WAEC SSCE - Economics - 2021

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One way that government can increase farmers' incomes is by fixing minimum prices for their crops. This means that the government sets a floor price below which the farmers cannot sell their produce. By doing so, farmers are guaranteed a certain level of income even if the market prices fall due to oversupply or other factors. Fixing maximum prices is unlikely to increase farmers' incomes as it would limit the amount they can earn for their crops, while encouraging them to produce surplus output may lead to lower prices due to oversupply. Increasing taxes on inputs could also have a negative effect on farmers' incomes by increasing their production costs, which may lead to lower profits. Therefore, fixing minimum prices is generally considered the most effective way to increase farmers' incomes, as it ensures they receive a fair price for their produce and incentivizes them to continue farming.

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The supply of land for agricultural purposes can be increased through the processes of reclamation and irrigation. Reclamation involves making land that is unsuitable for farming, such as swamps and deserts, usable for agricultural purposes. Irrigation involves providing water to farmland to increase productivity. These processes increase the amount of land that can be used for agriculture and help to improve crop yields. The other options mentioned are not effective ways to increase the supply of land for agriculture. Mechanized farming can improve productivity, but it does not increase the amount of land available for farming. An increase in land prices may encourage more people to sell their land, but it does not increase the overall amount of land. Converting building sites to farmland may be possible in some cases, but it is not a scalable or sustainable solution for increasing the supply of agricultural land.

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Abundant natural resources do not contribute to economic growth in developing countries because of mismanagement and corruption. While natural resources can provide significant opportunities for economic development, their abundance alone does not guarantee success. In many developing countries, mismanagement and corruption are major obstacles to realizing the full potential of natural resources. Corruption can take many forms, such as bribery, embezzlement, and nepotism, and can occur at all levels of government and industry. This can lead to inefficiencies, waste, and a lack of accountability, which can undermine the effective management and use of natural resources. Similarly, mismanagement can also impede economic growth. Poor planning, inadequate infrastructure, and insufficient investment in education and training can limit the capacity of a country to effectively exploit its natural resources. In addition, over-reliance on a single commodity can leave a country vulnerable to fluctuations in global prices, which can have a negative impact on economic growth. Therefore, to fully benefit from their natural resources, developing countries need effective governance, sound economic policies, and investment in human capital. This can help to ensure that natural resources are managed efficiently, transparently, and sustainably, and that the benefits of resource wealth are shared more widely across society.

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The distinguishing function of an entrepreneur is risk-bearing. Entrepreneurs are individuals who take on financial risks and uncertainties to create new businesses or bring innovative ideas to the market. They are willing to invest their own money, time, and resources into a venture without any guarantee of success. This risk-taking behavior sets them apart from other business professionals. Entrepreneurs must also have the ability to identify and evaluate potential risks and opportunities, develop and execute business plans, and adapt to changes in the market. However, while planning, control, and management are all important aspects of entrepreneurship, it is the willingness to take on risk that distinguishes an entrepreneur from other business professionals.

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Net National Product (NNP) is the total value of all goods and services produced by the residents of a country in a given period, minus the value of capital that has been used up in the process of production. To calculate NNP at factor cost, we need to start with Gross Domestic Product (GDP) and make adjustments for net factor income from abroad, depreciation, and indirect taxes. Using the given data, we can calculate NNP at factor cost as follows: NNP at factor cost = GDP - depreciation + net factor income from abroad - indirect taxes NNP at factor cost = $2800 - $700 + $250 - $120 NNP at factor cost = $2,230 Therefore, the country's Net National Product (NNP) at factor cost is $2,230.

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When a commodity market operates without government interference, commodities are distributed through the operation of price mechanism. This means that the price of the commodity is determined by the interaction of supply and demand in the market, without any intervention from the government. As the demand for a commodity increases, the price of the commodity increases, leading to a decrease in demand and an increase in supply. On the other hand, when the supply of a commodity increases, the price decreases, leading to an increase in demand and a decrease in supply. In this way, the price mechanism helps to ensure that commodities are distributed efficiently, with those who are willing to pay the most for the commodity receiving it first.

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The average cost of producing 40 bags of rice is $11. To find the average cost, we divide the total cost by the output. In this case, the total cost of producing 40 bags of rice is $440. Therefore, the average cost of producing 40 bags of rice is: $440 / 40 = $11 So the answer is $11. It's important to note that the average cost is calculated by taking the total cost and dividing it by the output, not by taking the average of the total costs for each level of output. This is because the cost per unit of output can change as production levels increase or decrease, and taking the average of the total costs for each level of output could result in an inaccurate average cost.

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To obtain the median of a given data, we need to find the middle value that separates the data into two equal parts. One simple way to do this is by arranging the data in either ascending or descending order and finding the item that falls in the middle. If there is an odd number of items, the median is simply the middle value. For example, if we have the following set of data: {2, 4, 5, 7, 9} We can arrange it in ascending order as: {2, 4, 5, 7, 9} The middle value is 5, which is the median of the data set. If there is an even number of items, we need to find the average of the two middle values. For example, if we have the following set of data: {1, 3, 4, 6, 8, 9} We can arrange it in ascending order as: {1, 3, 4, 6, 8, 9} The middle values are 4 and 6. To find the median, we take the average of 4 and 6 which is (4+6)/2=5. Therefore, the correct option to obtain the median of a given data is to arrange the data in either ascending or descending order and find what item divides the set into two equal parts.

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The trader increased her supply from 50 to 120 boxes per week when the price of soap rose from $10 to $20. To determine whether the supply is unitary elastic, perfectly inelastic, fairly elastic, or inelastic, we need to look at the responsiveness of the quantity supplied to the change in price. If the quantity supplied changes proportionally to the change in price, then supply is unitary elastic. If the quantity supplied does not change at all despite the change in price, then supply is perfectly inelastic. If the quantity supplied changes significantly in response to the change in price, then supply is fairly elastic. If the quantity supplied changes only slightly in response to the change in price, then supply is inelastic. In this case, the trader increased her supply from 50 to 120 boxes per week, which is a significant increase. This suggests that the supply is fairly elastic, meaning that the quantity supplied is responsive to changes in price. Therefore, the correct answer is "fairly elastic".

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The dependency ratio is a measure of the number of people who are not of working age (0-15 and over 60) compared to the number of people who are of working age (16-60). In this case, 30% of the population is 0-15 and 10% is over 60, so 40% are not of working age. The remaining 60% of the population is of working age. So, the dependency ratio can be calculated as the number of people who are not of working age divided by the number of people who are of working age, or 40% divided by 60% which is 2:3. In simple terms, for every 3 people of working age, there are 2 people who are not of working age.

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The argument that "Government is able to participate and control the operation of the privatized businesses" is not an argument for the policy of privatization in West Africa because the whole idea behind privatization is to transfer ownership and control of a government-owned asset or service to the private sector. Privatization is meant to reduce government involvement in business operations and to promote competition, efficiency, and accountability. If the government is still able to participate and control the operation of the privatized businesses, then it would not be considered a true privatization.

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When people dispose of their assets, such as by selling them, they may be required to pay a tax on any profit they made from the sale. This tax is known as a capital gains tax. The capital gains tax is a tax on the increase in value of an asset between the time it was acquired and the time it was disposed of. For example, if someone bought a piece of real estate for $100,000 and sold it for $150,000, they would have a capital gain of $50,000. The capital gains tax would be calculated based on that $50,000 gain. The capital gains tax is not a tax on the total amount received from the sale of the asset, but only on the profit made from the sale. This is different from a sales tax or an expenditure tax, which are taxes on the total amount spent on a good or service. A value added tax is a type of sales tax that is applied at each stage of production, from the raw materials to the final product, based on the value added at each stage. This tax is not directly related to the sale of an asset. Therefore, the correct answer is "capital gains tax."

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The major source of finance to the Railway Corporation in West African countries is government subvention. This means that the government provides financial support to the Railway Corporation in order to help them fund their operations, maintain and upgrade their infrastructure, and purchase new equipment. This support can come in the form of direct funding, grants, or loans, and is usually included in the national budget. The government subvention is important for the Railway Corporation because it allows them to continue providing transportation services to the public, without having to rely solely on revenue from ticket sales or other sources. Other sources of finance, such as sale of shares or trade credit, may also be used by the Railway Corporation, but they are typically less significant compared to government subvention. Surplus, on the other hand, is a financial term used to describe a situation where the Railway Corporation's revenues exceed its expenses, which can then be reinvested in the company or distributed to shareholders as dividends. However, surplus is not a reliable or consistent source of finance, and is not something that can be relied on to fund the Railway Corporation's operations.

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Two factors that can improve the efficiency of labor are the work environment and the health status of workers. A good work environment can include factors such as comfortable temperature, proper lighting, and ergonomic design of work spaces and equipment. This can reduce stress and fatigue among workers, leading to higher levels of productivity and motivation. A worker's health status can also play a role in their efficiency at work. A healthy worker is more likely to be productive and able to perform their job tasks effectively. Employers can encourage healthy habits among workers through benefits such as on-site fitness facilities or wellness programs. It's important to note that both of these factors can have a significant impact on worker satisfaction and motivation, which can lead to higher levels of productivity and efficiency in the long term.

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The standard of living in two countries can be compared using the gross national product (GNP) per head. GNP per head is a measure of a country's average economic output per person. It takes into account the total income generated by a country, divided by the number of people living there. This gives us a good idea of the average standard of living in a country, and allows us to compare the standard of living between two countries. For example, if two countries have the same total national income, but one country has a smaller population, its GNP per head will be higher, indicating a higher standard of living for its citizens.

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The examples of land that are non-renewable are farmland already used for many years and some natural resources such as natural gas. Farmland that has been used for many years can become degraded and depleted of nutrients, making it difficult to grow crops. This land may take a very long time, if ever, to recover its fertility, making it non-renewable. Natural gas is a non-renewable resource because it is formed over millions of years from the remains of dead plants and animals. Once it is extracted from the ground and used, it cannot be replaced. Marshy and water-logged land and oxygen and carbon dioxide in the atmosphere are not examples of non-renewable land. Marshy and water-logged land can be restored through land management practices, and oxygen and carbon dioxide in the atmosphere are constantly being replenished through natural processes such as photosynthesis.

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The law of diminishing returns is applicable to the variable factors of production. This law states that as more and more of a variable input, such as labor or raw materials, is added to a fixed input, such as capital or land, the marginal product of the variable input will eventually decline. This means that each additional unit of the variable input will add less to the total output than the previous unit did. To put it simply, imagine you're making pizzas in a small restaurant with a fixed amount of oven space (fixed input). As you add more and more pizza makers (variable input), each additional pizza maker will help to increase production, but only up to a certain point. After a certain number of pizza makers, adding more won't increase production as much because they'll start getting in each other's way or not enough oven space to cook more pizzas. This is an example of the law of diminishing returns in action.

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If a country's import bill is high, that means the country is spending more money on importing goods from other countries than it is earning from exporting its own goods to other countries. To encourage exports and reduce the trade deficit, the country can take several measures. One such measure is to allow its currency to depreciate. When a country's currency depreciates, its goods become relatively cheaper compared to other countries. As a result, other countries may be more willing to buy goods from that country, increasing its exports. Additionally, when the country's currency depreciates, its own citizens may also be more inclined to buy locally produced goods instead of imported goods because imported goods will become relatively more expensive. Allowing the country's currency to appreciate, on the other hand, would make its goods more expensive compared to other countries. This could lead to a decrease in exports and an increase in imports, exacerbating the trade deficit. Liberalizing importation could make it easier for foreign goods to enter the country, which could increase competition for local producers. This may lead to an increase in imports, but it may not necessarily encourage exports. Increasing taxes on all locally produced goods would likely decrease demand for those goods, leading to a decrease in production and potentially leading to higher unemployment. This measure would not encourage exports and would not necessarily reduce imports either.

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The relationship between the marginal revenue (MR) and the average revenue (AR) of a monopolist can be described as follows: The MR curve slopes down to the right and is below the AR curve. This means that as a monopolist increases the quantity of goods sold, the marginal revenue (the extra revenue earned from selling one more unit) decreases, while the average revenue (the total revenue divided by the number of goods sold) also decreases, but at a slower rate. The reason for this is that, in a monopoly, the monopolist has the market power to set the price for their goods, so as they sell more, they may have to lower the price to entice more customers to buy. This leads to a decrease in the marginal revenue earned from each additional unit sold, and a decrease in the average revenue earned from all units sold. In simple terms, as a monopolist sells more goods, they will earn less from each additional unit they sell, causing both the marginal and average revenue to decrease, but the MR will decrease faster than the AR.

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The opportunity cost of buying the pair of shoes is the next best alternative that the consumer must give up in order to buy the shoes. In this case, the consumer has a budget of $10, and they want to buy a dress, a pair of shoes, a handbag, and jewelry, but they can only afford to buy some of these items. To buy the shoes, the consumer must spend $10, which leaves them with no money to buy the dress or the handbag. Therefore, the opportunity cost of buying the pair of shoes is the value of the dress and the handbag, which is $20 + $7 = $27. In other words, the consumer must give up the opportunity to buy the dress and the handbag, which are their next best alternatives, in order to buy the shoes. So, the correct answer is option number 3, which is "Handbag and Jewelry".

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The function of money that is not typically considered is "general acceptability". This is because general acceptability is not actually a function of money, but rather a characteristic of money that enables it to serve its functions effectively. The three primary functions of money are: 1. Medium of exchange: Money is used to facilitate transactions by acting as a medium of exchange, allowing people to trade goods and services without having to rely on barter. 2. Store of value: Money serves as a store of value, meaning that it can be saved and used to make future purchases. 3. Standard of deferred payment: Money can also be used as a standard of deferred payment, meaning that it can be used to settle debts and make payments at a later time. General acceptability is a characteristic of money that ensures that it is widely accepted by people in an economy as a means of payment for goods and services. This means that money needs to be trusted and recognized as having value by everyone in the economy. Without general acceptability, money would not be able to function effectively as a medium of exchange, store of value, or standard of deferred payment.

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Demand-pull inflation refers to a situation where the demand for goods and services in an economy exceeds the available supply, leading to an increase in prices. This type of inflation can be caused by several factors, but it is not caused by an increase in the cost of production or an increase in import duties. One of the main causes of demand-pull inflation is excessive demand in an economy, which can result from factors such as an increase in consumer confidence, higher disposable income, or increased government spending. When demand outstrips supply, sellers can increase their prices, leading to inflation. Another factor that can contribute to demand-pull inflation is deficit financing by the government. When a government spends more than it collects in taxes, it can create a situation where there is more money in circulation, which can drive up demand and prices. Excessive supply of foodstuff, on the other hand, can lead to a decrease in prices, known as deflation. Therefore, it is not a cause of demand-pull inflation. In summary, demand-pull inflation is caused by excess demand in an economy or deficit financing by the government. An increase in the cost of production or import duties is not a cause of demand-pull inflation.

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The fixed cost of production is $100. This is because the fixed cost is the portion of the total cost that does not change with the level of output. Looking at the table, we can see that when the output is zero, the total cost is $100. This means that even if the firm produces zero bags of rice, they still have to pay this $100 fixed cost. As the level of output increases, the total cost also increases. However, the increase in total cost is due to the variable cost, which is the cost that varies with the level of output (e.g. cost of raw materials, labor, etc.). Therefore, based on the given information, the fixed cost of production is $100.

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If a country imposes a barrier on trade, such as tariffs or quotas, it will result in an increase in the cost of imported goods. This makes them less competitive compared to domestically produced goods, leading to an increase in demand for locally produced goods. As a result, local industries will experience a boost in sales and may expand to meet the growing demand. This can result in the growth of infant industries, which may not have been able to compete with cheaper imports before the trade barrier was imposed. However, the downside is that it can also lead to higher prices for consumers and potentially limit the variety of goods available in the market.

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Non-economic factors that influence the location of firms are factors that are not necessarily related to profit or financial gain. These factors can include social, political, and environmental considerations. For example, the existence of required materials for production may be a key consideration for a firm when deciding where to locate. If a particular area has a rich supply of the raw materials that a company needs to produce its goods or services, it may make sense for that company to locate its operations in that area. The availability of a population of buyers is another factor that can influence where a firm decides to locate. If a particular area has a large and accessible population of potential customers, it may make sense for a company to locate its operations in that area to take advantage of this market. Adequate supply of power, good road and rail network can also be a key consideration for firms when deciding where to locate. These infrastructure considerations can impact a company's ability to transport goods and services to customers, as well as its ability to access the resources it needs to operate. The activities of politicians in deciding location of firms is not a common factor. However, sometimes government policies and regulations can have an impact on where firms decide to locate. For example, tax incentives or other government subsidies may be offered to companies that locate in certain areas, which can influence their decision-making process.

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A leftward shift in the supply curve for a commodity indicates a decrease in supply. In economics, the supply curve shows the relationship between the price of a commodity and the quantity that suppliers are willing and able to provide. When the supply curve shifts to the left, it means that at each price level, the quantity supplied is lower than before. This could be due to a number of factors such as a decrease in the number of suppliers, an increase in the cost of production, or a decrease in the quality of the commodity. In simpler terms, a leftward shift in the supply curve means that there is less of the commodity available for sale, and as a result, the price is likely to increase.

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The working population can be defined as the population aged between 16 to 60 years old, as they are typically considered to be of working age. Using the age distribution table, we can see that the percentage of the population aged between 16 to 40 years old is 45%, while the percentage of the population aged between 41 to 60 years old is 15%. Adding these two percentages gives us a total of 60% of the population aged between 16 to 60 years old, which represents the working population. Therefore, the correct answer is 60%.

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An increase in the rice harvest, all things being equal, is likely to cause the price of rice to fall substantially. This is because an increase in the supply of rice will result in a surplus, which will lead to a decrease in price as producers try to sell their excess rice. Conversely, if there is a decrease in the rice harvest, all things being equal, the price of rice is likely to increase due to a shortage of supply. Therefore, the law of supply and demand states that an increase in supply results in a decrease in price, while a decrease in supply results in an increase in price.

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The demand for wood and labor is an example of "derived demand." This means that the demand for these goods and services is derived from the demand for another product or service that they are used to produce. For example, if there is an increase in demand for housing, there will be a derived demand for wood and labor to build the houses. The demand for wood and labor is not a direct demand from consumers, but rather a demand that is derived from the demand for housing. Similarly, the demand for coal is derived from the demand for electricity, and the demand for steel is derived from the demand for construction and manufacturing. Derived demand is an important concept in economics, as it helps to explain the interdependence of different industries and the ripple effects that changes in one industry can have on others.

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The separation of ownership of resources and their control is mostly found in a joint stock company. A joint stock company is a type of business organization where ownership is divided into small units called shares. These shares are owned by individual investors who are known as shareholders. Shareholders have limited liability, meaning that they are only liable for the amount of money they have invested in the company, and are not personally responsible for the company's debts or obligations. In a joint stock company, shareholders elect a board of directors who are responsible for making important decisions about the company's operations and strategy. The board of directors hires managers to run the day-to-day operations of the company, but the ultimate authority still rests with the shareholders. This separation of ownership and control is not as prominent in other forms of business organizations such as sole proprietorship, partnership, or consumer co-operative. In a sole proprietorship, the owner has complete control over the business and is personally liable for its debts. In a partnership, control is shared between the partners and they are jointly liable for the business's debts. In a consumer co-operative, ownership and control are in the hands of the members who use the co-operative's services, and they have equal voting rights in the decision-making process.

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An increase in cash ratio by the central bank will reduce the supply of money. Cash ratio refers to the proportion of cash that commercial banks are required to hold in reserve with the central bank. When the central bank increases the cash ratio, it is essentially increasing the amount of cash that commercial banks must hold in reserve, which in turn reduces the amount of money available for lending and other economic activities. This reduction in the amount of money available in the economy reduces the supply of money. Therefore, an increase in the cash ratio by the central bank will not increase the supply of money, increase bank lending or encourage borrowing, but will reduce the supply of money available in the economy.

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To find the price (P) when the quantity (Q) is 50, we can substitute Q = 50 into the given equation P = 0.3Q. P = 0.3 x Q P = 0.3 x 50 P = 15 Therefore, when the quantity of mangoes supplied is 50, the price is $15. This means that if a buyer wants to purchase 50 mangoes, they would need to pay $15 in total. Hence, the correct answer is option B: $15.00.

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(a) Control of money supply by the Central Bank.

(i) Open Market Operation (OMO). This is the deliberate buying and selling of government securities (treasury bills and bonds) in the open market by the Central Bank to alter the amount of money in circulation. To reduce the money supply, the Bank sells securities; the public and commercial banks pay for them, so cash is withdrawn from the banking system and banks' ability to create credit falls. To increase the money supply, the Bank buys back securities, injecting cash into the system and expanding credit.

(ii) Bank rate (discount rate). This is the rate of interest at which the Central Bank lends to commercial banks as lender of last resort. To contract the money supply, the Bank raises the bank rate; commercial banks then raise their own lending rates, borrowing becomes dearer, loans fall and the money supply contracts. To expand the money supply, the Bank lowers the bank rate, making credit cheaper and encouraging borrowing.

(b) Four functions of the Central Bank of Nigeria.

• Issue of currency: it is the sole issuer of legal-tender notes and coins.
• Banker to the government: it keeps government accounts, receives revenue and makes payments on its behalf.
• Banker to and supervisor of commercial banks: it holds their reserves, acts as lender of last resort and regulates them.
• Control of money supply and credit: it conducts monetary policy through OMO, bank rate, reserve requirements, etc.
• Custodian of external reserves and management of the exchange rate.

Examination reminder: link each instrument to its direction: selling securities and raising the bank rate both reduce money supply; buying securities and cutting the rate both increase it.

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(a) Product retailing. Retailing is the final stage in the chain of distribution in which goods are sold in small quantities directly to the final consumer for personal use. The retailer buys from the wholesaler (or producer) and breaks bulk to serve individual buyers.

(b) Three roles of the wholesaler to the manufacturer.

• Provides a ready market and buys in bulk: the wholesaler purchases large quantities, enabling the manufacturer to sell output quickly and continue production.
• Warehousing (storage): the wholesaler stores goods, relieving the manufacturer of the cost and risk of holding large stocks.
• Provides finance: by paying for goods (often in advance or promptly), the wholesaler supplies the manufacturer with working capital.
• Bears risk and gives market information: the wholesaler bears storage and price risks and feeds back consumers' tastes and preferences to the manufacturer.

(c) Three problems associated with distribution of products.

• Poor transport and infrastructure: bad roads and inadequate storage raise cost and cause delay and spoilage.
• High cost of distribution: transport, storage and middlemen charges raise the final price to consumers.
• Hoarding and adulteration by middlemen: some intermediaries hoard goods to create artificial scarcity or tamper with products.
• Perishability of goods: without cold storage many products spoil before reaching consumers.

Examination reminder: address the roles specifically to the manufacturer (not the consumer), since the question fixes the audience.

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(a) Economies of scale. These are the cost advantages, seen as a fall in the long-run average (unit) cost of production, that a firm enjoys as it expands its scale of output. As output rises, total cost is spread over more units and specialised resources are used more efficiently, so cost per unit falls.

(b) Three internal economies of scale. (These arise from the growth of the individual firm itself.)

• Technical economies: a large firm can install big, specialised, more efficient machinery and use methods of mass production that lower unit cost.
• Managerial economies: a large firm can employ specialist managers and divide administrative work, raising efficiency without a proportionate rise in cost.
• Financial economies: large firms borrow more easily and at lower interest rates and can raise capital from many sources.
• Marketing (commercial) economies: bulk buying of inputs at discounts and bulk selling reduce cost per unit.

(c) Three factors that influence where a firm is sited (location factors).

• Nearness to raw materials: especially where materials are bulky or perishable, to cut transport cost.
• Availability of labour: supply of suitable skilled or cheap labour.
• Access to market: nearness to consumers reduces distribution cost.
• Transport and infrastructure: good roads, power and water supply.

Examination reminder: keep internal economies (from the firm's own growth) distinct from external economies (from growth of the whole industry).

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(a) The missing values (using \(AR = \dfrac{TR}{Q}\), \(TR = P\times Q\), \(MR = \dfrac{\Delta TR}{\Delta Q}\))

• X = AR at Q = 20 = \(\dfrac{3000}{20} = \$150\)
• U = Unit price at Q = 30 = AR = \(\dfrac{3600}{30} = \$120\)
• V = TR at Q = 40 = \(100\times 40 = \$4000\)
• W = MR at Q = 40 = \(\dfrac{4000-3600}{40-30} = \dfrac{400}{10} = \$40\)
• Y = AR at Q = 40 = \(\dfrac{4000}{40} = \$100\)

(b) Type of market

The firm operates in an imperfect market (monopoly). The unit price (average revenue) falls as output rises, and marginal revenue is below average revenue at every level. A firm facing a downward-sloping demand/AR curve with MR < AR is a price-searcher, not a perfectly competitive price-taker.

(c) Equilibrium output

A firm is in equilibrium where \(MR = MC\). Since \(MC = \$60\) at all outputs, equilibrium is where \(MR = \$60\), which occurs at Q = 30 units. Producing beyond this, MR falls below MC, so additional units subtract from profit.

(d) Margin of profit or loss at 50 units

At 50 units, \(TR = \$4000\). Taking the stated total cost as \$6,000:

\[\text{Profit} = TR - TC = 4000 - 6000 = -\$2000\]

The firm makes a loss of \$2,000.

(e) Another name for marginal cost

Incremental cost (the extra/additional cost of producing one more unit).

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(a) Three characteristics of perfect competition.

• There are many buyers and many sellers, so no single firm can influence the market price; each is a price taker.
• The product is homogeneous (identical), so buyers have no reason to prefer one seller.
• There is free entry into and exit from the industry in the long run.
• There is perfect knowledge of prices and conditions by buyers and sellers, and free/perfect factor mobility.

(b) Equilibrium of a perfectly competitive firm. In every case the firm maximises profit where marginal cost equals marginal revenue, \( MC = MR \), with MC cutting MR from below. Because the firm is a price taker, \( P = AR = MR \) and the demand curve is a horizontal line at the market price.

(i) Short run. The firm produces where \( MC = MR = P \). At this output the firm may earn supernormal profit (if \( P > AC \)), normal profit (if \( P = AC \)), or a loss (if \( P < AC \)). It continues in the short run so long as price at least covers average variable cost. Diagram: a horizontal demand line \( P = AR = MR \) cutting a U-shaped MC curve; the gap between price and AC at the equilibrium output shows profit or loss.

(ii) Long run. Supernormal profits attract new firms (free entry), which raises supply and lowers price, while losses drive firms out until price rises. Adjustment stops when each firm earns only normal profit, so long-run equilibrium is where \( P = AR = MR = MC = AC \) at the minimum point of the average cost curve. Diagram: the horizontal demand line is tangent to the lowest point of the AC curve, with MC passing through that point.

Examination reminder: stress that only normal profit survives in the long run because free entry and exit compete away any supernormal profit.

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Sector classification of the occupations

(a) Size of the entire labour force

Add every occupation: \(30 + 37 + 19 + 12.2 + 16.1 + 10.8 + 15.6 + 19 + 10.3 = 170\) million.

The labour force = 170 million workers.

(b) Percentage in each sector (each sector total divided by 170, times 100)

• (i) Primary: \(\dfrac{42.5}{170}\times 100 = 25\%\)
• (ii) Secondary: \(\dfrac{68.0}{170}\times 100 = 40\%\)
• (iii) Tertiary: \(\dfrac{59.5}{170}\times 100 = 35\%\)

(c) Ratio of mining workers to shoe-production workers

\(16.1 : 30 = 161 : 300\) (multiplying both by 10). Since 161 and 300 share no common factor, the ratio is 161 : 300.

(d) Percentage engaged in warehousing

\(\dfrac{12.2}{170}\times 100 = 7.18\%\) (approximately).

(e) Type of economy

(i) It is an industrialised (developed) mixed economy.

(ii) Reason: only 25% of the labour force is in primary (extractive/agricultural) production, while 75% is engaged in secondary and tertiary activities. A small primary share with large manufacturing and service sectors is the mark of an industrialised economy rather than a subsistence agrarian one.

Antwoorddetails

(a) Price elasticity of demand (PED). It is the degree of responsiveness of the quantity demanded of a good to a change in its price. It is measured as \( PED = \dfrac{\%\ \text{change in quantity demanded}}{\%\ \text{change in price}} \).

(b) Elastic versus inelastic demand.

(c) Effect on a trader's total revenue. Recall \( TR = P \times Q \).

(i) When demand is elastic: a fall in price causes a more than proportionate rise in quantity demanded, so total revenue rises; a rise in price causes a more than proportionate fall in quantity, so total revenue falls. Price and total revenue move in opposite directions. On a diagram, plot a gently sloping (flat) demand curve; cutting price from \( P_1 \) to \( P_2 \) enlarges the revenue rectangle \( P \times Q \).

(ii) When demand is inelastic: a rise in price causes only a less than proportionate fall in quantity, so total revenue rises; a fall in price causes total revenue to fall. Price and total revenue move in the same direction. On a diagram, draw a steep demand curve; raising price from \( P_1 \) to \( P_2 \) enlarges the revenue rectangle.

Examination reminder: to raise revenue, cut price when demand is elastic but raise price when demand is inelastic.

Antwoorddetails

(a) Domestic trade versus external trade. Domestic (internal) trade is the buying and selling of goods and services within the boundaries of a single country, using one common currency and one set of laws. External (international/foreign) trade is trade between different countries, involving different currencies, customs duties, exchange-rate problems and different commercial laws. External trade is further divided into import, export and entrepot trade.

(b) Terms of trade versus balance of trade. Terms of trade measure the rate at which a country's exports exchange for its imports, expressed as an index: \( \text{Terms of trade} = \dfrac{\text{index of export prices}}{\text{index of import prices}} \times 100 \). It shows whether export earning power is improving. Balance of trade is the difference in value between a country's visible exports and visible imports of goods over a period; a surplus (favourable) means visible exports exceed visible imports, a deficit means the reverse.

(c) Four causes of a balance of payments deficit.

• Excess of imports over exports: spending more on foreign goods and services than is earned from selling abroad.
• Fall in world prices of a country's exports (unfavourable terms of trade), reducing export earnings.
• Heavy external debt servicing: large outflows of interest and principal to foreign creditors.
• Capital flight and large invisible payments such as freight, insurance and profit repatriation by foreign firms.
• Over-dependence on a single export commodity, so a fall in its demand or price causes a deficit.

Examination reminder: do not confuse balance of trade (visibles only) with balance of payments (all transactions, visible and invisible, plus capital).