WAEC SSCE - Economics - 2018

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A firm's average cost decreases in the long run due to increasing returns to scale. This means that as the firm increases its production and expands its operations, it can benefit from economies of scale such as bulk purchasing, specialized equipment, and division of labor. These efficiencies can lead to lower average costs per unit of output, allowing the firm to be more competitive and potentially increase its profitability. On the other hand, if the firm experienced diminishing average returns or decreasing marginal returns, it would experience higher average costs as it increased its production, making it less competitive and potentially leading to decreased profitability. Decreasing average fixed cost may also contribute to lower average costs, but it is not the primary driver of cost reductions in the long run.

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An industry is a group of firms that produce similar products or provide similar services. These firms may compete with each other for market share, but they also share many common interests and challenges. For example, the automobile industry is made up of many different companies that produce cars and trucks. These firms may have different brands, models, and features, but they all rely on similar production processes, supply chains, and distribution channels. They also face common challenges such as fluctuating demand, changing regulations, and technological innovation. While some industries may provide jobs for many people, and others for few people, the number of jobs is not a defining characteristic of an industry. Rather, the key factor that defines an industry is the similarity of the products or services that are produced or provided by the firms within it. This similarity allows for the grouping of firms into specific industries, which can be useful for analysis and understanding of market trends, competition, and other economic factors.

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This is an example of seasonal unemployment. Seasonal unemployment refers to unemployment that occurs regularly in certain industries during certain times of the year, such as agriculture or tourism. In this case, workers at the school canteen may only be employed during the school term, and have no work during the holidays, making them examples of seasonal unemployment.

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Holding money to take care of contingencies is a precautionary motive. It means keeping a portion of money for unexpected events or emergencies like medical bills, job loss, or car repairs. The precautionary motive is a rational way to manage uncertainty and risk in personal finance. By keeping some money aside, individuals can avoid the need to borrow or sell assets at a loss during unexpected financial difficulties. The other motives for holding money are speculative, transactional, and expansionary, which involve different reasons for holding money.

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The value added by the baker is $18.00. To understand this, we need to know what value added means. Value added is the difference between the total revenue generated from the sale of a product and the total cost of all the inputs used to produce that product. In this case, the baker spent $250.00 on flour and other ingredients and $52.00 on distribution, for a total cost of $302.00. The baker then sold the bread for $320.00. To calculate the value added, we subtract the total cost from the total revenue: Value added = Total revenue - Total cost Value added = $320.00 - $302.00 Value added = $18.00 Therefore, the value added by the baker is $18.00. This represents the contribution the baker made to the economy by using their skills and resources to transform raw materials into a finished product that consumers were willing to pay for.

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The statement suggests that in poorer countries, a larger percentage of the labor force is engaged in agriculture. This is because agriculture is often the main source of livelihood for people in low-income countries. Agriculture provides food and raw materials, as well as employment opportunities for a significant portion of the population. In many cases, the lack of economic development and infrastructure in poorer countries also limits opportunities for other types of employment, such as manufacturing or trading. As countries develop economically and become more industrialized, there is typically a shift away from agriculture and towards other industries such as manufacturing and services. Therefore, the statement implies that the level of economic development is closely related to the type of employment opportunities available to the labor force.

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If the price of commodity X increases and consumers start buying more of commodity Y instead, then commodity X and Y are substitutes. Substitutes are products that can be used in place of each other. When the price of one substitute increases, consumers tend to switch to the other substitute because it becomes relatively cheaper. For example, if the price of beef increases, consumers might switch to chicken instead. On the other hand, complements are products that are typically used together, such as gasoline and cars. If the price of gasoline increases, consumers might reduce their demand for cars as well, since they need gasoline to run their cars. Inferior goods are products that people tend to buy less of as their income increases, such as instant noodles. Finally, bought goods is not a recognized economic term.

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In the event of bankruptcy, owners of joint-stock companies lose only the capital invested. A joint-stock company is a type of business organization where the ownership is divided into shares of stock, and the liability of the owners is limited to the amount of capital they have invested. This means that if the company goes bankrupt and cannot pay its debts, the owners of the company (the shareholders) will lose only the amount of money they have invested in the company's shares. They will not be personally liable for the company's debts or lose any of their private properties. However, if the company's assets are not sufficient to cover its debts, the shareholders may not receive any dividends, and their shares may become worthless. Therefore, the correct answer is only the capital invested.

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A firm should shut down in the long run if its average revenue is less than its average cost. In other words, if the firm is not making enough revenue to cover its costs, it will eventually go out of business. There are different types of costs associated with running a business, including fixed costs (which don't vary with the level of output) and variable costs (which do vary). The minimum average cost refers to the point at which the firm is producing output at the lowest possible average cost. If the firm's average revenue is less than its average variable cost, then it is not even covering the cost of producing each unit of output, let alone covering the fixed costs. In this case, the firm should shut down in the short run, and definitely in the long run if it continues to operate at a loss. If the firm's average revenue is equal to the minimum average cost, it is just breaking even, but not making any profit. In the long run, it might be better for the firm to shut down and invest its resources in a more profitable venture. Therefore, a firm should shut down in the long run if its average revenue is less than its average cost, which means that it is not generating enough revenue to cover all of its costs.

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Nations engage in international trade because of the differences in the comparative cost of producing goods and services. Comparative cost refers to the ability of a nation to produce goods and services at a lower opportunity cost compared to other nations. Opportunity cost is the cost of foregone production of one good or service when producing another. For example, suppose country A can produce 100 units of wheat or 50 units of cloth with the same resources. In contrast, country B can produce 100 units of wheat or 40 units of cloth with the same resources. In this case, country A has a comparative advantage in producing cloth because it can produce more cloth (50 units) than country B (40 units) when given the same resources. As a result of this difference in comparative cost, country A can specialize in producing cloth and trade with country B, which can specialize in producing wheat. This allows both countries to benefit from the trade, as they can obtain more of both goods than they could produce on their own. Absolute cost, fixed cost, and variable cost are not directly related to the reasons for international trade. Instead, comparative cost is the key factor that explains why countries trade with each other.

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The stock exchange is an example of the capital market. The capital market is a market for long-term financial instruments such as stocks, bonds, and other securities. It enables companies and governments to raise funds for their long-term investment projects, such as expanding their business, developing new products, or building infrastructure. The stock exchange is a platform where investors can buy and sell shares of publicly listed companies. By buying stocks, investors become part owners of the company and can benefit from its growth and profits. The stock exchange plays a critical role in the capital market by providing liquidity to investors and allowing companies to access funding for their long-term projects. Therefore, the correct answer is the capital market.

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At output level 5, the total variable cost is $35.00. Variable cost is the cost that varies with the level of output produced, and it includes costs such as raw materials, direct labor, and fuel. From the table, we can see that the total cost for producing 5 units is $55.00, and the total cost for producing 4 units is $38.00. Therefore, the variable cost for producing the 5th unit is $55.00 - $38.00 = $17.00. Hence, the total variable cost for producing 5 units is the sum of the variable cost for producing each of the 5 units, which is $17.00 x 5 = $35.00.

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The largest component of national income in developing countries consists of wages and salaries. National income is the total income earned by a country's citizens, including income earned from work, investments, and other sources. Wages and salaries are the income earned by individuals from their employment. In developing countries, the majority of the population is employed in the agricultural and service sectors, which are labor-intensive. Therefore, wages and salaries form the largest component of national income in developing countries. On the other hand, profits are the income earned by businesses, and rent is the income earned by owners of land and property. While these components also contribute to national income, they are typically smaller in developing countries compared to wages and salaries.

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The total fixed cost is $20.00. Fixed cost is a cost that does not change with the level of production or the quantity of goods produced. In the given table, the total cost increases as the quantity produced increases. However, when the quantity produced is zero (0), the total cost is still $20.00. This means that regardless of the quantity produced, the business incurs a fixed cost of $20.00. Therefore, the correct answer is $20.00.

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Goods whose demand varies directly with money income are called normal goods. This means that as a person's income increases, their demand for these goods also increases. Normal goods are often considered to be luxury or non-essential items, such as high-end clothing, jewelry, or expensive cars. In contrast, inferior goods are goods whose demand decreases as a person's income increases. For example, if a person's income goes up, they may choose to buy a more expensive brand of bread instead of the cheaper, lower-quality bread they used to buy. Complementary goods are goods that are consumed together, such as peanut butter and jelly. If the price of one complementary good increases, the demand for the other good may also decrease. Substitutes are goods that can be used in place of each other, such as coffee and tea. If the price of one substitute good increases, the demand for the other good may increase. Overall, normal goods are goods whose demand varies directly with money income, meaning that as a person's income increases, their demand for these goods also increases.

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The International Bank for Reconstruction and Development (IBRD) was created in 1944 to assist in the post-World War II reconstruction efforts of member countries. Its primary function is to provide long-term loans and technical assistance to developing countries to help them achieve economic development and reduce poverty. Reducing tariff among members is not a function of IBRD. This function is typically handled by international trade organizations such as the World Trade Organization (WTO). Developing human resources is a key aspect of IBRD's work as it helps to ensure that countries have the necessary skilled workforce to support their economic development efforts.

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A price floor is a minimum price that is set by a government or authority for a particular good or service. It is usually set above the equilibrium price, which is the market price where the quantity demanded and the quantity supplied of a good are equal. When a price floor is set above the equilibrium price, it causes a surplus of the good, as the quantity supplied exceeds the quantity demanded. In other words, producers are willing to supply more of the good than consumers are willing to buy at the higher price. Therefore, the correct option is "above the equilibrium and causes surplus."

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Out of the given options, massive importation of consumer goods will not lead to economic growth. Economic growth is defined as an increase in a country's output of goods and services over time. It is typically measured by the growth rate of Gross Domestic Product (GDP). Economic growth occurs when a country increases the factors of production such as capital, labor, and technology. Massive importation of consumer goods means that a country is importing finished goods such as clothes, electronics, and cars from other countries. While this may provide immediate satisfaction to consumers, it does not contribute to economic growth because it does not increase a country's factors of production. On the other hand, massive importation of capital goods (such as machinery and equipment) can boost economic growth as it helps to increase a country's production capacity. Intensive capital formation locally refers to investing in the production of capital goods locally, which can also increase a country's production capacity. Similarly, the use of modern technology can help a country to produce more efficiently, increase productivity and ultimately boost economic growth. In summary, while the importation of consumer goods may have short-term benefits, it does not contribute to a country's long-term economic growth.

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Public limited liability companies are not necessarily democratic in nature because of government appointees being members of the board or because they are run by elected public officers. However, they can be considered democratic because of the principle of shareholder democracy. In a public limited liability company, shareholders elect the board of directors, who are responsible for making important decisions for the company. This allows for the voice of the shareholders to be heard and for them to have a say in the direction of the company. This is a democratic aspect of public limited liability companies as it allows for the will of the people (the shareholders) to be reflected in the decisions of the company.

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The concept described is "double coincidence of wants." Double coincidence of wants is a situation where two parties have goods or services that the other desires and are willing to exchange. In the given example, the housewife has meat, and she desires tomatoes, and another person has tomatoes and desires meat. They must find each other and agree on the terms of the exchange. This can be a challenging task since the two parties may not meet each other, or their wants may not coincide. However, if they do find each other, they can benefit from trading with each other and satisfy their needs. The concept of double coincidence of wants is essential in understanding the origins and functions of money, which eliminates the need for a double coincidence of wants in trade. Therefore, the correct answer is the double coincidence of wants.

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Producers operating in a free market economy are more efficient as a result of the existence of competition. In a free market economy, producers are free to produce and sell goods and services as they see fit, without interference from the government. This means that they are also free to compete with each other. When there are many producers competing for the same customers, they are motivated to be more efficient in order to lower their costs and offer lower prices than their competitors. This competition also incentivizes them to innovate and improve their products and services to stand out from the competition. For example, if there are two bakeries in a town, and they both produce and sell bread, they will need to be efficient in order to offer lower prices than their competitor. This could mean investing in better equipment, sourcing cheaper ingredients, or streamlining their production process to reduce waste and increase productivity. These actions will help them keep their costs down, and as a result, offer lower prices to their customers. On the other hand, if there were only one bakery in the town and no competition, they may not feel the same pressure to be efficient or innovative, as there are no competitors to undercut their prices or offer a better product. Therefore, the existence of competition in a free market economy motivates producers to be more efficient, innovative, and cost-effective, which benefits both the producers and the consumers.

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