JAMB UTME - Economics - 2005

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When we talk about elasticity of demand, we are referring to the responsiveness of the quantity demanded of a product to a change in its price. If the elasticity of demand is greater than 1, but less than infinity, then we say that the demand is "elastic". This means that a change in the price of the product will result in a relatively larger change in the quantity demanded. For example, if the price of a product increases by 10%, but the quantity demanded decreases by more than 10%, then we say that the demand is elastic. In other words, customers are very sensitive to changes in the price of the product, and are likely to look for substitutes or alternatives if the price increases. On the other hand, if the elasticity of demand is less than 1, then we say that the demand is "inelastic". This means that a change in the price of the product will result in a relatively smaller change in the quantity demanded. For example, if the price of a product increases by 10%, but the quantity demanded only decreases by less than 10%, then we say that the demand is inelastic. In other words, customers are less sensitive to changes in the price of the product, and are less likely to look for substitutes or alternatives if the price increases. Therefore, if the elasticity of demand is between 1 and infinity, then the demand is elastic.

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The factor responsible for the current inflationary pressures in Nigeria is the exchange rate depreciation. When the exchange rate of a country's currency depreciates, it means that the currency has lost its value compared to other currencies. This can lead to an increase in the prices of imported goods and services, as they become more expensive to purchase. In Nigeria's case, the depreciation of the naira against other major currencies such as the US dollar and the British pound has led to an increase in the prices of goods and services, particularly imported items, such as food, fuel, and machinery. This increase in prices, in turn, has led to a rise in the country's inflation rate. Therefore, exchange rate depreciation is the primary factor responsible for the current inflationary pressures in Nigeria.

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The savings deposit in a commercial bank is called "Money." When you deposit money into a savings account at a commercial bank, you are essentially lending your money to the bank. In return, the bank pays you interest on your savings. This money can be withdrawn from the account when needed, although some banks may have restrictions on the number of withdrawals you can make within a certain period of time. It's important to note that savings deposits are different from other types of bank deposits, such as time deposits or certificates of deposit (CDs), which typically have longer terms and higher interest rates but also come with penalties for early withdrawal. "Capital" and "Fund" are more general terms that can refer to various types of financial resources, and "Near" and "Call money" are not commonly used to describe savings deposits in commercial banks.

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The distinction between onshore and offshore operations in oil exploration lies in the location of the sites. Onshore operations are conducted on land, while offshore operations are conducted in the oceans or other bodies of water. This difference in location requires different techniques of production and equipment, and also affects the output generated and the size of production. Onshore drilling involves drilling wells vertically into the ground, while offshore drilling involves drilling wells horizontally or at an angle from a platform or floating vessel. Offshore drilling also poses unique environmental and safety risks due to the potential for spills and accidents in the ocean.

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During a conflict between management and workers, the union's bargaining power is primarily based on negotiation. Negotiation involves discussions between the union and management to try to reach an agreement that satisfies both parties. Through negotiation, the union can push for better wages, benefits, and working conditions for its members. Picketing and work-to-rule are also tactics that the union may use to put pressure on management during negotiations. However, these tactics are not as effective as negotiation when it comes to achieving long-term solutions. Ultimately, the outcome of the conflict depends on the bargaining power of both the union and management, and their willingness to compromise and reach a mutually beneficial agreement. Management decision, on the other hand, is not a bargaining power of the union but rather a decision made by management.

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When an economy is operating above full employment level, it means that all available resources are already being used, and there is no spare capacity to produce more goods and services. In such a scenario, implementing an expansionary monetary policy, such as reducing interest rates or increasing money supply, can lead to a rise in the inflation rate. This is because, with no spare capacity, any increase in demand will lead to higher prices instead of an increase in output. As people have more money to spend due to the lower interest rates or increased money supply, they will compete for the limited goods and services available, driving up prices. This is known as demand-pull inflation, where increased demand leads to higher prices. Therefore, an expansionary monetary policy in an economy operating above full employment level would lead to a rise in the inflation rate.

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When the marginal utility of a commodity is zero, the total utility is at its maximum. The concept of marginal utility states that the additional satisfaction or benefit a consumer derives from consuming an additional unit of a good or service decreases as they consume more of that good or service. Therefore, when the marginal utility of a commodity is zero, the consumer has consumed an amount of the commodity where the additional satisfaction they get from consuming an extra unit is negligible or zero. This means that the total utility that the consumer derives from consuming that commodity is at its highest point because any additional units would provide no additional benefit or satisfaction.

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Idle cash balances are held for unplanned purchases. Idle cash balances refer to the extra money that someone or an organization has on hand, but isn't currently being used for any specific purpose. It's like having spare change in your pocket or money in a savings account that you haven't allocated for a particular expense. When you have idle cash balances, you might choose to hold onto that money until an unexpected expense comes up or until you decide to make an unplanned purchase. For example, if your car breaks down or a family member gets sick, you may need to spend money that you hadn't planned for. By having idle cash balances on hand, you can be better prepared for these types of situations. In contrast, if you have a planned purchase in mind, such as buying a new car or house, you would likely allocate your money specifically for that purchase and not consider it as idle cash balances. Likewise, if you're considering investing in bonds or shares, you would be making a deliberate choice to invest your money rather than holding onto it as idle cash balances.

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An inverse relationship between price and quantity demanded means that the two variables change in opposite directions. When the price of a good or service increases, the quantity demanded of it tends to decrease, and when the price decreases, the quantity demanded tends to increase. This is the law of demand, which states that there is an inverse relationship between the price of a good or service and the quantity demanded of it, all other factors being equal. Therefore, when the price of a good or service changes, it affects the behavior of consumers and their demand for it.

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The business organization in which the owners' personal property may be forfeited in the event of bankruptcy are partnerships and sole proprietorships. This is because partnerships and sole proprietorships are not separate legal entities from their owners, and the owners are personally responsible for the debts and obligations of the business. In the event of bankruptcy or other legal action against the business, the owners' personal assets can be seized to satisfy the business's debts. Limited liability companies and corporations, on the other hand, provide limited liability protection to their owners, meaning that their personal assets are generally protected in the event of bankruptcy or legal action against the business.

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For a firm to break even in the long run, the total revenue should be equal to the total cost. At the break-even point, the firm is not making a profit nor a loss. The point where the marginal cost curve cuts the average cost curve at its lowest point represents the break-even point. This is because at this point, the marginal cost of producing each additional unit of output is equal to the average cost of production, and the total cost is minimized. Therefore, the correct answer is: "average cost curve at its lowest point".

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When a monopolist produces goods, the price of the goods usually increases, which leads to a decrease in the quantity demanded. The demand for a monopolist's goods can be categorized as elastic, inelastic, or unitary elastic. If the demand for a good is inelastic, then the quantity demanded changes less than the price. Therefore, a monopolist should produce within the range where his demand is inelastic to maximize his profits. If the demand is elastic, the monopolist may need to lower the price to increase sales, which will lead to a reduction in profit. If the demand is unitary elastic or infinitely elastic, the monopolist's profits will also be affected.

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A long-term capital outflow is recorded in the balance of payment as a "debit on the capital account". This is because a capital outflow represents an outflow of domestic assets (such as investments or loans) to foreign entities. As a result, it leads to a reduction in the domestic capital stock, and is therefore recorded as a debit (or negative) entry on the capital account of the balance of payments.

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Hoarding of goods typically occurs when demand is greater than supply. This happens when consumers want to purchase more of a particular product than is available in the market. In response to the shortage, some consumers may start to hoard or stockpile the product, causing further scarcity and driving up prices. Hoarding can also occur during times of uncertainty or crisis, such as natural disasters or pandemics, when people stockpile goods in anticipation of future shortages or disruptions in supply chains.

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Economic freedom refers to the ability of individuals and businesses to make their own economic decisions without interference from the government or other outside forces. In a market economy, economic freedom is a fundamental characteristic as it allows individuals to own property, start businesses, and participate in the economy without government intervention. This freedom promotes competition and innovation, leading to economic growth and prosperity. In contrast, a planned economy, where the government controls economic decision-making, limits economic freedom and often leads to inefficiencies and lack of innovation. Therefore, economic freedom is a basic feature of a market economy.

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The regulatory authority of the capital market in Nigeria is the Securities and Exchange Commission (SEC). This is an organization set up by the Nigerian government to regulate and oversee the activities of the capital market. The SEC is responsible for ensuring that companies and individuals who participate in the Nigerian capital market operate in a fair and transparent manner. It also ensures that investors are protected from fraudulent practices and that the market operates in a way that promotes confidence and stability. Therefore, if you want to engage in any investment activity in the Nigerian capital market, it is important to ensure that you comply with the rules and regulations set out by the SEC.

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The problem of planning in Nigeria is mainly in the implementation of the plans. This means that while there may be well-articulated plans, there are challenges in effectively carrying them out. Factors such as corruption, inadequate funding, lack of political will, and poor coordination among government agencies can hinder the successful implementation of plans in Nigeria. As a result, many plans end up being abandoned or poorly executed, which can negatively impact the country's development.

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In the long run, the equilibrium point of a monopolistic firm is a point where the demand curve is tangential to the average cost curve. In economics, a monopolistic firm is a market structure in which there is only one seller of a particular product or service. This gives the firm the power to set its price above the marginal cost, leading to economic profits in the short run. However, in the long run, other firms may enter the market, eroding the monopoly power and bringing the price down to the average cost level. At the long-run equilibrium point, the firm produces the quantity of output at which the price equals the average cost, and there is no incentive for other firms to enter the market. The demand curve is tangential to the average cost curve at this point, which means that the firm is earning zero economic profit. This is because if the firm charges a higher price, it will lose customers to the competitors, and if it charges a lower price, it will earn less revenue than the cost of producing the goods. Therefore, the firm has no incentive to change the price or the quantity of output in the long run, and it operates at the efficient scale of production. Thus, the demand curve being tangential to the average cost curve is a good measure of long-run equilibrium point for a monopolistic firm.

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The loans from the World Bank to developing countries are mainly to support their infrastructure investment. This means that the World Bank provides financial assistance to these countries to help them build or improve things like roads, bridges, ports, and airports. The goal is to help these countries create the basic infrastructure needed for economic growth and development. By investing in infrastructure, developing countries can attract foreign investment, create jobs, and improve their overall standard of living. The World Bank also provides technical assistance and expertise to help countries plan and implement their infrastructure projects effectively.

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Division of labour in a car assembly plant means breaking down the process of making a car into smaller tasks or activities and assigning each worker to do a specific task repeatedly. This specialization helps increase efficiency, speed up the production process, and improve the quality of the final product. For example, one worker may be responsible for installing tires, while another may be responsible for installing the windshield. This division of labour allows workers to become experts at their specific task, leading to a higher quality end product, increased productivity, and overall cost savings for the company. Therefore, the correct answer is assigning each worker to a specific activity.

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Equity financing is the raising of funds by a company through the sale of stocks to the public. This means that the company offers ownership shares to investors in exchange for capital. In other words, the company is selling a portion of its ownership in exchange for money. As a result, the investors become shareholders in the company, and they may receive dividends and have the right to vote on certain issues related to the company's operations. The term "equity" refers to the value of the company that is owned by shareholders, which is also known as shareholders' equity or owner's equity.

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Economies of scale refer to reduced costs per unit that arise from increased total output of a product. It is a fall in the long run average costs because of an increased scale of production. This basically means the cost of production per unit reduces as you produce more units. For example, a larger factory will produce power hand tools at a lower unit price, and a larger medical system will reduce cost per medical procedure.

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The localization of industries in Nigeria is mainly influenced by several factors, including market size, raw materials, population groupings, and external economies. Market size refers to the number of potential customers or demand for a product in a particular area. Industries tend to locate in areas where there is a large market for their products, which helps them to maximize their profits. Raw materials are also an essential factor in industrial localization. Industries that require specific raw materials will be located near those materials to minimize transportation costs and improve efficiency. Population groupings refer to the distribution of people in a particular area, such as urban or rural areas. Industries tend to locate in areas where there is a large concentration of people to ensure a ready supply of labor. External economies refer to the benefits that industries receive from being located near other industries, such as shared infrastructure, access to suppliers, and shared labor markets. Industries may cluster in certain areas to take advantage of these external economies. In summary, industries in Nigeria locate in areas where there is a large market for their products, access to raw materials, a concentration of people for labor supply, and access to external economies.

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The correct answer is: "living standards have risen by 128%". A price index is a measure of the average change in prices of a basket of goods and services over time. The increase in the price index from 100% to 128% means that the overall price level has increased by 28% over that period. Therefore, if living standards were to remain constant, people would need to earn 28% more to maintain their standard of living. However, since the question says the price index is "computed between two time periods", and since it indicates an increase in the price index, this means that the living standards have risen by 128%, since the overall price level has increased by that percentage, and people can still afford to buy more goods and services with their income.

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The technical relationship between input combination and maximum attainable output is called a production function. It shows the maximum output that can be produced from any given combination of inputs, such as labor and capital. The production function is usually represented graphically by an isoquant, which is a curve that connects different combinations of inputs that produce the same level of output. By analyzing the production function, firms can determine the most efficient input combination to produce the desired level of output.

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The agricultural backward-linkage effect refers to the establishment of subsidiary industries to support and provide inputs to the primary agricultural industry. In other words, it involves the development of industries that produce goods or services required by the agricultural industry such as farm machinery, fertilizer, pesticides, and seedlings. This is done in order to increase the efficiency and productivity of the agricultural sector, and ultimately lead to economic growth and development.

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The major contribution of the petroleum industry to the Nigerian economy is the generation of revenue for the government. Nigeria is a major producer of crude oil, which accounts for a significant percentage of the country's Gross Domestic Product (GDP) and government revenue. The petroleum industry contributes about 80% of Nigeria's foreign exchange earnings and over 50% of government revenue. The government generates revenue from the petroleum industry through taxes, royalties, and other fees paid by oil companies operating in the country. This revenue is then used to fund critical infrastructure projects, provide social services, and fund other government programs. The petroleum industry's contribution to the Nigerian economy is significant, as it provides the government with the financial resources needed to drive economic growth and development. It also creates indirect employment opportunities in other sectors that benefit from government spending on infrastructure and social services. Therefore, the major contribution of the petroleum industry to the Nigerian economy is the generation of revenue for the government.

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The major assumption in a perfectly competitive market is that individuals cannot influence prices. This means that no individual buyer or seller has enough power to affect the price of a good or service. Instead, prices are determined solely by the forces of supply and demand in the market. In other words, in a perfectly competitive market, prices are set by the market itself, not by any individual buyer or seller. This assumption is important because it leads to the efficient allocation of resources and helps ensure that goods and services are produced at the lowest possible cost.

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Under perfect competition, the short-run supply curve of a firm is determined by its marginal cost curve. In a perfectly competitive market, there are numerous buyers and sellers, and all firms produce identical products. As a result, no individual firm has the ability to affect the market price. This means that the firm takes the market price as given and adjusts its output level accordingly. To maximize profit, the firm will produce at a level where its marginal cost equals the market price. Therefore, the short-run supply curve for a perfectly competitive firm is equal to its marginal cost curve above the minimum of its average variable cost curve. In the short run, a firm can only vary its variable inputs, such as labor and raw materials. Therefore, its short-run supply curve is upward-sloping due to the law of diminishing marginal returns. As output increases, marginal cost eventually increases, causing the firm to require a higher price to cover its costs and earn a profit. In summary, the short-run supply curve of a firm under perfect competition is determined by its marginal cost curve, as the firm will produce at a level where marginal cost equals market price to maximize profit.

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Population density is described as the average number of people per square kilometer in a given area. Population density is a measure of how many people are living in a specific area of land. It is calculated by dividing the total population of an area by the size of the land area in square kilometers. For example, if a city has a population of 1 million people and covers an area of 100 square kilometers, then its population density would be 10,000 people per square kilometer. Population density can vary widely between different regions, countries, and even within a single city. Higher population density can put pressure on resources, infrastructure, and the environment, while lower population density can result in isolation and limited access to services. Therefore, the average number of people per square kilometer is a good measure of population density, as it provides a standardized way of comparing different areas and understanding the impact of population on the environment and society.