Economics 2024 Jamb Examination

A production possibility curve (PPC) shows the maximum combination of two goods that an economy can produce with available resources and technology. It emphasises scarcity because resources are limited, and it also shows unemployment or inefficiency when production occurs inside the curve rather than on it. It does not, however, directly show economic development. Economic development relates to long-term qualitative improvement in living standards, which cannot be depicted by the PPC itself but rather by an outward shift of the curve. Therefore, economic development is not one of the concepts emphasised by the PPC.

The Organisation of Petroleum Exporting Countries (OPEC) aims to coordinate and unify petroleum policies among member countries to secure fair and stable prices and ensure stable revenue. It does not establish refineries in all member states because refinery construction is not part of its core mandate; individual countries decide whether to build refineries. Ensuring stable oil flow to consumers and stabilising prices are part of OPEC's objectives. Therefore, the establishment of petroleum refineries in every member state is not an objective of OPEC.

A market with few dominant sellers and many buyers is known as an oligopoly. Duopoly refers to a special form of oligopoly with only two sellers. Perfect competition has many sellers and many buyers, while a monopoly has just one seller. The correct term, when the number of sellers is few but more than two, is oligopoly.

The marginal propensity to consume (MPC) and the marginal propensity to save (MPS) always sum to one. This is because any additional unit of income is either consumed or saved. Therefore, \( \text{MPC} + \text{MPS} = 1 \), reflecting the complete use of income between these two possible actions.

In a free market economy, efficiency arises because producers compete for customers. Competition forces firms to reduce waste, lower costs, improve quality, and innovate. Government regulation plays a minimal role in a free market, and the number of participants does not directly create efficiency unless competition is strong. Shareholder commitment is also not a primary driver of efficiency. Competition is the key factor that encourages producers to operate efficiently.

The acceleration principle explains that changes in income lead to larger changes in investment. Firms increase investment when demand and income rise because they need additional capital to expand production. This means income influences investment rather than the other way around. Therefore, investment is induced by changes in income, making income the cause and investment the effect.

In developing economies, a large proportion of national income comes from wages and salaries because the labour force is usually large and agriculture and informal sectors dominate production. Profit and rent are generally smaller portions due to less industrialisation. Therefore, wages and salaries form the largest single component of national income in developing countries.

Money is held for three classical motives: transaction, speculative, and precautionary. The precautionary motive involves holding money for unforeseen circumstances such as emergencies or unexpected bills. Transaction motive relates to day-to-day spending, while speculative motive is based on expectations of future interest rate movements. Therefore, holding money for contingencies reflects the precautionary motive.

A firm continues to operate as long as its revenue covers variable costs. If average revenue falls below average variable cost, the firm cannot even cover essential operating expenses in the short run. In the long run, failure to cover variable costs makes production unsustainable, so shutting down becomes necessary. Therefore, the shutdown point occurs when average revenue is less than average variable cost.

Agriculture covers both crop cultivation and the rearing of animals for human use, making it the broadest and most accurate term. Forestry deals with the management of forests, monoculture refers to growing a single crop over a large area, and horticulture focuses mainly on fruits, vegetables, and ornamental plants. Therefore, the term that encompasses both cultivation and animal rearing is agriculture.