2021 JAMB ECONOMICS PAST QUESTIONS AND ANSWERS

Marginal cost is the cost of producing one additional unit of a good. It reflects the variable costs incurred, unlike the fixed costs that do not vary with output.

The price mechanism allocates resources, regulates demand and supply, and rewards producers based on market dynamics, balancing consumer needs and producer incentives.

In a free market economy, prices are determined by supply and demand. Scarcity is managed through pricing, unlike in planned economies where government intervenes.

A scale of preference lists wants in order of priority, helping consumers make choices based on limited resources and opportunity costs.

Resources are underutilized if production occurs within the production possibility curve (PPC), indicating that more could be produced with existing resources.

Natural resources are often free gifts of nature, such as forests or minerals, provided by nature without human effort.

Capitalist economies often lead to income inequality as wealth concentrates among certain individuals, unlike more equitable systems like socialism.

If mining contributes 60% of GDP, then $540 * 0.60 = $324 is from mining. Percent calculations are essential in determining contributions.

Goods in competitive demand replace each other; as demand for one rises, demand for the other falls, e.g., tea and coffee.

Ostentatious goods or luxury items have a positively sloped demand curve, where higher prices increase their appeal to consumers who view them as status symbols.

In perfect competition, price equals marginal revenue (MR) and average revenue (AR) as firms are price takers.

Elasticity is calculated as a percentage change in quantity demanded divided by percentage change in price. Here, it would be 2.0.

Government subsidies lower production costs, increasing supply and shifting the curve rightward, unlike taxes that raise costs.

Perfectly elastic supply has a horizontal curve, showing that producers supply any amount at a given price. Any price change affects supply infinitely.

Budget allocations are calculated based on proportions. For example, if education is a certain fraction of the budget, that fraction of $7,200 is allocated to it.

Ratios compare expenditures; for example, if health and agriculture allocations are proportional, their ratio reflects this division.

Equilibrium occurs when marginal utility equals price, maximizing satisfaction relative to expenditure on each unit.

Minimum prices above equilibrium cause market surplus as quantity supplied exceeds quantity demanded.

A price floor is a minimum set above equilibrium price, often used to protect producers.

Technological innovation enhances productivity, preventing diminishing returns unlike limited resources or constant technology.

Low technology limits specialization, as advanced methods are required for efficient division of tasks in manufacturing.

Average fixed cost decreases as production rises, as fixed costs are spread across more units, unlike variable or marginal costs.

Fixed costs (like rent) remain even if production stops, unlike variable costs, which depend on output.

A firm reaches equilibrium when marginal cost equals marginal revenue, maximizing profit. This is true if MC cuts MR from below.

Cooperative societies focus on member welfare, offering credit and promoting mutual support, rather than maximizing profit like corporations.

Limited control in management arises because shareholders do not directly manage, unlike in partnerships.

Middlemen help break bulk to provide goods in smaller quantities, making products accessible to retailers and consumers.

Retailers break bulk for individual consumers, offering products in smaller units that wholesalers do not sell.

Rapid population growth expands markets, potentially boosting economic activity, though it may stress resources.

Factors like race or color do not affect productivity, unlike training, welfare, or equipment, which directly enhance labor quality.

Frictional unemployment involves temporary job loss as workers transition, unlike seasonal or structural unemployment.

Marketing boards stabilize farmer income, often using buffer stocks to manage crop prices, unlike bodies focused on warehousing or taxation.

A point inside the PPC shows underutilized resources, unlike points on the curve which indicate full efficiency.

The processing industry transforms raw materials, adding value and enhancing products, unlike extraction industries that produce raw goods.

Net National Product (NNP) accounts for depreciation, providing a realistic income figure by subtracting wear on capital.

Unemployment allowance is a transfer payment, non-productive and redistributive, unlike earnings or investment.

Higher income with high population can increase poverty as per capita income remains low.

Gold coins hold intrinsic value, unlike currency notes or bank deposits that rely on government backing.

Increasing interest rates discourages borrowing, controlling inflation by reducing spending power.

Government interventions guide economic development through policy, unlike private sector-led markets.

Externalities create market failures, where private costs differ from social costs, unlike in perfectly competitive markets.

Satisfaction is not a monetary function; money serves as exchange, value store, and unit of account.

Rising demand with constant supply typically causes price increases to balance quantity demanded and supplied.

Luxury goods have elastic demand as consumers can adjust purchases based on price changes, unlike essentials with inelastic demand.

Supply surges typically reduce prices if demand does not adjust, as excess goods drive market prices down.

Consumer preferences impact demand, while supply depends on production factors like cost and technology.

Cross elasticity reflects demand shifts in substitutes; higher prices in one increase demand for alternatives.

A monopoly has a single market seller, unlike competitive markets with multiple sellers.

Firms produce while marginal revenue equals marginal cost, achieving profit maximization in perfect competition.

Public choice theory argues that government intervention may lead to inefficiencies, unlike theories supporting regulation.

Perfect competition has many sellers, no entry barriers, and standardized products, leading to market efficiency.

Opportunity cost is the benefit of the next best option forgone, integral to decision-making in economics.

Demand curve shifts right when income or substitutes’ prices rise, increasing purchasing power.

Perfectly elastic demand has a horizontal curve, showing consumers respond infinitely to price changes.

Balance of payments tracks a country’s global transactions, including trade, unlike national income which focuses on domestic output.

Human Development Index (HDI) includes income, education, and life expectancy, assessing broader economic welfare.

Consumer income affects demand, while supply is influenced by production factors like technology and cost.

Demand-pull inflation results from rising demand, unlike cost-push which stems from increased production costs.

Fiscal policy aims to manage economic growth, balancing inflation and unemployment, unlike monetary policy which focuses on money supply.