JAMB Economics 2016

22 reviewed questions with answers and explanations.

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Question 2

The money market provides business firms with the avenue to

  1. purchase goods and services
  2. purchase capital equipment
  3. obtain short-term funds
  4. obtain long-term funds
Answer and explanation

C: obtain short-term funds

Money-market instruments supply short-term funds to firms and other borrowers. Longer-term capital raising is associated with the capital market.

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Question 3

The optimum level of output for pure monopolist occurs where

  1. P is highest
  2. P=AC
  3. P=MC
  4. MR=MC
Answer and explanation

D: MR=MC

For an interior profit maximum, marginal revenue equals marginal cost, with the appropriate rising-cost crossing. Producing another unit then adds as much cost as revenue.

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Question 5

The Economic Community of West African States (ECOWAS) is an example of

  1. globalization
  2. regional marketing board
  3. economic integration
  4. economic union.
Answer and explanation

C: economic integration

ECOWAS is a regional arrangement aimed at closer economic cooperation and integration among West African states. It is not a commodity marketing board or global integration itself.

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Question 6

Given: 32, 18, 24, 17, 16, 32, 28, 68, 71 and 15, the mode of the distribution is

  1. 71
  2. 56
  3. 32
  4. 15
Answer and explanation

C: 32

The mode is the value occurring most often. In this list, 32 appears twice and every other value appears once, so the mode is 32.

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Question 8

Given: 2, 4, 6, 8, 4 and 6, the absolute mean deviation is

  1. 6.00
  2. 1.67
  3. 30.00
  4. 0.60
Answer and explanation

B: 1.67

The mean is (2 + 4 + 6 + 8 + 4 + 6)/6 = 5. Absolute deviations total 3 + 1 + 1 + 3 + 1 + 1 = 10, so their average is 10/6, about 1.67.

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Question 10

If the output of a firm experiencing economies of scale increases, the average cost would

  1. be at minimum
  2. rise
  3. be at maximum
  4. fall.
Answer and explanation

D: fall.

Economies of scale mean average cost decreases as the scale of output increases. A firm on that part of its long-run cost curve experiences falling average cost.

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Question 14

Life insurance companies contribute to economic development by holding a part of their assets in

  1. long-term financial instruments
  2. equipment
  3. cash and near money
  4. money-market instruments.
Answer and explanation

A: long-term financial instruments

Life insurers channel long-term premiums into long-term assets, helping finance investment over extended periods. This matches the long duration of many insurance obligations.

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Question 15

The wage rate is mostly related to

  1. marginal productivity of labour
  2. average productivity of labour
  3. marginal efficiency of investment
  4. total productivity of Labour.
Answer and explanation

A: marginal productivity of labour

In the competitive marginal-productivity model, labour demand reflects the value of the additional output from another worker. That marginal productivity helps determine the wage firms are willing to pay.

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Question 16

The choice of how to produce in a command economy is determined by

  1. consumers
  2. government
  3. industries
  4. labour unions.
Answer and explanation

B: government

A command economy relies on central government planning to choose production methods and allocate inputs. Consumers and firms do not independently make the central planning decision.

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Question 17

The co-efficient of price elasticity of supply is

  1. % change in supply / % change in price
  2. % change in quantity supplied / % change in price
  3. % change in quantity supplied / % change in income
  4. % change in quantity demanded / % change in income
Answer and explanation

B: % change in quantity supplied / % change in price

Supply elasticity compares the percentage change in quantity supplied with the percentage change in the good's price. It measures responsiveness along the supply curve.

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Question 19

In a limited liability company, the greatest risk is borne by the

  1. preference shareholders
  2. debentures shareholders
  3. ordinary shareholders
  4. board of directors.
Answer and explanation

C: ordinary shareholders

Ordinary shareholders receive the residual return after prior claims have been met. Their dividends and capital recovery are less protected than creditors' and preference shareholders' claims.

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Question 21

An inflation that co-exists with high rate of unemployment is

  1. hyperinflation
  2. cost-push inflation
  3. stagflation
  4. demand-pull inflation.
Answer and explanation

C: stagflation

Stagflation combines a rising general price level with weak economic activity and high unemployment. It is distinguished by inflation and labour-market weakness occurring together.

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Question 26

The capital/output schedule is: Capital units | Total output (kg) 1 | 13 2 | 43 3 | 123 4 | 243 5 | 353 6 | 483 7 | 563 8 | 663 Determine average product at the fifth unit of capital.

  1. 310.5
  2. 176.5
  3. 70.6
  4. 62.0
Answer and explanation

C: 70.6

Average product is total output divided by the number of input units. At five units of capital, output is 353 kg, so average product is 353/5 = 70.6 kg per unit.

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Question 34

Given: Qd = 30 — 3P and Qs = 9P — 15, determine the equilibrium price

  1. N12.00
  2. N3.75
  3. N2.80
  4. N3.00
Answer and explanation

B: N3.75

Equating demand and supply gives 30 - 3P = 9P - 15. Therefore 45 = 12P and P = N3.75; both quantities are 18.75.

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Question 37

The demand for inferior goods is inversely related to change in

  1. income
  2. price
  3. supply
  4. taste.
Answer and explanation

A: income

An inferior good has negative income elasticity: its demand tends to fall when income rises and rise when income falls. This classification is defined by the income relationship.

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Question 38

The minimum number of partners needed to form a partnership is

  1. 7
  2. 4
  3. 2
  4. 3
Answer and explanation

C: 2

A partnership requires at least two partners agreeing to carry on business together. One person alone is a sole proprietor, not a partnership.

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Question 39

When diminishing returns sets in, the total variable cost begins to

  1. rise at an increasing rate
  2. fall at a decreasing rate
  3. rise at a decreasing rate
  4. fall at an increasing rate.
Answer and explanation

A: rise at an increasing rate

With the variable input price constant, diminishing marginal product means progressively more input is needed per extra unit of output. Total variable cost consequently rises at an increasing rate.

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Question 40

The capital/output table is: Capital units | Total output (kg) 1 | 13 2 | 43 3 | 123 4 | 243 5 | 353 6 | 483 7 | 563 8 | 663 What is the marginal product of the seventh unit of capital?

  1. 80kg
  2. 100kg
  3. 310kg
  4. 173kg
Answer and explanation

A: 80kg

Marginal product is the additional output from one more unit of capital. The seventh unit raises output from 483 kg to 563 kg, giving 563 - 483 = 80 kg.

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Question 41

Given: 32, 18, 24, 17, 16, 32, 28, 68, 71 and 15, what is the range?

  1. 26
  2. 32
  3. 56
  4. 68
Answer and explanation

C: 56

The range is the largest observation minus the smallest. Here the maximum is 71 and the minimum is 15, so the range is 56.

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Question 43

If P = 1/4 (Qs + 30), what is the quantity supplied at ₦18?

  1. 64.5
  2. 42.0
  3. 2.4
  4. 30.0
Answer and explanation

B: 42.0

Multiply P = (Qs + 30)/4 by 4 to obtain Qs = 4P - 30. At P = 18 this gives 72 - 30 = 42 units.

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Question 44

When a consumer is at an interior equilibrium, MRSxy is equal to the

  1. product of the two prices
  2. sum of the two prices
  3. ratio of the two prices
  4. difference of the two prices.
Answer and explanation

C: ratio of the two prices

At an interior consumer optimum, marginal rate of substitution equals the price ratio of the two goods. This matches the consumer's trade-off to the market trade-off.

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Question 48

At full employment level, a contractionary monetary policy will Lead to a

  1. rise in aggregate supply
  2. rise in aggregate demand
  3. rise in the inflation rate
  4. fall in the inflation rate
Answer and explanation

D: fall in the inflation rate

At full employment, monetary contraction restrains aggregate demand and price pressure. In the standard model it lowers the inflation rate rather than increasing aggregate demand.

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