WAEC SSCE - Economics - 2011

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A firm's main aim is to maximize profits. This means that the firm's goal is to earn as much revenue as possible while minimizing costs. By doing so, the firm can generate profits, which can then be reinvested into the business or distributed to shareholders. While there may be other objectives that a firm may pursue, such as increasing market share or satisfying the ambitions of its managers, ultimately the firm's success is measured by its ability to generate profits.

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A firm will shut down in the long run if its earning is less than normal profit. In economics, normal profit refers to the minimum level of profit necessary to keep a firm in business in the long run. This includes the opportunity cost of the entrepreneur's time and capital investment, as well as any other costs necessary to maintain the business. If a firm's earning is less than this level of profit in the long run, it is not covering all of its costs and will eventually go out of business. Therefore, a firm will shut down if its earning is less than normal profit, as it cannot sustain its operations in the long run.

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When a country's net income from abroad is added to its total output, the result is the Gross National Product (GNP). GNP is a measure of the total economic output of a country's citizens, including its production and income from foreign investments. It is calculated by adding the value of all goods and services produced by a country's residents, regardless of their location, and adding any income earned by residents from foreign sources. Essentially, GNP is a measure of the total economic activity of a country's citizens, regardless of where that activity takes place.

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A firm has the power to make super normal profits both in the short run and long run in a monopoly market. In a monopoly market, there is only one supplier of a product or service, which gives the firm complete control over the price and quantity supplied. The firm can set a price above the marginal cost of production, allowing it to earn super normal profits. In the long run, barriers to entry prevent other firms from entering the market, allowing the monopoly firm to continue earning super normal profits. Therefore, the correct answer is Monopoly.

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A normal demand curve slopes downward from left to right. This means that as the price of a product or service decreases, the quantity demanded of that product or service increases, and vice versa. This is the typical relationship between price and demand in a competitive market, where consumers are willing to pay less for a product or service as the supply of that product or service increases.

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The correct answer is: real cost is the alternative forgone while the money cost is the actual amount paid for buying the item. Money cost refers to the amount of money that is spent on a good or service. Real cost, on the other hand, refers to the alternative that must be given up in order to obtain that good or service. This alternative is often referred to as the opportunity cost. So, the real cost of an item is not just the amount of money that was spent on it, but also the value of the next best alternative that was given up to obtain it. For example, if you choose to buy a new phone for $500, the money cost is $500. However, the real cost also includes the opportunity cost of what else you could have done with that $500, such as investing it, saving it, or buying a different item.

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If the current price of an apple is twice that of last year, it means that the price level has increased over time. This suggests that the value of money has decreased, and therefore, it is falling. In other words, the purchasing power of money has declined, and it now takes more money to buy the same amount of goods and services as before.

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The type of production that involves the tapping and harnessing of natural resources is called primary production. This refers to the economic sector that involves the extraction and collection of natural resources from the earth or sea, such as agriculture, mining, forestry, and fishing. The primary sector is considered the foundation of any economy, as it provides the raw materials necessary for other industries to manufacture finished products. Examples of primary production activities include farming crops and livestock, drilling for oil, mining minerals and ores, and harvesting timber.

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When total utility is constant, it means that the additional satisfaction or usefulness gained from consuming one more unit of a good (marginal utility) is equal to zero. This is because the total utility is the sum of the marginal utilities of all the units consumed. Therefore, if total utility is not changing, it implies that the marginal utility is neither increasing nor decreasing but has reached a point of equilibrium where the additional satisfaction gained from consuming one more unit is zero.

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Deposits held in a commercial bank are part of the money supply. This is because when customers deposit money into their accounts, the bank is able to use that money to make loans to other customers or invest in various financial instruments. As a result, these deposits effectively become a part of the circulating money supply in the economy, and can be used for transactions such as purchases of goods and services, payment of bills, and other financial transactions.

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The coefficient of income elasticity of demand for inferior goods is negative. This is because when consumers' income increases, they tend to buy less of the inferior goods and switch to buying better alternatives, causing the demand for inferior goods to decrease. The negative sign indicates the inverse relationship between income and demand for inferior goods.

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Human wants are unlimited. This means that people have unlimited desires and needs for goods and services. As one want is satisfied, another arises, leading to an endless cycle of wants. There is no limit to the number of wants that humans can have, and this is because as society advances and technology improves, new wants arise. Therefore, no matter how much is produced, human wants will never be fully satisfied.

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The natural growth rate of population can be defined as the difference between the birth rate and the death rate in a given population over a certain period of time, usually a year. It represents the rate at which the population is growing due to the excess of births over deaths. For instance, if the birth rate is 20 per 1,000 people per year and the death rate is 10 per 1,000 people per year, the natural growth rate would be 10 per 1,000 people per year. The natural growth rate can be used to estimate future population trends and plan for future needs such as healthcare, education, housing, and employment.

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The grouping of the population according to the economic activities people engage in is occupational distribution. This refers to the classification of individuals into various occupational categories based on the type of work they do. It is a way of analyzing and understanding the structure of an economy and its workforce. Some common occupational categories include agriculture, manufacturing, services, and professional occupations such as doctors, lawyers, and engineers. Occupational distribution provides insights into the level of development of an economy, the skills of its workforce, and the potential for economic growth.

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When the price is fixed above the equilibrium, it leads to a situation where the quantity supplied by the producers is more than the quantity demanded by the consumers. This usually happens when the government wants to protect agricultural producers from the market forces of demand and supply. By fixing the price above the equilibrium, the government ensures that the producers get a higher price for their produce than what they would get in a free market. However, this policy can also lead to some negative consequences. It can discourage producers from improving the quality of their produce or from being efficient in their production because they are guaranteed a high price regardless of the quality or efficiency. Also, it can lead to surpluses of unsold goods, which can be wasteful and costly to the government. Overall, fixing the price above the equilibrium is a policy that favours agricultural producers at the expense of consumers, and it is often used as a form of protectionism.

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The increase in population growth in big cities is referred to as urbanization. Urbanization is the process of the migration of people from rural areas to urban areas, resulting in the growth and expansion of cities. This process is usually driven by economic opportunities, social factors, and modernization. As people move to cities, the population increases, leading to the development of infrastructure, housing, and other amenities to support the growing population. Urbanization can have both positive and negative impacts on society, such as increased economic opportunities and improved access to services, as well as overcrowding, pollution, and social problems.

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When governments want to discourage consumption of a certain good, they tax goods whose demand is price inelastic. This is because when the demand for a good is price inelastic, consumers are not very responsive to changes in price and will continue to buy the good even if the price increases due to taxes. By taxing goods with price inelastic demand, the government can increase the price of the good and reduce its consumption, without causing a significant decrease in government revenue. In contrast, if a good has price elastic demand, consumers are very sensitive to changes in price, and even small increases in price may cause a significant decrease in demand, resulting in a decrease in government revenue.

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National income is used to measure a country's economic growth. It refers to the total value of goods and services produced within a country's borders over a specified period, usually a year. National income includes income earned by both individuals and firms and is a useful tool for assessing a country's economic performance over time. It is often used in combination with other indicators such as GDP, inflation, and unemployment to provide a comprehensive picture of a country's economic health.

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A rise in government expenditure can lead to higher inflation. This is because an increase in government expenditure means that there is more money available for people to spend, which can lead to a higher demand for goods and services. When demand is high, prices tend to go up, which leads to inflation. Additionally, government expenditure can increase the money supply, which can also contribute to inflation.

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A market structure where profit is maximized when marginal revenue, marginal cost and price are equal is known as perfect competition. In perfect competition, there are many buyers and sellers, and no one has the power to influence prices. As a result, firms in perfect competition are price takers and must accept the market price. In this type of market, firms can only make profit by producing at the point where their marginal revenue equals their marginal cost, and where the market price is equal to that point.

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If there are no barriers to entering a market, it means that anyone can become a buyer or a seller. In other words, there are no restrictions or obstacles preventing new firms or individuals from entering the market to compete with existing sellers. This encourages competition, which can lead to lower prices, better quality products, and greater innovation. It also means that consumers have more choices, and sellers must work harder to differentiate themselves from their competitors. Therefore, a lack of barriers to entry can result in a more efficient and dynamic market.

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An arrangement of data in rows and columns is referred to as a "table". It is a way of presenting data in a structured and organized manner that allows for easy comparison and analysis. Tables are commonly used in various fields, including statistics, finance, and science, to display and summarize large amounts of data. The data is organized in rows, which run horizontally, and columns, which run vertically. Each row represents a single item or observation, while each column represents a specific variable or category. Tables are useful because they allow for quick and efficient comparisons of data, as well as the ability to easily sort and filter the data to extract specific information.

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A tax is regressive if the rate of tax decreases as income increases. This means that people with lower incomes pay a higher percentage of their income in taxes compared to people with higher incomes. This can lead to a greater burden on low-income households and may exacerbate income inequality.

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The resources used in production are called factors of production. These are the resources required to produce goods and services. The three main factors of production are land, labor, and capital. Land refers to natural resources such as land, water, and minerals, while labor refers to the work done by people to produce goods and services. Capital refers to the tools, equipment, and other resources used in the production process. The combination of these factors of production determines the quantity and quality of the goods and services produced.

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Cost push inflation is caused by a rise in the cost of production. When the cost of production increases, the firms try to maintain their profit margin by increasing the price of goods and services. As a result, the general price level increases, leading to inflation. For example, if the cost of raw materials or labour increases, the firms will have to spend more money to produce the same amount of goods. To maintain their profit margin, they will increase the price of the goods, leading to an increase in the general price level. This is known as cost-push inflation.

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The cross elasticity of demand measures the responsiveness of the quantity demanded of one good to a change in the price of another good. In this case, the 20% rise in the price of Whiskey leads to a 30% increase in quantity demanded of Schnapps. This means that the two goods are substitutes, as the increase in the price of Whiskey led consumers to switch to the relatively cheaper alternative, Schnapps. The formula for cross elasticity of demand is the percentage change in quantity demanded of good Y divided by the percentage change in the price of good X: Cross elasticity of demand = (% change in quantity demanded of Y) / (% change in price of X) Using the values given in the question, we can calculate the cross elasticity of demand as follows: Cross elasticity of demand = (30% / 20%) = 1.5 Therefore, the cross elasticity of demand is 1.5.

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The unemployment rate is the percentage of the labor force that is unemployed and actively seeking employment. In this case, the labor force is 2.5 million and the number of employed people is 2 million. Therefore, the number of unemployed people is 2.5 million - 2 million = 0.5 million. To calculate the unemployment rate, we divide the number of unemployed people by the labor force and multiply by 100 to express the result as a percentage. So, the unemployment rate is (0.5 million / 2.5 million) * 100 = 20%. Therefore, the correct option is: 20%.

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In the short run, at least one factor of production is fixed, which means that it cannot be changed. Therefore, fixed cost does not change in the short run. Fixed costs are expenses that do not vary with changes in the level of production or output, such as rent, salaries, and property taxes.

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Palm oil and palm kernel have a joint supply. This means that the production of one leads to the production of the other. Palm oil is extracted from the fleshy part of the palm fruit, while palm kernel oil is extracted from the kernel or seed inside the fruit. Therefore, the production of palm oil automatically leads to the production of palm kernel oil as a by-product. They are both widely used in various industries, such as food, cosmetics, and biofuel.

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The production possibility curve (PPC) indicates that as more of one good is produced, less of the other goods is produced. This is because resources such as labor, capital, and raw materials are limited, and using them to produce more of one good means there are fewer resources available to produce other goods. The PPC shows the tradeoff between producing one good versus another, and the opportunity cost of producing more of one good is the amount of the other good that must be given up. Therefore, the PPC is a graphical representation of the concept of scarcity and the need to make choices about how to allocate limited resources.

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A vertical supply curve represents a situation where the quantity supplied does not respond to changes in price. This means that the quantity supplied remains constant regardless of changes in price. The elasticity coefficient is a measure of how responsive the quantity supplied or demanded is to changes in price. In the case of a vertical supply curve, the elasticity coefficient is zero because there is no change in quantity supplied even when there is a change in price. Therefore, the correct option is 0.0.

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The demand for money to take advantage of changes in bond prices is known as the speculative motive. This refers to the desire to hold money to take advantage of investment opportunities that may arise in the future. In this case, investors may want to purchase bonds when prices are low and then sell them when prices increase in the future. The speculative motive is one of the three motives for holding money, alongside the transaction motive (to facilitate daily transactions) and the precautionary motive (to provide a buffer against unexpected events).

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Privatization is the transfer of ownership and control of public enterprises to private individuals or entities. The effect of privatization on the industrial sector of a country is that it ensures efficiency. This is because private individuals or entities operate for profit, and they are therefore incentivized to minimize costs and maximize profits. They are more likely to use resources efficiently and effectively, leading to increased productivity and output. Additionally, private enterprises are more likely to introduce new technologies and innovations, leading to increased efficiency in production. Overall, privatization can lead to a more efficient and productive industrial sector in a country.

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A rational consumer is one who spends his income to maximize satisfaction. This means that the consumer will make choices that will provide the greatest level of satisfaction, given their limited income and the prices of goods and services. A rational consumer will consider the marginal utility (the additional satisfaction gained from consuming an extra unit) and the price of each good or service before making a purchasing decision. In contrast to what some people believe, being a rational consumer does not mean that a person behaves in a particular way all the time, or that they know the price of all goods and buy the cheapest, or that they are not influenced by advertisement.

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The following options describe features of subsistence agriculture, except for one. Subsistence agriculture is a type of farming where farmers grow crops to feed themselves and their families, rather than for commercial purposes. - Little capital: Subsistence agriculture is typically characterized by farmers who have limited access to capital and rely on simple and traditional farming methods. - Processing of raw materials: Subsistence farmers often process their raw materials (e.g., grains) into food products for their own consumption. - Small allotments of land: In subsistence agriculture, farmers often work on small plots of land that are just large enough to provide for their family's needs. Therefore, the option that does not describe features of subsistence agriculture is: - Use of crude oil: Subsistence agriculture does not typically involve the use of crude oil, as it is not essential to the farming process and may not be readily available or affordable for subsistence farmers.

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The statement that is not true about land is: "land is mobile." This is because land is a fixed resource and cannot be moved from one place to another. It is the other factors of production, such as labor and capital, that can be mobile.

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A consumer purchasing a commodity X will maximize his satisfaction when the price of commodity X (Px) is equal to the marginal utility of commodity X (MUx). In other words, the consumer will buy more units of commodity X until the point where the additional satisfaction gained (MUx) is equal to the price paid for each unit (Px). So the correct option is "Px = MUx".

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One profitable form of business undertaken by commercial banks is lending money to borrowers. Commercial banks earn profits by charging interest on loans that they extend to borrowers. These loans can be in the form of personal loans, mortgages, or business loans. Banks carefully evaluate the creditworthiness of borrowers and set interest rates accordingly. As long as the interest earned from the loans is higher than the cost of obtaining funds to lend, banks can earn a profit. Therefore, lending money is one of the key functions of commercial banks.

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