JAMB Economics 1997

C: marginal utility derived per naira spent is the same for all the goods and services

At an interior consumer optimum, the marginal utility obtained from the last naira spent is equal across the goods purchased. If one good offered more extra utility per naira, shifting spending towards it would increase satisfaction without increasing the budget.

A: inconsistent

Transitive preferences would imply that someone who prefers bananas to pawpaw and pawpaw to oranges also prefers bananas to oranges. Preferring oranges to bananas instead creates a cycle, so the stated preferences are inconsistent with transitivity.

A: resources are directed by the price mechanism

In a free market, prices guide buyers' and producers' decisions and help direct resources towards different uses. This is the defining coordination mechanism; central bureaucratic allocation describes a planned system instead.

D: underpopulated

In optimum-population theory, an underpopulated country has too few people to make the best use of its resources and technology. Additional population can then raise output per person, giving increasing returns as the country moves towards its optimum population.

A: Dependency ratio is high

The two dependent age groups total 45% + 30% = 75%, leaving 25% in the intervening age group. The age-dependency ratio is 75/25 × 100 = 300 dependants per 100 working-age people, which is high. This age-based measure does not identify each person's actual employment.

C: Output to worker-hours

Labour productivity measures output produced per unit of labour input. Dividing output by the worker-hours used gives output per worker-hour. Reversing the ratio measures labour input required per unit of output instead.

D: Average variable cost

A firm can continue producing in the short run if its price covers average variable cost at the chosen output. Revenue then covers variable costs and may contribute towards fixed costs, which remain payable even if the firm temporarily shuts down.

A: 20 and 80

At equilibrium quantity demanded equals quantity supplied: 120 − 2 p = 4 p. Hence 6 p = 120 and p = 20. Substituting back gives Q = 4 × 20 = 80, which also equals 120 − 2 × 20.

B: only the price will increase

Perfectly inelastic supply is a vertical supply curve, so the available quantity does not respond to price. A rightward demand shift raises the price at which buyers take that fixed quantity; equilibrium quantity remains unchanged.

C: Greater than one

Income elasticity equals the percentage change in quantity demanded divided by the percentage change in income. When both increase and the quantity percentage is larger, this ratio exceeds one: demand is income-elastic.

A: preference shares

Among the share classes listed, preference shares have priority over ordinary shares in distributions of capital on liquidation, subject to their terms. Debentures represent debt rather than shares; creditors' claims are considered before distributions to shareholders.

B: decrease their output

On a backward-bending portion of supply, a higher price is associated with a smaller quantity supplied. This describes the assumed curve in the question; it is not a claim that every farmer or every agricultural market behaves that way.

B: a price fall results in its fall

With inelastic demand, quantity demanded increases by a smaller percentage than price falls. The extra sales do not offset the lower price, so total sales revenue falls. This is a revenue result; net profit additionally depends on costs.

D: raw materials

Plywood production needs timber, which is bulky to transport. Locating near timber supplies can reduce inbound transport and handling costs. This makes access to raw materials an important location factor for such industries.

D: general acceptability

Money must be generally accepted in payment if it is to function as a medium of exchange. Divisibility and uniformity help money work well, but an object with those qualities still fails as money if people will not accept it.

D: an increase in government expenditure

An increase in government expenditure raises aggregate demand, other things equal. If spending presses against available productive capacity, it can raise prices. Higher saving, monetary contraction and demand-reducing taxation generally work in the opposite direction in this demand-side comparison.

B: avoidance

In the standard distinction, tax avoidance uses legally permitted arrangements to reduce tax liability, whereas tax evasion involves unlawful concealment or non-payment. A relief or exemption is a specific provision rather than the general term for this behaviour.

C: N20 billion

The simple expenditure multiplier is 1/(1 − 0.75) = 4. The net change in autonomous spending is N10 billion − N15 billion = −N5 billion. Multiplying by 4 gives a GDP change of −N20 billion, a decrease of N20 billion.

D: N1,200 million

Substitute consumption and investment into the identity: Y = 200 + 0.75 Y + 100, in millions of naira. Therefore 0.25 Y = 300 and Y = 1,200 million. Checking: consumption is 1,100 million, which plus investment of 100 million gives 1,200 million.

C: Output method

The output method measures production by adding the value added by producers, or equivalently the value of final goods and services. Intermediate inputs must not be counted again, because their value is already contained in final output.

A: relinquishing of government’s equity participation to private individuals

Privatisation transfers government ownership or equity participation to private owners. Making an enterprise commercially oriented while keeping government ownership is commercialisation, and adding new finance alone is recapitalisation.

A: goods and services are exchanged in a manner similar to barter

Countertrade links an international purchase to a reciprocal commitment to take goods or services in return. It resembles barter, although arrangements can include money and more complex linked transactions. It is not simply selling goods over a retail counter.

B: International Monetary Fund

The IMF provides financing to help member countries address balance-of-payments difficulties while they implement economic adjustment. Development banks primarily support development financing, so the IMF is the organisation identified by this balance-of-payments role.