Economics 2006 Jamb Examination

In perfect competition, a firm will shut down in the short run if the market price is below the average variable cost, since it cannot cover even variable expenses.

Product differentiation means the same product is offered in different varieties, qualities, or forms to attract buyers.

Average revenue (AR), is revenue per unit and is found by dividing TR by the quantity sold, Q.

Hence we have: 660/6 = 110

The diagram represents a minimum price (floor) set at P2, above the equilibrium, leading to excess supply at q2. Hence, Option C is correct.

A movement from point K to M represents movement to a higher indifference curve, signifying greater satisfaction or utility for the consumer.

At point P, the slope of the indifference curve (MRS) equals one, meaning the consumer is willing to trade goods at a 1:1 ratio. Hence, unity is correct.

Average product (AP) = Total product / Number of men. For 3 men, AP = 540 ÷ 3 = 180 units.

The correct formula for a price index is: Price Index = (Current Price / Base Year Price) × 100.

The law of demand states that quantity demanded is a function of the inverse of price:

\[Q_d = f \left( \dfrac{1}{P} \right) \]

The size of the market determines the extent of demand. Without sufficient market size, a firm cannot profitably expand production.