2002 - JAMB Economics Past Questions and Answers - page 3

The Malthusian theory of population growth is known for its pessimistic outlook. Thomas Malthus argued that population growth would outstrip the growth of food production, leading to widespread poverty, famine, and disease.

Improved labor efficiency means that the same amount of labor can produce more output. This is reflected in the output-input ratio.

• Output-input ratio: This is a measure of efficiency, with output representing what is produced and input representing the resources used (in this case, labor).
• Increased output-input ratio: An increase indicates that more output is being produced for the same amount of input (labor), demonstrating improved efficiency.
• Decreased output-input ratio: Would mean that less output is produced relative to the same input (labor), thus is less efficient.
• Constant input-output ratio: Implies no change in efficiency, which would mean the same output is achieved with the same input.
• Increased input-output ratio: This would not be

Average Fixed Cost (AFC) is calculated by dividing total fixed costs by the quantity of output produced. As output increases, the fixed costs are spread over a larger number of units. This results in a continuous decrease in the AFC.

The short-run equilibrium output for a monopolist is determined by the intersection of the marginal cost (MC) and marginal revenue (MR) curves.

• A monopolist maximizes profit where marginal cost equals marginal revenue (MC = MR).
• At this point, the monopolist decides on the quantity to produce. The price is determined by the demand curve at that quantity.

The benefits that a firm receives from improvements in the industry it's a part of are called external economies of scale. This is because these economies originate from outside the firm.

The marginal cost curve above the point of shut-down represents the firm's supply curve in the short run. Here's why:

• Shut-down point: This is the point where the firm's revenue is just enough to cover its variable costs. Below this point, the firm minimizes losses by shutting down.
• Marginal cost and supply: The marginal cost curve shows the additional cost of producing one more unit. In a competitive market, a firm will supply goods where the price (which equals marginal revenue) is equal to or greater than its marginal cost. Above the shut-down point, the marginal cost curve effectively represents the quantity a firm is willing to supply at different prices.
• Other options: The demand curve represents the quantity of goods consumers are willing to buy at different

Deregulation is the removal or reduction of government regulations in a particular industry. The aim of deregulation is to increase competition, which typically leads to a more competitive market structure.

Under perfect competition, a firm's supply curve is determined by its marginal cost curve. This is because:

• Profit Maximization: Firms in perfect competition aim to maximize profits. They do this by producing at the quantity where marginal cost (MC) equals marginal revenue (MR). In perfect competition, the price (P) equals MR. Therefore, the profit-maximizing condition becomes P = MC.
• Supply Curve Derivation: The MC curve shows the additional cost of producing one more unit. The firm will supply a quantity where the price equals the marginal cost. Thus, the portion of the marginal cost curve above the average variable cost (AVC) represents the firm's supply curve.
• Other Options:
  • Total cost, variable cost, and fixed cost curves are related to

Here's the explanation:

• Increase in Demand: When demand increases, the demand curve shifts to the right. This puts upward pressure on the price.
• Decrease in Supply: When supply decreases, the supply curve shifts to the left. This also puts upward pressure on the price.
• Combined Effect on Price: Both the increase in demand and the decrease in supply contribute to a higher equilibrium price.
• Combined Effect on Quantity: The effect on quantity is indeterminate. The increase in demand tends to increase quantity, while the decrease in supply tends to decrease quantity. The net effect on quantity depends on the magnitude of the shifts in the curves. If the demand shift is greater than the supply shift, the quantity will increase. If the supply shift is greater than the demand shift, the