2024 - JAMB Economics Past Questions and Answers - page 6

Minimum price legislation, also known as a price floor, is a government-imposed price control or limit on how low a price can be charged for a product or service. It is usually set above the equilibrium price. The effects of a minimum price include:

• Excess supply: When the minimum price is set above the equilibrium price, the quantity supplied will exceed the quantity demanded, leading to an excess supply or surplus.
• Wastage of resources: Excess supply can lead to wastages if the surplus goods cannot be stored or sold.
• Unemployment: A minimum wage, a type of price floor, can lead to unemployment as businesses might reduce their workforce to cope with higher labor costs.
• Excess demand: Excess demand occurs when the minimum price is set below the equilibrium price. A minimum price set above the equilibrium price will cause the quantity supplied to exceed the quantity demanded.

OPEC's primary objectives include stabilizing oil prices, ensuring a steady income for member countries, and securing a consistent oil supply for consumers. Building petroleum refineries in all member states isn't a core objective of OPEC. While member states might independently establish refineries, it is not a collective goal of the organization.

The standard of living between two countries is best compared using per capita income.

• Per capita income: Calculated by dividing a country's national income by its population. This gives an average income per person, which is a good indicator of the standard of living.
• Gross National Income (GNI): A country's total income. While useful, it doesn't account for population size.
• Net National Income: GNI minus depreciation. Important, but it doesn't directly reflect the standard of living.
• Net disposable income: The income an individual has available to spend or save after taxes. It's relevant but not the best for country-to-country comparison.

The contribution of petroleum to the Nigerian economy is most prominent in the area of revenue generation. Here's why:

• Revenue Generation: Petroleum (crude oil and natural gas) is Nigeria's primary export. The sales of these resources generate significant revenue for the government, crucial for funding public services and infrastructure development.
• Infrastructural Development: While petroleum revenues contribute to infrastructure, it is not the most prominent area.
• Fuel Provision: Petroleum provides fuel for domestic consumption. However, revenue generation is a more significant contribution to the economy.
• Employment Generation: The petroleum sector generates employment, but it is not its most prominent contribution.

In the long run, a firm should shut down if it cannot cover its average variable costs. Here's why:

• Long-Run Considerations: All factors of production are variable in the long run. A firm must cover all costs to stay in business.
• Average Variable Cost (AVC): If the price (average revenue, AR) falls below the AVC, the firm does not cover its variable input costs.
• Shut-Down Point: When AR < AVC, the firm minimizes losses by shutting down, losing only fixed costs. Continuing operation leads to losses of both fixed and variable costs.
• Other Options:
  • AR > AC: Firm makes a profit and should not shut down.
  • AR = AC: Zero economic profit; may continue operation.
  • AR = minimum average revenue: Not a clear shut-down condition.

The diagram represents the circular flow of income, illustrating the flow of money and resources between households and firms in an economy.

Internal trade is the exchange of goods and services within a country. Problems generally include:

• Lack of specialization: Leads to inefficiency as producers may not focus on what they do best.
• Natural barriers: Mountains, rivers, or deserts can make transportation and trade difficult.
• Bargaining: Part of trade, but not necessarily a problem associated with it.

Market trade unions are not typically a problem; they may improve fairness and working conditions for involved workers.

The primary functions of marketing boards in Nigeria historically included:

• Grading of farm produce to ensure quality.
• Fixing prices for farm produce to stabilize the market and protect farmers.
• Marketing of farm produce, both domestically and internationally.

Importation of farm produce was generally not a function; the role focused on the export and domestic sale of locally produced agricultural goods.

The satisfaction derived from consuming a commodity is referred to as utility. Utility measures the satisfaction, happiness, or benefit a consumer gains from consuming a good or service.

Deflationary policies aim to reduce the overall price level in an economy. Main disadvantages include:

• Increased unemployment: Measures like raising interest rates or reducing government spending can decrease production and investment, causing job losses.
• Reduced economic growth: Lower demand and prices can lead businesses to cut production, slowing economic growth.
• Debt burden: Deflation increases the real value of debt, making repayment harder for borrowers.
• Discourages spending and investment: Consumers and businesses may postpone spending, expecting further price declines, worsening the deflationary spiral.

Option C is the most appropriate answer as deflationary policies can lead to unemployment.