Economics 2005 Jamb Examination

Division of labour means breaking down the production process into smaller, specialized tasks where each worker performs a specific role. In a car assembly plant, workers may focus on tasks such as fixing doors, wiring, or painting, rather than producing the whole car.

This specialization increases efficiency, reduces time wastage, and promotes expertise. Hence, assigning each worker to a specific activity demonstrates division of labour. Option A is correct.

In perfect competition, a firm’s supply decision depends on the marginal cost (MC). Specifically, the firm supplies output at points where the price equals or exceeds the MC above the minimum average variable cost (AVC).

Thus, the portion of the marginal cost curve above the AVC is the firm’s short-run supply curve. Hence, option B is correct.

Hoarding occurs when demand outweighs supply, leading to shortages. Consumers or traders withhold goods from the market in anticipation of higher future prices, worsening scarcity.

This situation typically arises when demand is greater than supply. Therefore, option C is correct.

The production function expresses the relationship between quantities of inputs (like labour and capital) and the maximum output that can be obtained with them.

It is a technical, not economic, relationship that shows how resources are transformed into goods and services. Hence, option A is correct.

Consumer equilibrium is attained when the ratio of marginal utility to price is equal for all goods: MUx/Px = MUy/Py.

Here, MUx/Px = 16/2 = 8, while MUy/Py = 24/4 = 6. Since MUx/Px > MUy/Py, the consumer gets more satisfaction per naira from X and should consume more of X and less of Y until the ratios equalize. Hence, option C is correct.

Haggling in the market involves bargaining over prices until both buyer and seller agree. This practice reflects the principle of the price mechanism, where demand and supply forces determine prices.

By negotiating, the buyer is influencing how resources (goods and money) are allocated through market interaction.

The law of demand states that as the price of a commodity rises, the quantity demanded falls, and as the price falls, the quantity demanded rises, all things being equal.

This is described as an inverse relationship because price and demand move in opposite directions. Hence, option A is correct.

Marginal utility is the additional satisfaction from consuming one more unit of a good. When marginal utility becomes zero, it means additional consumption adds no further satisfaction.

At this point, total utility reaches its maximum level, after which consuming more may lead to negative utility. Hence, option D is correct.

In a market economy, individuals and firms are free to make their own economic decisions regarding production, consumption, and investment, without central planning interference.

This freedom of choice is what characterizes a market economy, unlike a planned economy where government directs activities. Hence, option D is correct.

When price elasticity of demand is greater than 1, it means a percentage change in price results in a greater percentage change in quantity demanded.

This is called elastic demand, showing consumers are highly responsive to price changes. Hence, option A is correct.