses must pay their employees more, which leads to higher production costs. As a result, businesses may increase the prices of their goods and services to offset the increased costs, which leads to inflation. Additionally, if workers have more money to spend due to higher wages, this can increase demand for goods and services, which can also lead to inflation. On the other hand, tax increases, an increase in unemployment, and budget surpluses are not likely to be inflationary. Tax increases reduce the amount of money people have to spend, which can decrease demand and lower prices. An increase in unemployment means fewer people have jobs and less money to spend, which can also decrease demand and lower prices. Finally, a budget surplus means the government is taking in more money than it is spending, which can lead to lower interest rates and lower prices.

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Agriculture is central to Nigeria's economic development because it is the largest employer of labor in the country. Many Nigerians, particularly those in rural areas, are employed in various agricultural activities such as farming, fishing, and animal husbandry. These activities provide income for millions of households, reduce poverty, and promote economic growth. Furthermore, agriculture accounts for a significant portion of Nigeria's Gross Domestic Product (GDP) and remains a major source of foreign exchange earnings for the country. Nigeria's comparative advantage in agriculture lies mainly in agro-allied industries, which are value-added activities that process agricultural products to create finished products such as textiles, food, and beverages. The export of these products earns Nigeria foreign exchange, which is essential for economic development. Therefore, the development of agriculture is essential to Nigeria's economic growth because it provides employment opportunities, contributes significantly to GDP, and earns foreign exchange.

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If the same basket of goods which cost N12.00 in 1985 cost N15.00 in 1987, the price index for 1987 is 125. A price index is a measure of the average price of a basket of goods over time, expressed as a percentage of the price in the base year. To calculate the price index, we divide the price of the basket of goods in the current year by the price of the same basket of goods in the base year and multiply by 100. In this case, the base year is 1985, and the current year is 1987. The price of the basket of goods in 1985 is N12.00, and the price of the same basket of goods in 1987 is N15.00. So, the price index for 1987 can be calculated as follows: Price index for 1987 = (Price of basket of goods in 1987 / Price of basket of goods in 1985) x 100 Price index for 1987 = (N15.00 / N12.00) x 100 Price index for 1987 = 1.25 x 100 Price index for 1987 = 125 To put it simply, the price index is a measure of the average price of a basket of goods over time. To calculate the price index, we divide the price of the basket of goods in the current year by the price of the same basket of goods in the base year and multiply by 100. In this case, the price index for 1987 is 125 because the price of the same basket of goods increased from N12.00 in 1985 to N15.00 in 1987.

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An imperfect market where there is only one buyer for a particular commodity is called a monopsony. In a monopsony market, there is a single dominant buyer who has the power to dictate the price at which they are willing to buy the commodity from the sellers. The sellers have limited options to sell their goods and are forced to accept the buyer's terms, which may not be favorable to them. As a result, the monopsony buyer has the ability to exert significant influence over the market and can drive prices down. To put it simply, a monopsony is a market structure where there is only one buyer for a particular commodity, giving them significant market power over the sellers. This is the opposite of a monopoly, where there is only one seller, and an oligopoly, where there are a few dominant sellers.

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The system of measurement of national income as the sum of all final demands is called the expenditure approach. The expenditure approach is a method used to calculate a country's gross domestic product (GDP). It measures the total amount spent on all goods and services produced within a country in a given period. This includes consumption spending by households, investment spending by businesses, government spending, and net exports (exports minus imports). The expenditure approach is based on the idea that the total amount of money spent on goods and services is equal to the total value of those goods and services. By adding up all the final demands for goods and services, the expenditure approach provides an estimate of a country's overall economic activity and standard of living.

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The capital provided by individuals to a firm by purchasing stocks is called equity capital. When a company issues stocks, it is essentially selling ownership in the company to investors. By purchasing stocks, investors become shareholders in the company and are entitled to a portion of the company's profits, known as dividends. Equity capital is a form of long-term financing for a company, and the investors who provide this capital are taking on a degree of risk in exchange for the potential for higher returns. Unlike debt capital, which must be repaid with interest, equity capital does not have to be repaid and does not accrue interest. Instead, investors hope to see the value of their stocks increase over time, allowing them to sell their shares for a profit.

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The most important factor in siting a petrol-chemical plant is the nearness to the source of raw materials. This is because petrol-chemical plants rely on a steady and reliable supply of raw materials, such as crude oil, natural gas, or coal, to produce their products. The cost and availability of these raw materials can have a significant impact on the profitability and competitiveness of the plant. Therefore, siting the plant close to the source of raw materials can help to ensure a steady supply and reduce transportation costs. While proximity to sources of power, availability of labor, and proximity to financial institutions can also be important considerations, they are generally considered to be secondary to the availability of raw materials. For example, while access to power is necessary for operating the plant, it is often possible to generate power on-site or transport it over long distances. Similarly, while availability of labor and proximity to financial institutions can affect the plant's operational costs and financial viability, they may not be as critical as the availability of raw materials for the plant's overall success.

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The basic purpose of imposing legal reserve requirements on commercial banks is to provide a device through which credit creation by banks can be controlled. Legal reserve requirements refer to the percentage of deposits that banks are required to hold in reserve as cash or deposits with the central bank. By increasing or decreasing the legal reserve requirement, the central bank can control the amount of money that banks can create through lending. This is an important tool for managing the money supply and maintaining price stability in the economy.

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When there is technical progress that leads to a reduction in costs, it becomes cheaper to produce the product. This means that companies can make more products at a lower cost. As a result, the supply of the product increases, and this puts downward pressure on the equilibrium price. At the same time, because the product is cheaper, more people are willing and able to buy it. This means that the demand for the product increases, putting upward pressure on the equilibrium quantity. Therefore, the correct answer is: a decrease in equilibrium price and an increase in equilibrium quantity.

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A monopolistic firm operating at the output where marginal cost equals marginal revenue is said to be in a state of equilibrium or profit maximization. At this point, the firm is producing the quantity of output where the last unit produced generates as much revenue as it costs to produce. Therefore, the firm's profit is at its maximum since any additional production would lead to an increase in the cost of production, which would not be matched by a corresponding increase in revenue. The price at this point will be higher than the marginal cost, and the firm will be able to cover its fixed and variable costs. Thus, the correct option is: Price is above marginal revenue.

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Out of the options given, the reward associated with entrepreneurship as a factor of production is profit. Entrepreneurship refers to the ability and willingness to take on risks and create something new, such as starting a business. When an entrepreneur invests their time, money, and other resources into a venture, they do so with the aim of generating profit. Profit is the reward for successful entrepreneurship. It is the amount of money that remains after deducting all the expenses from the revenue generated by the business. Profit is important for entrepreneurs as it provides them with the incentive to continue taking risks and investing in their ventures. Salaries, interests, and rents, on the other hand, are associated with other factors of production. Salaries are the reward for labor, interests are the reward for capital, and rents are the reward for land.

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Economies of scale refer to the cost advantages that a company can achieve as it increases its production scale. These cost advantages arise because the average cost per unit of output decreases as the level of production increases. In other words, the bigger the scale of production, the lower the cost per unit of output. Therefore, the correct option is when the average cost is falling with output. As a company increases production, it can spread its fixed costs (such as rent, machinery, and other overhead expenses) over a larger number of units produced, which leads to a decrease in the average cost per unit. Additionally, the company can also negotiate better deals with suppliers due to its larger scale of production, which can further reduce costs. Therefore, companies that can take advantage of economies of scale can become more efficient and competitive in the market.

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The demand for a product is said to be price inelastic if a change in the price of the product results in a relatively small change in the quantity of the product demanded by consumers. In other words, if the price elasticity of demand is less than one, then the demand for the product is considered to be price inelastic. This means that consumers are not very sensitive to changes in the price of the product, and are willing to pay relatively higher prices for it. On the other hand, if the price elasticity of demand is greater than one, then the demand for the product is considered to be price elastic, meaning that consumers are highly sensitive to changes in the price of the product, and a change in price results in a relatively large change in the quantity demanded.

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The major function of a wholesaler is bulk breaking. This means that the wholesaler purchases large quantities of goods from the manufacturer and then sells smaller quantities to retailers or other businesses who may not be able to purchase such large quantities directly from the manufacturer. By buying in bulk, the wholesaler can negotiate lower prices from the manufacturer and then pass on those savings to their customers. This helps to create a more efficient supply chain and allows for greater distribution of goods to consumers. While a wholesaler may also provide other services such as warehousing and information about products, their primary function is to break down large quantities of goods into smaller, more manageable quantities for resale.

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A manufacturer may choose to bypass the wholesaler in the distribution chain for several reasons. One reason could be to provide the quantity needed by retailers. If the manufacturer has a large number of retailers ordering smaller quantities of the product, it may be more efficient for the manufacturer to sell directly to the retailers rather than going through a wholesaler. This allows the manufacturer to provide the quantity needed by each retailer and eliminate the additional costs and time associated with working through a middleman. Another reason could be to collect useful information on their product. By selling directly to retailers, the manufacturer can gain more insight into how their product is performing in the market. They can collect data on which products are selling best, where they are selling best, and how much of the product is being sold. This information can be used to improve the product and better target specific markets. A third reason could be to provide warehousing facilities. If the manufacturer has excess storage capacity, they may choose to bypass the wholesaler and offer warehousing facilities directly to the retailers. This allows the retailers to store their products closer to their customers, reducing transportation costs and improving delivery times. Violating government regulations on distribution is not a valid reason for a manufacturer to bypass the wholesaler. Doing so can result in legal consequences and damage the manufacturer's reputation. Therefore, the correct answer is: To provide the quantity needed by retailers, to collect useful information on their product, or to provide warehousing facilities.

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In equilibrium, injections are equal to withdrawals. Injections refer to the money that flows into an economy, which includes investments, government spending, and exports. Withdrawals, on the other hand, refer to the money that flows out of an economy, which includes savings, taxes, and imports. When injections are equal to withdrawals, it means that the money flowing into the economy is equal to the money flowing out of the economy. This is known as the equilibrium state, and it is an important concept in macroeconomics. For example, if an economy is experiencing a surge in exports, this will increase the injections into the economy. However, if there is also a corresponding increase in imports, which is a withdrawal, the injections and withdrawals will balance each other out, and the economy will remain in equilibrium. To put it simply, in economics, injections refer to the money flowing into an economy, and withdrawals refer to the money flowing out of an economy. In equilibrium, these two must be equal, meaning that the money flowing in is equal to the money flowing out.

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The situation described in the question is known as constant returns to scale. This means that if all inputs (such as labor, capital, and materials) are doubled, the output will also double. In other words, the production function exhibits constant returns to scale if the proportional increase in inputs results in a proportional increase in output. This can be seen as a linear relationship between input and output, where the slope of the line is constant.

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If the demand for imports is elastic, then an increase in import duties will lead to a significant decrease in the quantity of imports demanded. This decrease in demand will result in a decrease in total expenditure on imports. On the other hand, if the demand for imports is inelastic, then an increase in import duties will have little effect on the quantity of imports demanded. As a result, the total expenditure on imports will increase despite the increase in import duties. Therefore, if the demand for imports is elastic, an increase in import duties will lead to a decrease in total expenditure on imports. But if the demand for imports is inelastic, an increase in import duties will lead to an increase in total expenditure on imports.