JAMB Economics 1988

D: Resources are limited in relation to wants

Scarcity is relative: available resources are limited compared with the wants people seek to satisfy. It does not mean that an economy has no resources or cannot produce goods.

C: It uses scientific methods to explain observed phenomena and predict future events

Economics applies systematic observation, models and evidence to explain economic behaviour and assess predictions. Its scientific method is not limited to laboratory experiments.

C: Inconsistent

The preferences form a cycle: shoes are preferred to the watch, the watch to trousers, and trousers back to shoes. This violates transitivity, so the preference ordering is inconsistent.

B: Value

The paradox of value contrasts a necessity with a low price and a less essential good with a high price. Prices relate to marginal utility and scarcity, rather than to the total usefulness of all available units.

B: External economies

External economies are cost advantages arising outside the individual firm, such as shared infrastructure or specialised suppliers. They differ from internal economies generated by expanding or reorganising the firm itself.

C: It relates physical outputs to physical inputs

A production function describes the relationship between physical inputs and the output that can be produced with a given technology. It is not a relationship between the monetary values of inputs and outputs.

C: Marginal product begins to fall

Diminishing marginal returns begin when an additional unit of the variable input adds less output than the preceding unit, while other inputs are fixed. Total output can still rise even as marginal product falls.

B: All assets where quantity cannot be varied in the short run

Fixed costs relate to inputs that cannot be varied in the short run and do not change with current output. Variable costs instead change as production changes within that period.

B: Break-even level output

At break-even output, total revenue exactly covers total cost, leaving zero economic profit. This is distinct from the output that maximises profit, which depends on marginal revenue and marginal cost.

B: The amount where marginal utility became zero

In the standard diminishing-marginal-utility model with satiation, a consumer takes free units while they add satisfaction. Consumption stops when an extra unit adds no utility, rather than continuing into negative marginal utility.

D: Both the price and the quantity rise

With an unchanged upward-sloping supply curve, increased demand moves equilibrium to a higher price and a larger quantity. Producers supply more in response to the higher price.

D: Average revenue multiplied by the quantity sold

Average revenue equals total revenue divided by quantity sold. Multiplying average revenue by that quantity gives total revenue; marginal revenue is the change in revenue from another unit.

D: May close down

A monopolistically competitive firm can earn a profit or a loss in the short run. If operating revenue cannot cover avoidable variable costs, it may shut down rather than continue producing.

D: Marginal revenue product

Marginal revenue product is the extra revenue earned from using one more unit of an input. It measures the revenue contribution of that factor, rather than simply its physical output.

B: Sleeping partners

Sleeping partners invest in a partnership but do not take an active role in its day-to-day management. Their ownership role differs from acting as a stockbroker or simply working part-time.

A: Tendency to concentrate industries in particular areas

Industrial localisation is the concentration of firms or industries in particular geographical areas. It describes the clustering pattern, rather than merely selecting a site for one factory.

D: Liquidity ratio

A required liquidity ratio sets the minimum share of specified liquid assets a bank must hold. Tightening this requirement can restrict how much of its resources is available for lending.

C: Laws and customs

What people accept as money depends on institutional rules and established social acceptance. Laws and customs cover monetary arrangements more broadly than any one commodity or paper standard.

D: Property tax

A property tax is imposed directly on ownership or value of property. Sales taxes, purchase taxes and export duties are charged on transactions or goods and are classified as indirect taxes here.

A: Increase its foreign exchange reserves

An external-payments surplus before official reserve financing can provide foreign currency for accumulation of reserves. Increasing reserves strengthens the stock of foreign assets available to the monetary authorities.

A: Shipping and aviation

Shipping and aviation transport services are classified as invisible trade in the traditional balance-of-payments terminology. Merchandise and bullion are physical goods rather than transport services.

C: Be at a slower rate than population growth

Malthus proposed that unchecked population could grow geometrically while food production grew arithmetically. In that theory, food production grows more slowly than population, creating pressure on subsistence.

B: 0.80

The average propensity to consume is total consumption divided by total income. Here APC=400/500=0.80, meaning80% of aggregate income is consumed.

B: Indirect taxes

Expenditure measures output at market prices. To move to factor cost, subtract indirect taxes and add subsidies, because these create a difference between what buyers pay and what producers receive for factor services.

C: Expenditure, income and output

National income can be measured through expenditure on final output, incomes generated in production, or the value of output produced. These approaches describe the same economic activity from different sides.

D: Socialist economy

Collectivism emphasises collective ownership and control of productive resources. In the classification used here, state ownership and management of enterprises are associated with a socialist economy.