JAMB Economics 1985

24 reviewed questions with answers and explanations.

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Question 1

One main quality of a good is that it

  1. Is sold in the market
  2. Satisfies wants
  3. Is made in the factory
  4. Is always tangible
  5. Is non-perishable
Answer and explanation

B: Satisfies wants

A good has utility: it can satisfy a human want. Goods need not be factory-made, sold for money or non-perishable.

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Question 3

Bisi needs a book costing N10.00. If Bisi buys the book instead of a hat, the opportunity cost of this choice is the

  1. Cost of the book
  2. Cost of the hat
  3. Book
  4. Hat
  5. N10.00
Answer and explanation

D: Hat

Opportunity cost is the next-best alternative forgone. By choosing the book instead of the hat, Bisi gives up the hat; the opportunity cost is that alternative, rather than the money price itself.

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Question 4

An economic problem exists whenever

  1. There is scarcity and choice
  2. There are no buyers for our goods
  3. There are too many sellers
  4. Many people are out of work
  5. All raw materials are imported
Answer and explanation

A: There is scarcity and choice

An economic problem arises when resources are scarce relative to wants. Scarcity makes choice necessary, because using resources for one purpose means giving up another use.

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Question 5

The meaning of scale of preference is

  1. Preparing a list of goods and services to be purchased in order of priority
  2. Showing the monthly income
  3. Budget preparation without due regard to proper priorities
  4. Consumer preference for luxurious goods
  5. Consumer preference for foreign goods
Answer and explanation

A: Preparing a list of goods and services to be purchased in order of priority

A scale of preference ranks wants in order of importance. This priority list helps a consumer decide which wants to satisfy first when income is limited.

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Question 7

The age distribution of a population is NOT influenced by

  1. Birth rates
  2. Death rates
  3. Patterns of immigration
  4. Patterns of emigration
  5. School-leaving age
Answer and explanation

E: School-leaving age

Births, deaths and migration change the numbers of people in different age groups. School-leaving age is an education rule, rather than a direct demographic component of the population age distribution.

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Question 8

One theory of population contends that population tends to increase much faster than the supply of food, and that if the growth in population is not checked, it will be checked by natural forces like misery, disaster and food shortage. This theory was propounded by

  1. Prof. Paul Samuelson
  2. Adam Smith
  3. David Ricardo
  4. Rev. Thomas Malthus
  5. Prof. Ojetunji Aboyade
Answer and explanation

D: Rev. Thomas Malthus

Thomas Malthus proposed that unchecked population could grow geometrically while food supply grew arithmetically. He argued that preventive and positive checks would restrain population. This identifies his historical theory, rather than a universal forecast.

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Question 9

For quantities consumed of 0, 1, 2, 3, 4 and 5 units, the total-utility entries are –, 10, 15, 17, 18 and 18. The corresponding marginal-utility entries are –, 10, 5, 2, 1 and 0. Which law does this schedule illustrate?

  1. Diminishing marginal utility
  2. Diminishing marginal productivity
  3. Diminishing returns
  4. Increasing returns
  5. Increase total utility
Answer and explanation

A: Diminishing marginal utility

Marginal utility is the extra satisfaction from one more unit. The listed marginal utilities fall from 10 to 5, 2, 1 and then 0. Total utility still rises until the final unit adds no further satisfaction.

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Question 11

In market economies, resources are allocated through the

  1. Government authorities
  2. Price system
  3. Banking system
  4. Central planning bureau
  5. Revenue allocation formula
Answer and explanation

B: Price system

Market prices coordinate buyers and sellers. Changes in prices signal relative scarcity and influence what consumers demand and what producers supply, directing resources between uses.

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Question 13

At every point on an indifference curve, the

  1. Total utility is decreasing
  2. Prices of all goods are constant
  3. Consumer is satiated
  4. Level of utility is constant
  5. Level of utility is increasing
Answer and explanation

D: Level of utility is constant

An indifference curve joins combinations of goods that give a consumer the same level of satisfaction. The quantities of the goods can change along the curve while utility remains constant.

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Question 17

The amount of labour a producer hires relative to other factor inputs depends on the

  1. Price of labour or its wage
  2. Prices of labour, machinery and other inputs
  3. Price of machinery
  4. Prices of the other inputs
  5. Type of machinery
Answer and explanation

B: Prices of labour, machinery and other inputs

A producer compares the cost of labour with the costs of machinery and other inputs when choosing an input mix. Relative factor prices matter alongside the available production technology.

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Question 18

Which of the following is NOT a feature of under- development?

  1. Low per capita income
  2. Vicious circle of poverty
  3. Low level of industrialization
  4. Greater dependence on primary production
  5. High per capita income
Answer and explanation

E: High per capita income

High income per person is not a characteristic of underdevelopment. Low income, limited industrialisation and dependence on primary production are commonly used indicators in this comparison.

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Question 25

When a business has unlimited liability

  1. All its profits can be taxed away by the government
  2. All its assets are owned by the members of its board of directors
  3. The business ceases to exist at the death of one of its owners
  4. The owners are responsible for all its financial debts
  5. The owners are not responsible for all its financial debts.
Answer and explanation

D: The owners are responsible for all its financial debts

Unlimited liability means the owners remain personally responsible for the business debts. Liability is not restricted to the amount they invested in the business.

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Question 29

Because money serves as a standard of deferred payments

  1. It serves as a store of value
  2. Goods can be bought on credit with determined value
  3. Future trade becomes possible
  4. It serves as a unit of account
  5. It becomes valuable
Answer and explanation

B: Goods can be bought on credit with determined value

As a standard of deferred payment, money expresses an amount that will be paid later. A credit purchase can therefore specify the debt in money units when the agreement is made.

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Question 30

Which of the following is a necessary prerequisite for trade by barter.

  1. Need for double coincidence of wants
  2. Multiple exchange rate
  3. Impossibility of future trade
  4. Impossibility of large-scale production
  5. Indivisibility of commodities
Answer and explanation

A: Need for double coincidence of wants

Direct barter requires each participant to want what the other offers. This double coincidence of wants allows the exchange to take place without using money.

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Question 32

Which of the following is NOT among the canons of taxation as set out by Adam Smith?

  1. Equality
  2. Security
  3. Certainty
  4. Convenience
  5. Economy
Answer and explanation

B: Security

Smith’s four tax maxims are conventionally summarised as equality, certainty, convenience and economy. Security is not one of those four canons.

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Question 35

By terms of trade, we mean the

  1. Ratio of exports to imports
  2. Difference between exports and imports
  3. Difference between current account and capital account
  4. Index of export prices to import prices expressed as a percentage
  5. Ratio of short-term capital movements
Answer and explanation

D: Index of export prices to import prices expressed as a percentage

The terms-of-trade index equals the export-price index divided by the import-price index, multiplied by 100. It compares the prices a country receives for exports with the prices it pays for imports.

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Question 39

Under Article 3 of the original 1979 ECOWAS free-movement protocol, a Nigerian citizen meeting the entry requirements could visit Ghana without a visa for up to

  1. 14 days
  2. 30 days
  3. 60 days
  4. 90 days
  5. 100days
Answer and explanation

D: 90 days

Article 3 of the original 1979 ECOWAS protocol provided visa-free entry for visits of up to 90 days. It required valid travel and health documents and entry through an official border point; longer stays required permission. This question concerns that original historical provision.

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Question 42

The process by which a country attempts to reduce the import of manufactured goods by encouraging firms to produce these goods at home is described as

  1. Export promotion
  2. Import -substitution
  3. Industrialization
  4. Export-diversification
  5. Import-creation
Answer and explanation

B: Import -substitution

Import substitution seeks to replace imported goods with goods produced domestically. It differs from export promotion, which focuses on selling domestic output to foreign markets.

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Question 43

Under normal circumstances a producer will bear the entire burden of taxation on his output if the

  1. Demand for his product is completely elastic
  2. Supply of his goods is more elastic than the demand
  3. Demand for his product is more elastic than the supply
  4. Production of his commodities is subject to diminishing returns
  5. Production fo his commodities is subject to increasing returns to scale
Answer and explanation

A: Demand for his product is completely elastic

With perfectly elastic demand, buyers will not pay a higher market price. A per-unit tax therefore lowers the price received by producers by the tax amount, placing the tax burden on them in the standard competitive model.

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Question 45

The act of combining factor inputs in order to obtain specific output is known as

  1. Factor procurement
  2. Manufacturing
  3. Investment
  4. Industrialization
  5. Production
Answer and explanation

E: Production

Production combines inputs such as labour, capital and materials to create output. Manufacturing is one form of production, while the broader term also covers services and other productive activities.

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Question 46

Disguised unemployment

  1. Exists when manpower is not being utilized efficiently
  2. Calls for the implementation of five-year plans
  3. Can be eliminated if the press is free
  4. Can be eliminated if the capital output ratio is increased
  5. Is a statistical artifact with no economic meaning
Answer and explanation

A: Exists when manpower is not being utilized efficiently

Disguised unemployment occurs when people appear employed but their labour is underused. In the usual surplus-labour example, some workers can leave without reducing total output.

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Question 48

A farm uses 5 hectares of land throughout. For labour inputs of 1, 2, 3, 4, 5 and 6 workers, total output is 10, 25, X, 60, 73 and 82 respectively. Corresponding marginal products are 10, 15, 21, 14, 13 and Y. Which pair gives X and Y?

  1. X = 20, Y = 6
  2. X = 38, Y = 9
  3. X = 46, Y = 9
  4. X = 46, Y = 14
  5. X = 10, Y = 10
Answer and explanation

C: X = 46, Y = 9

Marginal product is the change in total output when one more worker is added. Therefore X =25+21=46, and Y =82−73=9. The fixed land input remains5 hectares.

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Question 49

The unemployment associated with a recession is called

  1. Voluntary
  2. Frictional
  3. Cyclical
  4. Structural
  5. Disguised
Answer and explanation

C: Cyclical

Cyclical unemployment rises when an economic downturn reduces aggregate demand and employers need fewer workers. It differs from frictional unemployment during job searches and structural unemployment caused by mismatched skills.

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Question 50

At a smooth interior maximum of total revenue, marginal revenue is

  1. Constant
  2. Negative
  3. Zero
  4. Positive
  5. Maximum
Answer and explanation

C: Zero

Marginal revenue measures the change in total revenue from an additional unit. At a smooth interior maximum of total revenue, its slope is zero, so marginal revenue is zero.

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