JAMB Economics 1983

21 reviewed questions with answers and explanations.

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Question 1

Which of the following items is NOT included in measuring national income by the income approach?

  1. Wages and salaries of public servants
  2. Student grants and scholarships.
  3. Profits of companies.
  4. Income earned by self employed persons such as lawyers.
  5. Rents on property.
Answer and explanation

B: Student grants and scholarships.

Scholarships and student grants are transfers, not payment for current production. Wages, business profits, self-employment income and rent are earned through productive activity.

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Question 3

Which of the following items is NOT an argument for locating industries in rural areas?

  1. Rural areas supply agricultural raw material.
  2. The pace of development will be quickened in rural areas.
  3. Employment will be provided for rural inhabitants.
  4. Capital is easily available in rural areas.
  5. Suitable humid climate is sometimes found in rural areas.
Answer and explanation

D: Capital is easily available in rural areas.

Access to capital is not automatically easier in rural areas. Local agricultural inputs, jobs and regional development can justify rural industrial location, but easy finance cannot simply be assumed.

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Question 5

The natural growth rate of a population is the

  1. Sum of the birth rate and the death rate
  2. Sum of the birth rate and the net migration rate
  3. Birth rate minus the death rate
  4. Birth rate divided by the net migration
  5. Death rate minus the net migration.
Answer and explanation

C: Birth rate minus the death rate

Natural population growth counts births minus deaths. Migration is included in total population change but excluded from natural increase.

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Question 6

Which of the following sets fully represents factor of production?

  1. Sunlight, machinery, man, land
  2. Land, labour, capital, enterprise technology
  3. Capital, technology, ideas, market, land.
  4. Land, water, weather.
  5. Money, market, middlemen.
Answer and explanation

B: Land, labour, capital, enterprise technology

The conventional factors are land, labour, capital and enterprise. Technology influences how productively they are combined. This option includes all four; the alternatives omit one or more of them.

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Question 9

If successive units of labour are added to a piece of land while capital and technology remain constant, a point will be reached in the level of production when each added unit of labour will add less to the output than previous units of labour. This illustrates which concept?

  1. The productivity of labour
  2. The law of diminishing marginal utility
  3. The law of diminishing returns
  4. The concept of factor intensity
  5. Labour intensive production.
Answer and explanation

C: The law of diminishing returns

With land and capital fixed, extra workers eventually have less fixed equipment and space per person. Beyond a point, each additional worker adds less output: diminishing marginal returns. Total output may still increase.

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Question 11

Other influences held constant, why is a household’s downward-sloping demand curve for semovita consistent with the law of demand?

  1. The demand for semovita is high
  2. The local markets are flooded with semovita
  3. It is produced in Nigeria
  4. Every household can afford to buy semovita
  5. Higher prices attract lower quantities while lower prices attract larger quantities
Answer and explanation

E: Higher prices attract lower quantities while lower prices attract larger quantities

Along a downward-sloping demand curve, a higher price corresponds to a smaller quantity demanded and a lower price to a larger quantity demanded, other influences held constant.

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Question 13

For the usual U-shaped average-cost curve, the marginal-cost curve intersects it

  1. From above at its lowest point
  2. From below before the lowest point
  3. From below at its lowest point
  4. From below after the lowest point
  5. At zero point
Answer and explanation

C: From below at its lowest point

When marginal cost is below average cost, an extra unit lowers the average. When marginal cost is above average cost, it raises the average. Therefore the rising marginal-cost curve crosses average cost at its minimum.

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Question 15

The meaning of ‘wage-price spiral’ is

  1. Demand pull and cost push inflation pulling each other in different directions
  2. Demand pull and cost push inflation intensifying each other
  3. Both of them bringing about a reduction in the price level
  4. That demand pull and cost push inflation increase employment
  5. That wages and prices are rising at a proportional rate
Answer and explanation

B: Demand pull and cost push inflation intensifying each other

Higher wages can increase firms’ costs and household spending. Higher prices can then prompt further wage demands. These feedback effects can reinforce inflation; wages and prices need not rise in a fixed proportion.

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Question 18

In a sole proprietorship the decisions are made by the

  1. Government
  2. Board of directors
  3. Management
  4. Shareholders’ conference
  5. Owner
Answer and explanation

E: Owner

A sole proprietorship has one owner. The proprietor has ultimate decision-making authority, although everyday tasks can be delegated. It has no shareholders’ conference or company board.

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Question 23

Which of the following are direct taxes?

  1. Sales taxes
  2. Excise duties
  3. Income and company taxes
  4. Tariff duties
  5. Commodity taxes
Answer and explanation

C: Income and company taxes

Income tax and company tax are levied directly on income or profits. Sales taxes, excise duties, tariffs and commodity taxes are indirect taxes associated with transactions or goods.

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Question 24

Division of labour has many advantages. Notwithstanding, it is greatly limited by

  1. Monotony of work
  2. Decline of craftmanship
  3. Risk of unemployment
  4. Extent of market demand
  5. Boredom
Answer and explanation

D: Extent of market demand

Specialisation requires enough customers to buy the increased output. A small market limits the scale on which narrowly specialised jobs can be supported. Monotony and lost craftsmanship are possible disadvantages rather than the size limit described here.

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Question 28

Comparative cost doctrine of international trade means specialization in production

  1. According to absolute cost advantage
  2. According to absolute cost disadvantages
  3. According to Comparative cost disadvantages
  4. According to comparative cost advantages
  5. On the basis of the availability of labour
Answer and explanation

D: According to comparative cost advantages

Comparative advantage means producing at a lower opportunity cost. Countries can gain by specialising in goods for which they give up relatively less other output, even if one country has an absolute advantage in every good.

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Question 29

The meaning of ‘Dumping’ is selling goods in a foreign market

  1. At a price below that received in the home market
  2. At a price higher than that received in the home market
  3. At a price equal to the cost price in the home market
  4. In order to encourage indigenous producers
  5. At a price equal to the selling price in the home market
Answer and explanation

A: At a price below that received in the home market

Dumping involves an export price below the product’s normal value, commonly assessed using its comparable home-market price. It is not simply exporting at any low price.

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Question 33

Mono-product economies are those that

  1. Have a rich cultural heritage
  2. Produce only raw materials
  3. Live from the export of their raw products
  4. Produce one main commodity
  5. Specialize in agriculture industries
Answer and explanation

D: Produce one main commodity

A mono-product economy depends heavily on one main commodity. This does not mean that literally no other goods are produced, or that every such economy is agricultural.

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Question 35

If an economy is growing at an annual rate of 7% and 4% of it is known to be due to the improve ments in labour and capital combined, the balance of 3% is usually due to

  1. Land and related factors
  2. Abundance of natural resources
  3. Level of human capital
  4. Technical progress or other factors
  5. The discipline of political leaders
Answer and explanation

D: Technical progress or other factors

Subtract the contribution attributed to labour and capital from total growth: 7 − 4 = 3 percentage points. This residual is associated with technical progress and other productivity influences not captured by the measured inputs.

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Question 37

When a government owns enterprises a numbers of advantages arise. Which of the following is NOT one of such advantages?

  1. More capital is provided
  2. Pricing policy may be in the interest of consumers
  3. Government workers may be indifferent towards the public.
  4. Infrastructures are rapidly developed.
  5. Income may be more evenly distributed
Answer and explanation

C: Government workers may be indifferent towards the public.

Indifference towards the public is a possible problem of public enterprise, not a benefit. Public ownership may support investment, infrastructure and social pricing, although these benefits are not guaranteed.

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Question 39

The system of exchange that requires a double coincidence of wants is known as

  1. The gold standard
  2. Barter
  3. The commodity system
  4. The gold exchange standard
  5. The cheque system
Answer and explanation

B: Barter

Barter exchanges goods or services directly. Each trader must want what the other offers: a double coincidence of wants. Money removes this requirement by serving as a generally accepted medium of exchange.

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Question 40

The effect of emigration on a country’s population, all other things remaining equal, is to

  1. Increase its size
  2. Cause overpopulation
  3. Increase its growth rate
  4. Reduce the proportion of children
  5. Reduce its size
Answer and explanation

E: Reduce its size

Emigration means people leave the country. Holding births, deaths and immigration unchanged, each emigrant reduces the resident population. It does not by itself establish a change in the proportion of children.

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Question 41

Money performs a number of functions. ONE of these functions makes it possible for any person to provide for old age. Because of that particular function, money is regarded as a

  1. Medium of exchange
  2. Measure of value
  3. Unit of account
  4. Store of value
  5. Standard for deferred payments.
Answer and explanation

D: Store of value

As a store of value, money lets purchasing power be carried from the present into the future. Savings can help provide for old age, although inflation can reduce their real value.

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Question 43

Which of the following defines Economics most comprehensively?

  1. Buying and selling
  2. Organization of industries.
  3. Study of human behaviour in the allocation of scarce resources.
  4. National development planning and budgeting
  5. Banking and insurance
Answer and explanation

C: Study of human behaviour in the allocation of scarce resources.

Economics studies choices about allocating scarce resources among competing uses. Buying and selling, banking and public planning are examples within that wider subject.

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Question 47

When demand is elastic, it means that consumer

  1. React more proportionately to price change
  2. Are not sensitive to price change
  3. Will stop buying when price increases
  4. React less proportionately to price change
  5. React equally to price change
Answer and explanation

A: React more proportionately to price change

Elastic demand means the percentage change in quantity demanded exceeds the percentage change in price in magnitude. Consumers therefore respond more than proportionately to the price change.

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