JAMB Economics 1989

C: Transactions in goods and services and payments for such transactions between individual firms and households

The simple circular flow connects households and firms through real exchanges and money payments. Households supply factors and buy output, while firms pay factor incomes and receive spending on goods and services.

D: (Land, rent), (capital, interest), (labour, wage).

The conventional factor rewards are rent for land, interest for capital and wages for labour. Profit is associated with entrepreneurship, rather than with the labour input.

A: Interest rate

In a competitive capital market, the interest rate measures the return forgone by committing funds to one use instead of lending them. It therefore represents the opportunity cost of using capital.

D: Perfectly inelastic

Perfectly inelastic demand means quantity demanded does not change when price changes. Its price elasticity is zero, and the demand curve is vertical.

C: Durability of the product

Durability affects whether consumers can postpone replacement purchases when prices rise. Goods that can continue serving their purpose may allow a stronger demand response over time.

B: Productivity

Marginal productivity theory relates a factor’s reward to its contribution at the margin. In the standard competitive formulation, demand for a factor reflects the value of its marginal product.

B: Vertical integration

Vertical integration joins firms at different stages of the same production or distribution chain, such as manufacturing and retailing. Horizontal integration joins firms at the same stage.

C: Shift the demand curve for the product to the right

Advertising can increase consumers’ willingness to buy a product at each price, shifting demand to the right. A price fall causes movement along an existing demand curve, rather than this shift.

D: Involves the provision of direct services

Direct personal services often rely on close contact with customers and the provider’s own skills. Such activities can operate efficiently on a small scale, unlike processes requiring large capital or mass production.

A: Sole proprietorship

In a sole proprietorship the same person normally owns, manages and controls the business. This combines the main decision-making roles directly in the proprietor.

C: Entrenched democratic control in the conduct of business

Democratic member control is a defining cooperative principle, commonly one member, one vote. Partnership control is instead governed by the partners’ agreed arrangements and need not follow that cooperative rule.

A: Preferred stock

Preference shares commonly carry a specified dividend rate and priority over ordinary shares. A dividend is a shareholder payment; debentures and bank loans pay interest instead.

A: Relatively low transport cost for both raw materials and output and factor mobility

Footloose industries face relatively low transport costs and can obtain mobile inputs in different locations. They are less tied to a particular raw-material source or market than transport-intensive industries.

D: Barter exchange mechanism

Direct barter requires each party to want what the other offers. This double coincidence of wants is unnecessary when an accepted medium of exchange is used.

B: Increase in factor prices

An increase in factor prices raises production costs. Firms may respond by reducing supply or raising prices, creating cost-push inflationary pressure.

C: Existing bonds and stocks are traded

A stock exchange principally provides an organised secondary market for trading existing shares and bonds. Trading ownership claims differs from a firm directly borrowing a new bank loan.

A: Controlling credit and money supply

Reserve requirements influence the liquidity banks must retain and can constrain credit expansion. They are therefore connected to monetary and credit control, rather than primarily to fraud prevention.

C: Free markets may not work or produce desired results

Government intervention can address market failures, such as externalities or inadequate provision of public goods. A market outcome need not achieve every social objective simply because private exchange occurs.

A: Investments income, direct tax and indirect tax

Direct taxes, indirect taxes and income from government investments are distinct revenue categories. The other options mainly list individual taxes within the tax categories rather than separate broad sources.

D: Revenue sharing and profit maximization

Public spending can support stability, distribution and social services. Profit maximisation is not its general purpose, so the combined revenue-sharing and profit-maximisation option does not describe the main objectives.

B: Balance on current account

The goods balance is55.54−53.32=2.22 million naira. The services balance is30.56−28.70=1.86 million. Their sum is4.08 million; with no other current-account transactions in this schedule, it is the current-account balance.

B: In which its opportunity cost is lower than that of the trade partner

Comparative advantage is determined by relative opportunity cost. A country gains a specialisation advantage in a good when it sacrifices less alternative output than its trading partner.

B: products flow across national boundaries

International trade crosses national borders, whereas inter-regional trade occurs within a country. Comparative advantage can apply to both, so it is not the defining distinction.

B: Per capita income is at a maximum

Optimum population is the population size that maximises income or output per person for the given resources and technology. It is not simply the largest population or the point where births equal deaths.

C: Tertiary producers

Banking and insurance provide services and belong to the tertiary sector. They do not primarily extract raw materials or manufacture physical goods.

D: Capital depreciation

Net national product is gross national product after subtracting capital depreciation. Depreciation accounts for fixed capital used up during the production period.

D: Gross domestic product

Gross domestic product measures output produced within the domestic economy, regardless of the producers’ nationality. Gross national product instead adjusts for net factor income from abroad.

B: Achieve a rapid increase in the welfare and standard of living of Nigerians

Development planning seeks to improve people’s welfare and living standards. Higher output and enterprise profitability can contribute to that aim, but they are narrower measures than overall social welfare.