JAMB UTME - Economics - 1994

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In the long run, a firm in a perfectly competitive market will make normal profit. Normal profit is the minimum level of profit necessary to keep a firm in operation. It is equal to the opportunity cost of the resources used in the production process, including the implicit cost of the entrepreneur's time and effort. In a perfectly competitive market, there are many firms selling an identical product, and there are no barriers to entry or exit. This means that in the long run, firms will be able to earn only normal profit, because any abnormally high profits will attract new firms to enter the market, driving down the price and reducing the profits of all firms. Similarly, any abnormally low profits will cause some firms to exit the market, reducing the supply and driving up the price and profits of the remaining firms. Therefore, the correct option is that in the long run, a firm in a perfectly competitive market will make "normal profit".

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The system of agriculture practice which involves hunting, gathering and growing of food crops for family consumption only is described as subsistence farming. Subsistence farming is also known as traditional or primitive farming. In this type of farming, farmers grow crops and rear animals mainly for their own consumption and not for sale. It is practiced mainly in rural and developing countries, and is often characterized by small land holdings, low levels of technology, and a focus on staple crops such as maize, wheat, and rice. The main aim of subsistence farming is to provide food for the farmer's family and not for commercial purposes. Therefore, is the correct answer.

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Per capita income will rise by 3 percent. National income is the total income earned by a country, while per capita income is the average income per person in the country. To calculate per capita income, we divide the national income by the population. If national income rises by 6% and population rises by 3%, then the increase in national income will be spread over a larger population. Therefore, per capita income will increase by a smaller percentage than the increase in national income. To calculate the new per capita income, we can use the following formula: New per capita income = (old per capita income) x (1 + percentage change in national income - percentage change in population) Using the values given in the question, we can plug in: New per capita income = (old per capita income) x (1 + 0.06 - 0.03) Simplifying the equation: New per capita income = (old per capita income) x 1.03 This shows that per capita income will increase by 3 percent.

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An increase in the supply of labour in a factory while other things remain equal will lead to a decrease in the wage rate and an increase in employment. This is because the supply of labour will increase, while the demand for labour remains constant. This will create a surplus of labour in the market, which will put downward pressure on wages. As the wage rate decreases, firms will find it more affordable to hire additional workers, leading to an increase in employment. Therefore, the correct option is that an increase in the supply of labour in a factory while other things remain equal will lead to "a decrease in the wage rate and an increase in employment".

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A deficit balance of payment occurs when a country is importing more goods and services than it is exporting. One of the techniques to rectify this is through devaluation. Devaluation is the reduction in the value of a country's currency in relation to other currencies. This makes the country's exports cheaper and more attractive to foreign buyers, while also making imports more expensive, thereby reducing the demand for them. The end result is an improvement in the country's balance of payment position.

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Taxes and government expenditures are instruments of fiscal policy. Fiscal policy refers to the government's use of taxation and government spending to influence the economy. Through fiscal policy, the government can adjust the level of aggregate demand in the economy, which in turn affects economic growth, employment, and inflation. For example, during a recession, the government may increase government spending and reduce taxes to stimulate demand and boost economic growth. Conversely, during a period of high inflation, the government may decrease spending and increase taxes to reduce demand and control inflation. Therefore, the correct option is that taxes and government expenditures are instruments of "fiscal policy".

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If the economy of a country is operating at X, it means that the productive capacity of the economy is being fully utilized. In other words, the economy is producing goods and services at its maximum potential with the available resources, such as labor, capital, and natural resources. This indicates that there is no excess capacity in the economy, and firms are producing at their most efficient levels to meet the demand for goods and services in the market. Therefore, is the correct implication.

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The basic economic problems of the society refer to the fundamental questions that arise due to the scarcity of resources. The three main economic problems are: 1. What to produce: This refers to the decision of what goods and services should be produced with the limited resources available. 2. How to produce: This refers to the decision of how goods and services should be produced, given the limited resources available. 3. For whom to produce: This refers to the decision of how the goods and services produced should be distributed among the members of the society. Therefore, the correct option is "what to produce, how and for whom".

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Elasticity of demand is an effective tool in the hands of a producer as it helps him to set the price that maximizes his profit. Elasticity of demand refers to the responsiveness of quantity demanded to a change in price. When the demand for a product is elastic, a small change in price results in a significant change in the quantity demanded. In contrast, when the demand for a product is inelastic, a change in price has a relatively small effect on the quantity demanded. A producer can use elasticity of demand to set the price that maximizes his profit. If the demand for his product is elastic, then he will want to set a lower price to increase the quantity demanded and maximize his revenue. Conversely, if the demand for his product is inelastic, he can set a higher price to maximize his revenue and profit. In this way, a producer can use elasticity of demand to find the optimal price point that maximizes his profit. This helps him to stay competitive in the market and also to determine what he should produce based on the demand for his product. Therefore, the correct answer is option (D) set his price to maximize his profit.

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A demand which is positively related to price is not true of normal goods, ostentatious goods, or capital goods. However, it is true of Giffen goods. A Giffen good is a special type of inferior good for which the quantity demanded increases as the price increases. This is in contrast to the law of demand, which states that the quantity demanded of a good decreases as the price increases, for all normal goods. The reason for this unusual behavior is that the Giffen good is often a staple food item, such as bread or rice, that represents a significant portion of a consumer's budget. As the price of the good increases, the consumer has less money to spend on other goods, so they end up buying more of the Giffen good, despite its higher price. Therefore, is the correct answer.

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The correct expression for cross elasticity of demand is: %change in quantity demanded of commodity X / %change in price of commodity Y This formula measures the responsiveness of the quantity demanded of one product (commodity X) to a change in the price of another product (commodity Y). In other words, it tells us how much the demand for commodity X changes when the price of commodity Y changes. If the result is positive, it means that the two products are substitutes, and an increase in the price of one leads to an increase in the demand for the other. If the result is negative, it means that the two products are complements, and an increase in the price of one leads to a decrease in the demand for the other.

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Opportunity cost is an economic concept that refers to the value of the best alternative forgone when making a decision. In other words, it is the cost of the next best alternative that is given up in order to pursue a certain action or decision. Opportunity cost is a measure of the trade-offs that individuals, businesses, and societies face when they make choices. It is often described as the "sacrifice made for the satisfaction of a want" because it involves giving up something desirable in order to pursue something else that is more desirable. Therefore, is the correct description of the opportunity cost concept.

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The features described in the question are characteristics of a pure monopoly. A pure monopoly exists when a single firm is the only supplier of a particular product or service in the market, and there are no close substitutes. As a result, the monopolist has considerable market power, allowing them to restrict output, set prices higher than in a competitive market, and create barriers to entry to prevent new competitors from entering the market. These actions often lead to higher prices, reduced output, and a loss of consumer surplus.

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The term used to describe a policy aimed at promoting the local production of goods which are usually imported is "import substitution". Import substitution is an economic policy that seeks to reduce a country's dependency on imported goods and promote the growth of domestic industries by producing goods locally that were previously imported. This policy aims to protect domestic industries from foreign competition and to reduce the outflow of foreign currency resulting from imports. Import substitution policies typically involve the use of protective measures such as tariffs, quotas, and subsidies to stimulate domestic production and discourage imports. The ultimate goal is to achieve self-sufficiency and reduce reliance on imports. Therefore, Option (B) is the correct answer.

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The basic relationship between the cost of production and the market price of any commodity in the short run is that the market price reflects the variable costs of production, but not necessarily the fixed costs. Variable costs include factors such as raw materials, labor, and utilities, which can vary depending on the level of production. In the short run, the market price may not rise above variable costs, as fixed costs such as rent or equipment may still need to be paid even if production is reduced. Ultimately, the market price is determined by the supply and demand for the commodity in question, as well as any external factors such as inflation or changes in consumer preferences.

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An increase in both the legal reserve ratio and discount rate is an indication of a contractionary monetary policy aimed at reducing inflationary pressure and slowing down economic growth. An increase in the legal reserve ratio implies that commercial banks are required to hold a higher percentage of their deposits as reserves, which reduces the amount of money available for lending and hence decreases the quantity of money in circulation. Also, an increase in the discount rate, which is the interest rate at which commercial banks borrow from the central bank, makes it more expensive for banks to borrow money, and this in turn discourages them from lending money to customers. The combination of these two measures decreases the quantity of money in circulation, reduces consumer spending, and ultimately decreases the value of money.

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The basic idea behind brand differentiation under an imperfect market arrangement is to create demand for the particular product by making it stand out from its rivals. In an imperfect market, where there is limited competition and products are not identical, companies seek to differentiate their product from others to attract customers and increase sales. Brand differentiation involves creating a unique image or identity for a product that sets it apart from its competitors in the eyes of consumers. Brand differentiation can be achieved through various means such as quality, design, packaging, advertising, pricing, and customer service. By emphasizing these unique attributes of the product, companies aim to create a distinct identity and build brand loyalty among customers. Ultimately, the goal of brand differentiation is to increase the perceived value of the product and create demand for it, which can lead to higher sales and profits for the company. Therefore, Option (B) is the correct answer.

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Diminishing returns set in at point J. A production function shows the maximum amount of output that can be produced from a given amount of inputs. As more and more inputs are added, output initially increases at an increasing rate, but at some point, adding additional inputs will result in smaller increases in output. This is known as diminishing returns. In the diagram, point J is where the slope of the production function starts to decrease. This indicates that additional inputs are resulting in smaller increases in output. At point J, adding more inputs is still increasing output, but at a decreasing rate. Beyond point J, adding more inputs would result in decreasing output, which is known as negative returns. Therefore, point J is the point at which diminishing returns set in.

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The correct answer is "the Nigeria National Petroleum Corporation". The Nigeria National Petroleum Corporation (NNPC) is a Nigerian government-owned oil corporation. It was established in 1977 with the aim of regulating the country's oil industry and ensuring that the benefits from Nigeria's oil reserves are shared among the Nigerian people. The NNPC is involved in all aspects of the oil industry, from exploration to production and refining, and it works in partnership with both local and international oil companies.

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To calculate the total population of country X at the end of 1990, we need to add up the number of births, immigrants, and remaining citizens after accounting for deaths and emigration, and then subtract the number of deaths from this total. The number of births is 450,000, while the number of deaths is 210,000. So the net increase due to natural growth is 450,000 - 210,000 = 240,000. The net migration is the difference between the number of immigrants and emigrants, which is 20,000 - 10,000 = 10,000. Thus, the total population at the end of 1990 is: 35,000,000 (original population) + 240,000 (net increase due to natural growth) + 10,000 (net migration) = 35,250,000. Therefore, the total population of country X at the end of 1990 is 35,250,000. Option (D) is the correct answer.

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A sustained increase in the production of goods and services in a country is called economic growth. It refers to the increase in the real output of an economy over a period of time. Economic growth is measured by the percentage increase in real GDP (Gross Domestic Product), which is the value of all goods and services produced in a country adjusted for inflation. Economic growth is important for a country as it leads to increased employment opportunities, higher incomes, and a better standard of living for the people.

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In the long run, all production factors are considered to be variable. This means that firms have enough time to adjust all of their inputs, including labor, capital, and technology, in response to changes in market conditions. In the short run, at least one input is considered to be fixed, usually capital. This is because capital, such as a factory or equipment, cannot be easily adjusted in the short term. However, in the long run, firms can make adjustments to all their inputs to optimize their production and minimize costs.

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In international trade, shipping and other freight charges are treated as invisible items. Invisible items are those international transactions that do not involve the physical movement of goods or assets across borders, but rather involve the provision of services or the transfer of intangible assets such as patents, trademarks, and copyrights. Shipping and other freight charges fall under the category of invisible items because they represent the cost of transporting physical goods across borders and do not themselves represent the physical movement of goods. In contrast, unilateral transfers refer to the transfer of funds or assets from one country to another without any expectation of a corresponding payment or transfer in return. Capital transactions and autonomous capital transactions, on the other hand, refer to the transfer of financial assets, such as stocks, bonds, and loans, between countries.

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Inflation in the Nigerian economy may be fueled by an increase in government expenditure. When the government spends more money, it increases the demand for goods and services in the economy. If the supply of these goods and services cannot keep up with the demand, prices will rise, leading to inflation. As such, the increase in government expenditure may lead to an increase in inflation.

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One of the ways by which the government can speed up economic development is through the encouragement of savings, investment, and equitable distribution of goods and services. Economic development refers to the sustained increase in a country's per capita income and standard of living over time. One of the key ways to achieve this is through the accumulation of capital, which can be achieved through increased savings and investment. The government can encourage savings and investment by providing incentives such as tax breaks and subsidies, as well as by creating a favorable investment climate with policies that encourage entrepreneurship, innovation, and private sector investment. Equitable distribution of goods and services, on the other hand, ensures that everyone in the society benefits from economic growth and development, and reduces income inequality, which can be a barrier to sustainable economic growth. Therefore, is the correct answer.

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The necessity of choice arises because of the scarcity of resources relative to the unlimited human wants and needs. This means that there are not enough resources to produce everything that people desire, so they must make choices about which goods or services they will consume and which they will forgo. Consumers have to make decisions about what they value the most and what they are willing to give up to obtain it, based on their own preferences and priorities. In other words, people have to make choices because they cannot have everything they want, and they have to decide what is most important to them. Therefore, the correct option is that "human wants are insatiable".

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Unemployment can be reduced by adopting labour-intensive techniques of production. When a country or firm employs more labour, the demand for labour increases, which ultimately leads to a reduction in unemployment. Additionally, labour-intensive techniques of production have the advantage of creating more job opportunities, which can help to reduce the level of unemployment. However, the adoption of labour-intensive techniques of production may lead to lower productivity, which can have an adverse effect on economic growth. Therefore, a mixture of labour and capital-intensive techniques of production may be a more suitable approach to reduce unemployment and promote economic growth.

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In the event of liquidation of a private limited liability company, the shareholders' liability is limited to their investment in the company. This means that the shareholders' personal assets such as their income from all sources, family assets, and collateral offered for bank loans are protected and not at risk. Limited liability is one of the key characteristics of a private limited liability company. It means that the shareholders are not personally liable for the debts and obligations of the company beyond the amount of their investment in the company. Therefore, if the company goes bankrupt and is liquidated, the shareholders will not be required to contribute more than the amount they have already invested in the company.

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If the actual population in a country is less than the optimum population, then it is desirable to have a larger population. This is because a larger population can mean more economic activities, more productivity and possibly greater economic growth. However, having a larger population without a corresponding improvement in technology or infrastructure to support the population can lead to resource depletion and overuse of the available resources. Therefore, it is important to strike a balance between the population size and available resources to ensure sustainable economic growth and development.

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The major factor that causes fluctuations in the supply of agricultural produce is weather variations. Weather variations such as rainfall, temperature, and humidity have a significant impact on agricultural production. Too much or too little rainfall, extreme temperatures, or other weather events such as droughts, floods, and storms can damage crops and reduce yields, resulting in a decrease in the supply of agricultural produce. Conversely, favorable weather conditions can lead to increased crop yields and a greater supply of agricultural produce. While high prices can also influence the supply of agricultural produce to some extent, weather variations have a more significant impact. Pests can also cause fluctuations in supply by damaging crops, but weather variations are the primary factor. Rural-urban migration, on the other hand, may affect the demand for agricultural produce but does not have a direct impact on the supply of agricultural produce. Therefore, the correct answer is option (C) weather variations.

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The circular flow of income refers to the continuous flow of goods, services, and money among households, businesses, and the government in an economy. This flow illustrates how these different economic agents are interdependent and rely on each other for their economic well-being. Households provide factors of production such as labor and capital to businesses, which use these factors to produce goods and services. The households, in turn, purchase these goods and services from businesses, generating revenue for the businesses. The government also plays a role in this flow, collecting taxes from households and businesses, and using that revenue to provide public goods and services. The circular flow of income is an important concept in macroeconomics and helps to explain how the overall economy functions.

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Gresham's law in Economics shows that "bad money drives out good money". This means that when two types of money are in circulation, people will tend to hoard the money that they believe is of higher value and spend the money that they believe is of lower value. In other words, people will try to get rid of the "bad" money and hold onto the "good" money. This can lead to a situation where the "bad" money becomes the dominant currency in circulation, while the "good" money is hoarded or taken out of circulation. This phenomenon can occur when there is a difference in the intrinsic value of the two types of money, or when there is a difference in the perceived value of the two types of money. Therefore, the correct option is that "bad money drives out good money" is what Gresham's law in Economics shows.

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A major shortcoming of the sole proprietorship form of business is lack of continuity. Sole proprietorship is a type of business organization where a single person owns and runs the business. Since the business is tied to the owner, if the owner dies or is unable to continue operating the business, it may have to be dissolved. In other words, the life of the business is directly tied to the life of the owner. This is a major disadvantage because it limits the growth potential of the business and makes it difficult to attract investors or obtain financing. In contrast, other forms of business organization such as partnerships and corporations can continue to operate even if one of the owners or shareholders leaves or dies. Therefore, the correct option is that the lack of "continuity" is a major shortcoming of the sole proprietorship form of business.

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The borrowing rights of a member country of the International Monetary Fund (IMF) are determined by its quota to the fund. Quota refers to the share of each member country in the financial resources of the IMF, which is determined by various factors such as the size of the country's economy, its contribution to the international trade system, and its balance of payments. A country's quota also determines its voting power in the IMF. Therefore, the higher the quota of a member country, the greater its borrowing rights in the IMF.

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The main objective of the Economic Community of West African States (ECOWAS) is to promote the free movement of persons, goods, and services within the sub-region. ECOWAS was formed to create a regional economic bloc that would promote cooperation and integration among West African countries. This includes removing trade barriers, facilitating the movement of people across borders, and harmonizing policies and regulations to promote economic development and growth. While ECOWAS has also pursued other objectives such as establishing a development bank and creating a common currency for the sub-region, the primary goal remains to promote regional integration and economic cooperation.

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Petroleum is the mainstay of the Nigerian economy because it is the country's main foreign exchange earner. This means that Nigeria earns a significant portion of its foreign currency by exporting petroleum and petroleum-based products to other countries. As a result, the government relies heavily on the revenue generated from the oil sector to fund its budget and other developmental projects. In addition, many industries in Nigeria depend on petroleum for their operations, including transportation, power generation, and manufacturing, among others. Therefore, the correct option is that petroleum is the "main foreign exchange earner".

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Labour-intensive strategy of industrialization emphasizes the use of manual method of production. This approach relies on a large amount of labor with minimal use of machinery or technology in the production process. It involves utilizing the abundant labor resources in developing countries to create employment opportunities and enhance economic growth. By adopting a labor-intensive approach, the economy can create more jobs, especially in the agricultural and manufacturing sectors, leading to a reduction in unemployment and poverty.

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Every economy requires an accurate census because it assists in providing a sound framework for policy formulation. A census is an official count of a population, and it provides valuable data about the size, composition, and distribution of the population. This information is crucial for policymakers to make informed decisions about resource allocation, social services, and infrastructure development, among other things. For example, a census can help policymakers determine the need for schools, hospitals, and other public facilities in different areas of the country. It can also help them identify population trends, such as aging or migration patterns, that may impact future policy decisions. Therefore, the correct option is that an accurate census assists in "providing a sound framework for policy formulation".