JAMB Economics 2000

B: allocation of resources to alternative uses

Economics studies how scarce resources are allocated among competing uses. Household and firm behaviour belongs to microeconomics, while aggregates such as inflation belong to macroeconomics; the broader allocation idea encompasses both.

A: I, II and III

Every economic system must decide what to produce, which methods and inputs to use, and who receives the output. These are the basic what, how and for-whom questions represented byI,II andIII.

C: relative prices

Relative market prices communicate which goods are more highly valued relative to their costs and alternatives. Producers respond to these signals when deciding what to make in a capitalist economy. A central planner is the allocation authority in a planned system instead.

B: Labour

Demand for labour is derived from demand for the goods and services workers help produce. Firms hire workers because their work contributes to output that can be sold, rather than because labour itself is usually the final consumer good.

C: −0.6

Demand for Y changes by(20 − 50)/50 = −0.6, while X's price changes by(50 − 25)/25 = 1. Cross elasticity is−0.6/1 = −0.6. The negative sign indicates that a higher price of X reduces demand for Y.

D: complements.

Demand for Y falls when the price of X rises, giving negative cross elasticity. This is the usual relationship between complementary goods used together. Substitutes would normally show an increase in demand for Y when X becomes dearer.

C: MC = AR = P

A price-taking firm has average revenue and marginal revenue equal to market price. At an interior profit maximum, marginal cost equals marginal revenue and crosses it from below. Thus MC = AR = P; total revenue and total cost need not equal these per-unit values.

C: 24

Marginal product is the increase in total output caused by one additional unit of the variable input. Moving from three to four units raises total product from 24 to 48, so X = 48 − 24 = 24.

D: 15.5

Average product is total output divided by the amount of variable input. With six units of input, total product is 93, so Y = 93/6 = 15.5 units of output per unit of input.

C: N40

Total cost is N5,000 + N15,000 = N20,000. Dividing by 500 units gives N40 per unit. Using variable cost alone would omit the fixed costs that also contribute to average total cost.

A: slope of the tangent to the curve at any given output

Marginal cost measures how total cost changes with output. On a smooth total-cost graph, this is the slope of the tangent at the chosen output. A line from the origin instead relates total cost to output and gives average cost.

B: marginal cost and marginal revenue be equal

For an interior profit-maximising competitive output, marginal cost equals marginal revenue, with the appropriate upward crossing. The firm also considers whether price covers average variable cost when deciding to operate in the short run.

D: maximum.

Marginal revenue is the change in total revenue from selling an additional unit. At the usual peak of the total-revenue curve its slope is zero, so marginal revenue is zero. Beyond the peak marginal revenue becomes negative and total revenue falls.

B: inelastic

When a larger harvest expands supply along an inelastic market demand curve, price falls proportionately more than quantity sold rises. The price reduction outweighs the extra sales, so total farmers' revenue can fall despite greater output.

A: Ratio of the dependent to the working-age group

Age distribution identifies the shares in dependent and working-age categories. Those shares are used to calculate an age-dependency ratio. Age counts alone do not establish the sex ratio or marital status of the population.

B: marginal revenue product of labour

Marginal revenue product is the additional revenue generated by one more unit of labour. Hiring is worthwhile while that extra revenue exceeds the wage. At an interior optimum, the wage equals marginal revenue product, with further hiring no longer adding profit.

A: Breaking bulk

Wholesalers buy large quantities from producers and divide them into smaller lots that suit retailers and other business customers. This breaking-bulk service links large-scale production to the quantities needed further down the distribution chain.

C: Income, output and expenditure

National income can be measured through the income earned in production, the value of output produced, or expenditure on final output. Properly defined, these are three ways of measuring the same underlying economic activity.

D: Unpaid household services

Much unpaid household work contributes to wellbeing but is outside conventional national-output measurement. Excluding it limits the usefulness of GNP as a welfare measure. Government purchases and paid wages are generally included in the relevant production accounts.

A: lower interest rates

In the standard liquidity-preference model, an increase in money supply with money demand otherwise unchanged lowers the interest rate needed to balance the money market. This is a model result, not a guarantee that every monetary expansion lowers all interest rates.

C: fairness of the tax

Whether a tax is fair involves a value judgement about how burdens ought to be distributed. That is a normative question. Measuring a tax rate or investigating its effect on work incentives can instead be positive, evidence-based analysis.

C: internal and external debts

Public debt includes domestic or internal borrowing and foreign or external borrowing. Loans from particular international institutions are only part of external debt, so naming those institutions alone does not cover the full composition.

D: £0.12 = N1.00

Equate the two prices: £60 corresponds to N500. Dividing both sides by 500 gives £60/500 = £0.12 for N1. This is the rate implied by the stated prices, not a current market exchange-rate quotation.

C: reap the benefit of a cartel

Producer coordination can give members collective benefits that an individual producer could not obtain alone. OPEC coordinates member petroleum policies and seeks market stability and steady producer income. Membership does not give Nigeria unilateral control of world prices.