JAMB UTME - Economics - 2009

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Total output @ 5 units - Total output @ 4 units/5-4
=425 - 212/1
=213

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The shape of the long-run average cost curve is best explained by the law of returns to scale. The law of returns to scale refers to the relationship between inputs and outputs in the long run, where all inputs can be varied. The curve shows the average cost per unit of output as the scale of production increases. If the cost per unit decreases as the scale of production increases, the curve is said to have economies of scale and will have a downward slope. Conversely, if the cost per unit increases as the scale of production increases, the curve is said to have diseconomies of scale and will have an upward slope. If the cost per unit remains constant as the scale of production increases, the curve is said to have constant returns to scale and will be a horizontal line.

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When workers have a union, the supply of labour is said to be monopsonistic. A monopsony occurs when there is only one buyer of a particular good or service. In the case of labor, a monopsony occurs when there is only one employer in a given market or industry. A union represents workers in their negotiations with their employer, and can act as a kind of monopoly on the supply of labor in that market. Because the union negotiates on behalf of all the workers in the industry, the employer must deal with the union if they want to hire any of those workers. This can give the union significant bargaining power and allow it to negotiate better wages, benefits, and working conditions for its members. As a result, the supply of labor becomes monopsonistic because the employer must deal with the union, which represents the entire pool of available labor in that market.

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In the long run, monopolistic competitive firms tend to make normal profits. This is because in the long run, new firms can enter the market, increasing competition and reducing demand for existing firms. As demand decreases, monopolistic competitive firms will reduce their prices to attract customers, which will reduce their profits. Conversely, if monopolistic competitive firms are making abnormally high profits, new firms will be attracted to the market, increasing competition and reducing demand, eventually causing profits to return to normal levels. Therefore, in the long run, monopolistic competitive firms tend to make normal profits.

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If a monopolist is incurring short-run losses, it means that his selling price is below the short-run marginal cost. In other words, the cost of producing one more unit of the good is higher than the revenue received from selling that unit. This situation occurs because the monopolist has set a price that is too low and cannot cover all of its costs, including fixed costs. This is because in the short-run, the monopolist is not able to adjust its fixed costs, such as rent and salaries, which are already committed. As a result, the monopolist is making a loss in the short-run.

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A typical feature of a market economy is that consumer sovereignty exists. Consumer sovereignty means that consumers have the power to determine what goods and services are produced based on their preferences and purchasing decisions. In a market economy, producers compete for the business of consumers by offering goods and services that satisfy their wants and needs. This competition among producers is what helps to set prices and allocate resources in the economy. In a market economy, producers are motivated by the potential to make a profit, but not all producers are guaranteed to be successful or make a profit. Full employment and equality of economic agents are not necessarily characteristics of a market economy. While a market economy may strive for full employment, it is not always achievable, and some individuals may experience unemployment. Similarly, a market economy does not guarantee equality among economic agents, as some individuals and businesses may be more successful or have more resources than others.

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According to the theory of comparative advantage, specialization will result in an efficient allocation of resources. The theory of comparative advantage states that if two countries specialize in producing the goods that they are relatively more efficient in producing, and then trade with each other, both countries can benefit and become better off. By focusing on the production of goods that they are relatively more efficient in producing, each country can produce more output with the same amount of resources than if they were producing everything themselves. For example, imagine that Country A is more efficient in producing cars and Country B is more efficient in producing computers. If Country A specializes in producing cars and Country B specializes in producing computers, both countries can produce more of both goods and benefit from trade. Country A can export cars to Country B and import computers, while Country B can export computers to Country A and import cars. This allows both countries to consume more of both goods than they would be able to produce themselves. Overall, specialization according to the theory of comparative advantage leads to an efficient allocation of resources and more efficient production, which benefits both parties involved in trade.

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In developing countries, it is easier to obtain accurate national income estimates through the GDP (Gross Domestic Product) method. This is because the GDP method calculates national income based on the total value of goods and services produced within a country's borders during a particular period. In contrast, other methods like GNP (Gross National Product) take into account the income generated by a country's citizens both within and outside the country. Developing countries may not have reliable data on the income of their citizens outside their borders, making GDP a more practical option for calculating national income. Additionally, the GDP method is generally considered a better indicator of a country's economic activity and growth, making it more suitable for policy-making and economic planning.

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The opportunity cost of buying a book is the value of the next best alternative that must be given up in order to buy the book. In this case, Musa has a choice of buying a shirt, a book and a bag. Therefore, the opportunity cost of buying a book is the value of the next best alternative foregone by buying the book, which is the alternative with the highest value among the other options. Since the other options are a shirt and a bag, the opportunity cost of buying a book is either a shirt and a bag or a bag only, depending on the value Musa assigns to each option. Therefore, the correct answer is either "A shirit and a bag" or "A bag only".

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If the government expenditure exceeds revenue, it results in a budget deficit. This means that the government is spending more money than it is earning in revenue. In order to fund the budget deficit, the government may need to borrow money, which can lead to an increase in national debt. A balanced budget is when government revenue is equal to government expenditure, while a budget surplus occurs when government revenue is greater than government expenditure.

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A cumulative frequency graph, also known as an ogive, is a graph used in statistics to show the cumulative frequency distribution of a set of data. The cumulative frequency at each point on the graph represents the total number of observations that fall below that point. It is a line graph that displays the cumulative frequencies of the data set at different intervals. The ogive is useful for determining the median and quartiles of a data set, and for visually displaying the shape of the distribution.

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When the government's spending exceeds its revenue, it leads to a budget deficit. This means that the government has to borrow money to cover the shortfall in its expenditures. A budget deficit can have various effects on an economy, such as increasing the national debt, reducing the value of the country's currency, and leading to higher inflation. Governments may choose to run a deficit to finance public projects, stimulate economic growth, or deal with emergencies. However, it is generally viewed as unsustainable in the long run, as it can lead to a vicious cycle of debt and interest payments, ultimately harming the economy.

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In a regulated market, price is determined by the government. A regulated market is an economic system where the government intervenes in the market to control certain aspects of the economy, such as prices and production levels. The government sets rules and regulations that producers and consumers must follow, and it may also set prices for certain goods or services. In a regulated market, the government may use a variety of tools to control prices, such as price ceilings or price floors. Price ceilings are a maximum price that can be charged for a good or service, while price floors are a minimum price that must be charged. The government may also use subsidies or taxes to influence the price of certain goods or services. Unlike a free market, where price is determined by the interaction of supply and demand, in a regulated market, the government has a significant role in setting prices and controlling the market.

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The privatization exercise in Nigeria is a move towards a market economy. Privatization involves transferring ownership of state-owned enterprises to private individuals or corporations, which promotes competition and free enterprise. A market economy is characterized by private ownership of businesses and minimal government intervention in economic affairs. In a market economy, market forces such as supply and demand determine the prices of goods and services, as well as the allocation of resources.

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The mobility of labour refers to the ease with which workers can move from one job or location to another in search of better opportunities. This mobility is mainly determined by wage rate differentials, which are the differences in pay between different jobs or regions. If the wage rate is higher in a particular location or occupation, workers are more likely to move there, increasing the mobility of labour. On the other hand, if the wage rate is lower or stagnant, workers may be less inclined to move, reducing the mobility of labour. While government policies and trade unions may also affect labour mobility to some extent, wage rate differentials are the primary driver.

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A public liability company is run on a daily basis by the board of directors. The board of directors is responsible for making decisions and setting policies for the company, as well as overseeing the work of the chief executive officer (CEO) and other top executives. The CEO is responsible for implementing the policies and decisions of the board, as well as managing the day-to-day operations of the company. The shareholders, on the other hand, have a voice in major decisions through voting on matters such as the election of board members and major corporate transactions. Financial consultants may provide advice to the board or CEO, but they do not have direct responsibility for running the company.

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A movement along the same demand curve is caused by the change in the price of the product. When the price of a product changes, the quantity demanded of the product also changes, resulting in a movement along the same demand curve. This is because a change in price affects the purchasing power of consumers, and they may choose to buy more or less of the product depending on how the change in price affects them. However, other factors such as income, tastes, and the price of other products may cause a shift in the demand curve, indicating a change in the quantity demanded at all prices.

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Occupational distribution of population refers to the division of a country's population into different occupational categories such as agriculture, manufacturing, services, and so on. The size and categories of the labor force depend on the occupational distribution of population. For example, if a large percentage of the population is engaged in agriculture, then the labor force will be dominated by workers in the agricultural sector. Similarly, if there is a large number of people in the services sector, then the labor force will be dominated by workers in that sector. Therefore, occupational distribution of population plays an important role in determining the size and categories of the labor force in a country.

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In the circular flow of income, an increase in savings by households means that they are consuming less of their income and keeping more for the future. This decrease in household consumption will cause a decrease in the demand for goods and services, which will lead to a decrease in production, and eventually a decrease in the income stream. As a result, there may be a decrease in imports since households will be consuming less, but there will also be a decrease in exports since the decrease in production will mean that there are fewer goods and services available to export. Therefore, the correct answer is a decrease in the income stream.

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Dumping is an international price discrimination in which an exporter firm sells a portion of its output in a foreign market at a very low price and the remaining output at a high price in the home market

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The current industrial development strategy in Nigeria is aimed at encouraging the growth of small and medium-scale industries (SMIs). This is because SMIs are believed to be crucial to the development of the economy, as they create jobs, promote innovation, and contribute to the overall growth of the country. The government has implemented several policies and initiatives to support the development of SMIs, such as providing access to credit, improving infrastructure, and offering incentives to entrepreneurs. The goal is to encourage the growth of SMIs and provide opportunities for entrepreneurship and innovation, as well as to diversify the country's economy away from dependence on oil exports.

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Industries for consumer goods are concentrated in urban centers as a result of the large market available in those areas. Urban areas are more populated, with higher purchasing power, and have a greater demand for consumer goods. Therefore, it makes economic sense for industries producing consumer goods to locate in urban centers to be closer to their customers and reduce transportation costs. Additionally, urban areas have better infrastructure, such as roads, telecommunications, and access to raw materials, which can aid the production process. This concentration of industries in urban centers can also lead to the development of industrial clusters, with firms within the same industry or related industries locating close to one another to benefit from shared knowledge, resources, and labor.

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A decrease in supply without a corresponding change in demand will lead to an increase in equilibrium price and a decrease in equilibrium quantity. This is because with a decrease in supply, there are fewer goods available to meet the demand, causing a shortage. To clear the market, suppliers will increase the price until the quantity demanded equals the quantity supplied at a higher price. As a result, the equilibrium price will increase, while the equilibrium quantity will decrease.

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Guided deregulation as currently practiced in Nigeria implies that market forces and government determine interest and exchange rates. This means that while the market forces have some degree of control over the rates, the government still has some level of regulation to ensure that they do not go beyond certain limits that could negatively impact the economy. Therefore, it is a combination of market forces and government control that determine interest and exchange rates.

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Production takes place when inputs (such as raw materials, labor, and capital) are transformed into outputs (such as goods and services) that have economic value. In other words, production involves using resources to create something of value that satisfies human wants and needs. This transformation of inputs into outputs is the essence of production, and it involves processes such as manufacturing, farming, mining, and service provision. Therefore, the correct answer to the question is "input is transformed into output".

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A supply curve is positively sloped because "price is an incentive to producers". This means that as the price of a product increases, producers are willing to supply more of it to the market. This is because a higher price means that producers can earn more profit by supplying more of the product to the market. Therefore, a positively sloped supply curve shows that as the price of a product increases, the quantity supplied of that product also increases. On the other hand, if the price of the product decreases, producers will be less willing to supply the product to the market since the profit margin will be lower. As a result, the quantity supplied of the product will decrease. This relationship between price and quantity supplied is captured by the positively sloped supply curve.

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As the level of output increases, the average fixed cost of a firm will continue to decrease. This is because fixed costs are spread over a larger output, resulting in a smaller portion of fixed costs being assigned to each unit produced. In other words, as output increases, the fixed cost per unit decreases, which leads to a decrease in the average fixed cost.

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The major assumption in cardinal utility theory is that utility is measurable. This means that it is possible to assign numerical values to the satisfaction or happiness that an individual derives from consuming a good or service. This allows economists to construct a numerical measure of utility and use it to analyze consumer behavior, including how much of a good they will consume at a given price, and how much they are willing to pay for it. Without this assumption, cardinal utility theory cannot be applied to real-world situations.

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A sole proprietor is an individual who owns and runs a business alone. The major problem confronting a sole proprietor is the limited source of capital. This is because a sole proprietor is solely responsible for raising capital for the business, which can be very difficult and challenging. The business owner may have to rely on personal savings, loans, or contributions from family and friends, which may not always be sufficient to sustain and grow the business. As a result, the business may be limited in terms of its size and scope of operations, which can affect its ability to compete with larger businesses in the industry.

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The World Bank is an international organization that aims to promote economic development and reduce poverty in its member countries. One of its main functions is to provide long-term loans to member countries to finance development projects such as infrastructure, education, and health care. These loans are usually for a period of 20 to 30 years and have lower interest rates than commercial loans. The World Bank also provides technical assistance and advice to its members on economic policy, debt management, and poverty reduction strategies.

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The location of a steel industry at Ajaokuta in Nigeria is mainly due to the proximity to large deposits of iron ore. This means that raw materials (iron ore) can be easily sourced and transported to the industry, reducing production costs and making it more efficient. The availability of transport networks and proximity to sources of power can also play a role in the decision, but the proximity to large deposits of iron ore is the main factor. Political considerations may also have played a role, but they are not the main reason for the choice of location.

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A manufacturer who wants to build a new plant will typically source funds from the capital market. The capital market is a financial market where long-term securities such as stocks and bonds are traded between investors and borrowers. In this case, the manufacturer would issue bonds or stocks to raise the funds needed to build the new plant. Investors who purchase these securities would be lending money to the manufacturer, in exchange for a promise of future returns. The capital market offers a way for companies to access large amounts of funds for long-term projects, such as building a new plant, which can be expensive and require a significant investment. Therefore, the capital market is an important source of funding for manufacturers and other companies seeking to undertake large-scale projects.

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The supply curve of a perfectly competitive firm is identical to its marginal cost curve. This means that the firm will supply goods as long as the price of the good exceeds the marginal cost of producing that unit. As the price increases, the firm will increase its quantity supplied, and as the price decreases, the firm will decrease its quantity supplied. This relationship between price and quantity supplied is captured by the firm's supply curve, which is directly related to its marginal cost curve.

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The ability of commercial banks to create money depends on the reserve ratio. When a commercial bank receives deposits from its customers, it is required to hold a certain percentage of those deposits in reserve, usually with the central bank. This reserve requirement is called the reserve ratio. The remaining portion of the deposits is available for the bank to lend out as loans or to invest in other assets. When the bank makes loans, the borrower receives the loan amount in the form of a deposit in their account. This new deposit adds to the bank's liabilities, but it also increases the amount of money in circulation in the economy, as the borrower is now able to spend the loaned money. Therefore, by making loans, commercial banks can create new money. The amount of new money that a bank can create through loans is dependent on its reserve ratio. A lower reserve ratio means that the bank can lend out more money and create more deposits, resulting in a greater increase in the money supply. Conversely, a higher reserve ratio means that the bank can lend out less money and create fewer deposits, resulting in a smaller increase in the money supply. Overall, the reserve ratio plays a key role in determining the ability of commercial banks to create money through lending and investing.

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The law of variable proportions states that as more units of a variable input are added to a fixed input, after a certain point the marginal product of the variable input will decrease. When total output is rising, it means that the variable input is adding more to the total output than the fixed input. Therefore, the marginal product (MP) of the variable input must be greater than the average product (AP) of all inputs. Hence, the correct option is: "MP is greater than AP."

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The price elasticity of supply (PES) measures the responsiveness of the quantity supplied of a product to a change in its price. It is calculated as the percentage change in quantity supplied divided by the percentage change in price. In this case, the price of the item changed by 8%, from its initial value, and the quantity supplied changed from 600 units to 660 units, which represents a 10% increase. Using the formula for PES, we get: PES = percentage change in quantity supplied / percentage change in price PES = 10% / 8% = 1.25 Therefore, the price elasticity of supply is 1.25. In other words, the quantity supplied of the item is relatively responsive to changes in its price. A PES of 1.25 indicates that a 1% increase in the price of the item will result in a 1.25% increase in the quantity supplied, assuming all other factors remain constant.

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Activities in the oil and gas industry are classified into upstream and downstream operations. Upstream operations refer to activities involved in oil exploration, drilling, production, and transportation, while downstream operations refer to activities such as refining, marketing, and distribution of finished petroleum products.