JAMB UTME - Economics - 1995

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The ultimate objective of economics is to make the best use of scarce resources. Economics is the study of how individuals, businesses, governments, and societies allocate their limited resources to satisfy their unlimited wants and needs. Since resources are scarce, the ultimate goal of economics is to allocate them in the most efficient way possible to maximize their utility or satisfaction. This involves making decisions on what to produce, how to produce it, and for whom to produce it. By making the best use of scarce resources, economics seeks to improve standards of living, increase economic growth, and enhance overall societal welfare.

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The consumer price index (CPI) is mostly used to determine the cost of living. CPI is a measure of the average change in the prices paid by consumers for a basket of goods and services over time. It is calculated by selecting a representative sample of goods and services that are typically purchased by households, and tracking the price changes of these items over time. CPI is used to measure inflation, and is often used to adjust wages, salaries, and other income sources to account for changes in the cost of living.

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The primary objective of all international economic organizations is to promote international economic co-operation for the mutual benefit of all members. These organizations are typically formed by groups of countries to facilitate international trade and economic co-operation, and they often work to promote economic development and reduce poverty around the world. International economic organizations may take various forms, including intergovernmental organizations, such as the United Nations, and regional organizations, such as the European Union or the African Union. Some organizations focus specifically on economic issues, such as the World Trade Organization (WTO), while others have a broader mandate that includes economic issues, as well as social and political issues, such as the United Nations Development Programme (UNDP). The primary goal of these organizations is to promote economic co-operation and integration among their member states. This may involve developing and implementing policies and programs that promote trade, investment, and economic development. They also aim to create a more stable and predictable global economic system that benefits all members, especially those in developing countries. Overall, the primary objective of all international economic organizations is to promote economic co-operation and integration for the mutual benefit of all members, with the ultimate goal of promoting economic development, reducing poverty, and creating a more stable and prosperous global economy.

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Any payment made to a factor of production (such as labor, capital or land) which is in excess of what is required to keep that factor in its current use is called economic rent. This means that the payment is more than the minimum required to retain the factor in its current use, as the factor is relatively scarce or in high demand. Economic rent is a form of income that can be earned by factors that have a limited supply, such as prime land in urban areas or highly skilled labor. Therefore, the answer is: economic rent. Note that real income refers to the purchasing power of income, profit is the excess of total revenue over total cost, and real wage is the wage rate adjusted for inflation.

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Profit can be defined as the difference between total revenue (TR) and total cost (TC). Using the given formulas, we can express profit as: Profit = TR - TC Substituting TR = AR x Q and TC = TFC + TVC, we get: Profit = AR x Q - TFC - TVC Therefore, the answer is: (AR x Q) - TC. Note that (AR + Q) - TFC and (TC x Q)/AR are not equivalent to the formula for profit, and (TFC + TVC)/Q is equivalent to the formula for average variable cost (AVC), not profit.

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The first thing the student in Obu'pu Secondary School is expected to do when they discover they simultaneously need a pen, an exercise book, an eraser, and a ruler, but can only purchase one item is to draw up a scale of preference. A scale of preference is a list of items arranged in order of their importance or preference. The student should arrange the items they need in order of their importance, starting with the most important and ending with the least important. This will help the student to determine which item to purchase first, based on their needs and priorities. For instance, if the student needs the pen most urgently for an exam, they will place the pen at the top of their scale of preference. If the student needs the exercise book for an assignment due the next day, they will place the exercise book second on their scale of preference. They will continue this process until they have ranked all the items they need. Once the student has drawn up their scale of preference, they can then purchase the item at the top of their list. This approach helps the student to make the best choice given the limited resources available to them, and to prioritize their needs based on their importance. Therefore, the first thing the student is expected to do is to draw up a scale of preference in order to determine which item to purchase based on their needs and priorities.

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Infant industries denote industries that are too young to compete in the world market. These industries are typically in the early stages of development and have not yet achieved the economies of scale, technological sophistication, and managerial expertise required to compete effectively with established industries in developed countries. As a result, infant industries may face significant challenges, such as high production costs, limited access to capital, and difficulty in acquiring technology and expertise. These challenges can make it difficult for them to compete with established industries in developed countries that benefit from economies of scale, access to capital, and technological sophistication. To support the growth and development of infant industries, some countries may implement protectionist measures, such as tariffs and subsidies, to shield them from competition and give them time to mature. The idea is that by providing these industries with time to develop, they will eventually become more competitive and be able to compete effectively in the global market. Overall, infant industries refer to industries that are too young to compete effectively in the global market and may require support and protection from the government to achieve maturity and competitiveness.

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Expansionary monetary policy refers to when a central bank increases the money supply in the economy to stimulate economic growth. It can be justified in a period of economic depression accompanied by low capacity utilization because the goal is to boost spending and encourage businesses to invest in new projects, creating jobs and increasing output. This type of policy is typically used when interest rates are already low and traditional fiscal policies are not effective. In contrast, when the economy is experiencing a boom with high inflation rates, expansionary monetary policy can exacerbate inflationary pressures by injecting more money into the economy, potentially leading to even higher inflation rates. When trade unions are clamouring for higher wages, it may be necessary to increase interest rates to prevent inflation from rising too quickly. Finally, the price of crude petroleum is a factor that can affect the economy, but it alone is not sufficient to determine the need for an expansionary monetary policy.

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In a free market economy, the foreign exchange rate is determined by the forces of demand and supply. When the demand for a currency is high, its value increases, and when the supply of a currency is high, its value decreases. For example, if there is a high demand for the US dollar, its value will increase relative to other currencies, and vice versa. The same applies to other currencies such as the euro, yen, and pound sterling. Factors that can influence demand and supply of a currency include trade flows, investment flows, inflation rates, interest rates, political stability, and economic performance. The exchange rate is determined by the interaction of these factors in the foreign exchange market, which is composed of buyers and sellers of currencies. The market operates 24 hours a day, five days a week, and is the largest financial market in the world. Overall, the foreign exchange rate in a free market economy is determined by the forces of demand and supply, which are influenced by a variety of economic and political factors.

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The major reason for the survival of small shops despite competition from large business enterprises is because of their local services and longer hours of operation. Small shops often offer specialized and personalized services that cater to the specific needs of their local communities. They may also have longer hours of operation than larger businesses, which can be more convenient for customers who work irregular hours. Additionally, small shops may offer a more intimate and friendly shopping experience, where customers can build personal relationships with the owners and staff. While larger businesses may have lower prices and a wider variety of goods, small shops can compete by providing unique and specialized products that cannot be found elsewhere. They may also be able to offer more flexibility in pricing and product selection since they have fewer overhead costs to cover. Moreover, the survival of small shops is also attributed to their ability to quickly adapt to changing market conditions and customer preferences due to their smaller size and more localized customer base. They can be more responsive to customer needs and preferences and tailor their offerings accordingly. Therefore, despite the competition from larger business enterprises, small shops can survive and thrive by offering personalized services, longer hours of operation, unique and specialized products, and adaptability to changing market conditions.

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A businessman who faces a very elastic demand for his product is advised to slightly reduce the price of his products in order to maximize his profit. This is because when the demand for a product is very elastic, a small change in price will result in a significant change in quantity demanded. For example, if the price of a product is reduced, the quantity demanded will increase significantly, resulting in a higher total revenue for the business. Conversely, if the price is increased, the quantity demanded will decrease significantly, resulting in a lower total revenue. Therefore, in order to maximize profit, a businessman facing a very elastic demand should aim to find the optimal price point that will result in the highest total revenue. This can be achieved by reducing the price of the product slightly, but not too much that it results in a loss for the business. Overall, in order to maximize profit when facing a very elastic demand for his product, a businessman is advised to slightly reduce the price of his products.

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When a bank is referred to as "distressed," it means that the bank is experiencing serious financial difficulties that make it unable to meet its financial obligations to its customers and creditors. This could be due to factors such as a low level of capital base, a high level of bad debts, or serious liquidity crisis, which means the bank is unable to meet its obligations as they fall due.

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If a good is characterized by zero price elasticity of demand, it means that the quantity demanded of the good is not affected by changes in its price. When the government imposes an indirect tax on such a good, the tax will be borne entirely by the consumer. This is because the producer is unable to pass on the tax to the consumer by increasing the price of the good. Since the quantity demanded of the good is not affected by its price, any increase in the price of the good due to the tax will not lead to a decrease in quantity demanded. Therefore, the producer will bear the entire burden of the tax, reducing their profit margin. In summary, the answer is: totally by the consumer.

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A firm maximizes its profits when its marginal revenue (MR) equals its marginal cost (MC). In other words, the firm should continue producing more output until the additional revenue generated by the last unit produced (MR) is equal to the additional cost incurred in producing that unit (MC). This is true both in the short run and in the long run. In the short run, a firm may have fixed costs that cannot be changed, such as rent on a factory. Therefore, the firm may be able to cover its fixed costs even if it is not making a profit in the short run. However, in the long run, all costs are variable, and the firm must be able to cover all costs, including the opportunity cost of capital, in order to maximize profits. The other options listed are important concepts in microeconomics, but they do not directly relate to profit maximization. Average cost (AC) is the total cost per unit of output, while average variable cost (AVC) is the variable cost per unit of output. Marginal cost (MC) is the additional cost incurred in producing one additional unit of output. While these costs are important to consider when making production decisions, they do not necessarily result in profit maximization unless they are compared to marginal revenue (MR).

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Preference shareholders in a joint stock company are those shareholders who receive a fixed rate of dividend and have the first claim on the net profits of the company before the ordinary shareholders. This means that they are entitled to receive their dividend before the ordinary shareholders and they will receive a fixed dividend amount regardless of whether the company makes a profit or not. So, if the company is profitable, preference shareholders will receive their fixed dividend and they may also receive additional dividends if there is enough profit remaining after the ordinary shareholders have been paid. However, if the company is not profitable, preference shareholders will still receive their fixed dividend amount while ordinary shareholders may not receive any dividend. Therefore, preference shareholders receive a more stable dividend income compared to ordinary shareholders who are subject to fluctuations in the company's profits.

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Stocking small quantities of a variety of goods is a function of the retailer. Retailers are businesses that sell goods or services directly to consumers. They typically purchase products from wholesalers or manufacturers and sell them to the general public in small quantities. One of the primary functions of retailers is to maintain a stock of goods that are in demand by consumers. Retailers often stock a variety of goods, which allows them to provide consumers with a wide selection of products. They may also stock small quantities of each product to ensure that their inventory turnover is high and that they do not have excess inventory that may go unsold. Retailers may use various strategies to manage their inventory and ensure that they have the right products in stock. For example, they may use point-of-sale systems to track sales and inventory levels in real-time, or they may use forecasting techniques to predict future demand for certain products. The goal of these strategies is to minimize stockouts and overstocking, which can lead to lost sales or excess inventory costs. Overall, stocking small quantities of a variety of goods is a critical function of the retailer, as it allows them to provide consumers with a broad range of products and ensure that their inventory turnover is high.

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Labour supply refers to the amount of work that is available from workers in a given market or economy. It is determined by the number of workers in the labor force, as well as the number of hours that these workers are willing and able to work at different wage rates. In other words, labour supply takes into account both the number of workers available to work and the amount of time that they are willing and able to dedicate to work at different wage rates. The labor supply curve represents the relationship between the wage rate and the quantity of labor that workers are willing to supply at that wage rate. Factors that affect labor supply include demographic trends (such as population growth and aging), changes in technology, changes in the demand for goods and services, and government policies that affect the availability and cost of labor. Understanding labor supply is important for employers, policymakers, and economists because it helps to inform decisions about wages, working conditions, and labor market regulations.

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In a free market economy, the available resources are more efficiently allocated by complete reliance on the price system. In a free market economy, the allocation of resources is done based on the price mechanism and the forces of demand and supply. The price system helps to coordinate the decisions of consumers and producers regarding the allocation of resources. The price of goods and services is determined by the interaction of demand and supply, which leads to the efficient allocation of resources as producers are incentivized to produce goods and services that are in high demand, and consumers are incentivized to purchase goods and services that provide them with the most value for their money. The price system encourages efficiency because it ensures that goods and services are produced and consumed at the lowest possible cost, which results in the greatest benefit for all participants in the economy.

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When compared with a labour-intensive industry, a capital-intensive industry employs more machinery than workers. This means that the capital-intensive industry relies heavily on advanced technology and machines to produce goods and services instead of human labor. Capital-intensive industries are characterized by high initial capital investment costs but have the advantage of producing goods and services at a lower unit cost, resulting in higher efficiency and productivity. Therefore, a capital-intensive industry requires fewer workers to produce the same amount of output as a labor-intensive industry.

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An increasing population might be of economic benefit to a country if a continuously higher proportion falls into the working class category. This means that the population growth is accompanied by an increase in the number of people who are employed and contributing to the country's economy. This would result in an increase in the country's gross domestic product (GDP), which is a measure of the country's economic output. Therefore, a growing population with a higher proportion of working-class individuals would lead to economic growth and development for the country.

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As an economy grows, the agriculture and industrial sector become increasingly interdependent and the demand made on each other is reflected in backward and forward linkages. Backward linkages refer to the demand made by the industrial sector for inputs from the agriculture sector, such as raw materials and agricultural products. Forward linkages, on the other hand, refer to the demand made by the agriculture sector for goods and services produced by the industrial sector, such as machinery and equipment. Therefore, backward and forward linkages are the most appropriate option to describe the demand made on each other by the agriculture and industrial sector as the economy grows.

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The opportunity cost of the use of productive resources which a producer owns and does not pay for constitutes an implicit cost. Implicit costs are the opportunity costs of using resources that a producer already owns and, therefore, does not pay for explicitly. In other words, they are the costs of using self-owned resources, such as the producer's own labor, capital, and land, for a particular activity. These costs are not directly visible in the accounting records of a firm since no actual payment is made. However, they are important to consider when making economic decisions because they represent the value of the next best alternative foregone. For example, if a business owner decides to use a building they own to produce goods, the implicit cost would be the potential rent income the building could have generated if it had been rented out to a tenant instead of being used for production. The owner may not have paid any explicit cost to use the building, but they still gave up the opportunity to earn rental income. Therefore, this forgone opportunity represents the implicit cost of using the building for production.

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The given inequality is 4y - 300 > 500. To solve for y, we can add 300 to both sides of the inequality: 4y - 300 + 300 > 500 + 300 Simplifying, we get: 4y > 800 Next, we divide both sides by 4: 4y/4 > 800/4 Simplifying further, we get: y > 200 Therefore, the range of income earned by workers that satisfies the inequality 4y - 300 > 500 is y > 200. This means that any income greater than 200 will satisfy the inequality, and any income less than or equal to 200 will not satisfy it. So, the correct option is "y > 200".

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The statement that is true regarding the effect of changes in demand and supply on price is that an increase in supply will lead to a fall in price and a rise in the quantity bought and sold. This is because, in a competitive market, an increase in supply of a good or service will lead to a surplus of the product, which will force sellers to lower prices in order to sell their excess inventory. As prices decrease, the quantity demanded by buyers will increase, leading to a rise in the quantity bought and sold. Conversely, a decrease in supply will lead to a shortage of the product, which will drive prices up as sellers compete for the limited supply. As prices increase, the quantity demanded by buyers will decrease, leading to a fall in the quantity bought and sold. An increase in demand will also lead to a rise in the price and quantity bought and sold, while a decrease in demand will lead to a fall in both price and quantity bought and sold.

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In recent times, agriculture in Nigeria tends to lose its vital labor force as a result of rural-urban drift. Rural-urban drift refers to the movement of people from rural areas to urban areas in search of better economic opportunities. Many young people who would have been involved in agriculture are leaving rural areas to seek employment opportunities in urban areas. There are several reasons for rural-urban drift in Nigeria. One of the main reasons is the lack of economic opportunities in rural areas. Agriculture in Nigeria is often characterized by low productivity, poor infrastructure, and limited access to credit and other resources. This has led to a decline in the profitability of agriculture and a lack of economic opportunities for rural youth. In addition, the growth of other sectors such as the oil sector has created more attractive employment opportunities in urban areas. Many young people see these sectors as offering more promising and higher-paying jobs than agriculture. Moreover, the lack of social amenities and basic infrastructure in rural areas, such as healthcare, education, and transportation, also contributes to rural-urban drift. Young people often leave rural areas in search of better access to these amenities and to escape from the poverty and hardships of rural life. Therefore, rural-urban drift is a major reason why agriculture in Nigeria is losing its vital labor force. To address this challenge, there is a need for the government to create more economic opportunities in rural areas, improve agricultural productivity and infrastructure, and provide basic amenities and social services in rural communities.

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The factor of production that has the highest degree of mobility is labour. This is because labour can be easily moved from one place to another, and can also be trained or re-skilled to work in different industries. Capital, on the other hand, is usually fixed in one location and cannot be easily moved. Land is also generally immobile, except for agricultural land which can be used for different crops. Entrepreneurship refers to the ability to organize the other factors of production, and is not a physical factor that can be moved. Therefore, labour is the factor of production with the highest degree of mobility.

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The major source of Nigeria's foreign exchange is the export of crude oil. Nigeria is one of the largest producers of oil in Africa and is a member of the Organization of the Petroleum Exporting Countries (OPEC). Crude oil exports account for a significant portion of Nigeria's gross domestic product (GDP) and government revenue. While Nigeria has a diverse range of natural resources, including palm kernel, cocoa, groundnuts, and cotton, the largest contributor to Nigeria's foreign exchange earnings is crude oil. Skilled manpower is also an important resource for Nigeria, but it is not a major source of foreign exchange earnings. Therefore, the answer is: crude oil.

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Inflation is a persistent increase in the general price level of goods and services over time. It can lead to a decrease in the purchasing power of money and an increase in the cost of living. One of the best methods to curb inflation in Nigeria is to reduce the volume of money supply. When there is too much money in circulation, demand for goods and services will increase, leading to a corresponding increase in prices. Therefore, reducing the volume of money supply will help to reduce the demand for goods and services and ultimately curb inflation. This can be achieved through various measures such as increasing interest rates, reducing government spending, and implementing effective monetary policies.

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The advantages that firms obtain directly from expanding their operations are referred to as "internal economies of scale." This refers to the cost savings and efficiencies that a firm experiences as it increases its scale of production. As a firm grows larger, it can take advantage of various economies of scale, such as purchasing inputs in bulk, spreading fixed costs over a larger output, and specializing in production processes. These cost savings can result in increased profitability for the firm.

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An aging population is a population in which the number of old persons is increasing. This means that the proportion of the population made up of older people is increasing relative to the proportion of younger people. The definition of "old" varies depending on the context and the country, but it generally refers to people over a certain age, such as 65 or 70 years old. An aging population is characterized by a shift in the age distribution of a population towards older ages. This can occur due to various factors such as declining birth rates, improved healthcare, and increased life expectancy. As a result, the proportion of older people in the population increases, while the proportion of younger people decreases. An aging population can have significant social and economic implications, including increased demand for healthcare and social services, changes in workforce participation and retirement patterns, and shifts in consumer spending patterns. It can also have implications for government policies related to social security, healthcare, and pension systems. Therefore, an aging population is a population in which the number of old persons is increasing, leading to a shift in the age distribution of the population towards older ages.

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The marginal product of labor is the additional output produced by adding one more unit of labor while holding all other inputs constant. The average product of labor is the total output produced by all units of labor divided by the number of units of labor employed. Looking at the table, we can see that when 2 workers are employed, the total product is 36 units. When 3 workers are employed, the total product is 52 units. Therefore, the marginal product of the 2nd worker is the additional output produced when the 2nd worker is added, which is 52 - 36 = 16 units. To find the average product of the 5th worker, we need to calculate the total product when 5 workers are employed, which is 70 units. Then we divide by the number of workers employed, which is 5. Therefore, the average product of the 5th worker is 70/5 = 14 units. Therefore, the answer is option (B) 22 and 19.

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The elasticity of demand measures how much the quantity demanded of a commodity changes in response to a change in its price. If a small change in price causes a large change in the quantity demanded, demand is said to be elastic. If a large change in price causes only a small change in the quantity demanded, demand is said to be inelastic. To calculate the elasticity of demand for commodity X, we use the formula: Elasticity of demand = percentage change in quantity demanded / percentage change in price In this case, the price changes from N25 to N20, which is a 20% decrease in price. The quantity demanded changes from 80 to 100, which is a 25% increase in quantity demanded. Therefore, the elasticity of demand for commodity X is: Elasticity of demand = 25% / 20% = 1.25 Since the elasticity of demand is greater than 1, we can conclude that the demand for commodity X is elastic. This means that consumers are sensitive to changes in the price of commodity X, and a small change in price causes a relatively large change in the quantity demanded.

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The true statements about agriculture in Nigeria are: (i) It provides food for the growing population. (ii) A large proportion of the population is engaged in agriculture. (iii) Agriculture products are used as raw materials by the local industries. Explanation: (i) Agriculture is a major source of food for the population of Nigeria, especially for those in rural areas where subsistence farming is practiced. (ii) Agriculture is a significant source of employment for a large proportion of the population, as many Nigerians are engaged in farming and related activities. (iii) Many local industries in Nigeria rely on agriculture products as raw materials for their operations. For example, cocoa is a major export product, and it is used in the production of chocolate and other products. Cotton is also an important export crop, and it is used in the production of textiles. However, statement (iv) is not true because agriculture does not serve as a source of heavy equipment for local industries.

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The active intervention of the central authorities in the management of a country's economy is typically based on the failure of market forces to produce satisfactory results. In other words, the government steps in when the free market is not able to efficiently allocate resources, ensure stable economic growth, or address market failures such as externalities or public goods. The government may intervene in various ways, such as implementing policies to regulate markets, setting prices, providing subsidies, imposing taxes, investing in infrastructure, and directing public investment. These interventions are aimed at achieving certain economic goals such as stabilizing prices, reducing unemployment, promoting economic growth, and ensuring social welfare. It is important to note that while government intervention can be effective in certain circumstances, excessive or poorly designed interventions can lead to inefficiencies, distortions, and unintended consequences. Therefore, the nature and extent of government intervention in the economy should be carefully balanced with the need to preserve market efficiency and individual freedoms.

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When public enterprises become commercialized, it means that they are expected to operate with the primary aim of making profits. This is because commercialization refers to the process of converting public enterprises that were initially created and run by the government for public service to profit-oriented entities that are self-sustaining and operate based on market forces and competition. Therefore, public enterprises are expected to generate revenue, cover their costs, and make a profit. This approach is intended to increase the efficiency and productivity of these enterprises and ensure their sustainability over time.