JUPEB 2024 ECONOMICS QUESTIONS
JUPEB 2024 ECONOMICS QUESTIONS BELOW
JUPEB 2024 ECONOMICS QUESTIONS
JUPEB 2024 ECONOMICS QUESTIONS
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ECONOMICS 2024 EXAM_REPLACEMENT MCQ & ESAY QUESTIONS
JUPEB 2024 ECONOMICS ANSWERS BELOW
JUPEB 2024 ECONOMICS OBJ SOLUTIONS
1. *A.Company.*
2. *A. available technology and factor prices.*
3. *B. Income theory.*
4. *C. Engel curve.*
5. *B. inverse.*
6. *A. Structural unemployment.*
7. *C. Milton Friedman.*
8. *D. 1*
9. *B. value added.*
10. *B. Private good.*
11. *A. Thomas Malthus.*
12. *D. Machinery.*
13. *B. increase in real output with attitudinal change and institutions.*
14. *C. Cape Verde.*
15. *C. Abidjan.*
16. *B. scarcity of resources.*
17. *A. determined outside the model.*
18. *D. violation of the axiom of transitivity.*
19. *C. net export.*
20. *C. I+G+X = S+T+M*
21. *C. Creditors.*
22. *B. gross domestic product.*
23. *C. over population.*
24. *C. balance of payment.*
25. *B. When a country is importing capital goods for infrastructural development.*
26. *B. sub-optimal.*
27. *B. Bread and butter.*
28. *B. increasing returns to scale.*
29. *B. N 2605m*
30. *B. ½*
31. *A. (birthrate + immigration) – (death rate+ emigration).*
32. *A. Mixed economy.*
33. *C. Efficiency wage.*
34. *A. N20,000*
35. *B. 1,616*
36. *C. 1.11*
37. *A. gross national product/population.*
38. *C. Permanent Income Hypothesis.*
39. *A. Economic growth.*
40. *D. Floating regime.*
41. *B. an infinite amount of goods can be sold at the prevailing market price.*
42. *A. capital gains tax.*
43. *C. inverse.*
44. *D. Capitalist and socialist economic systems.*
45. *B. Marginal productivity of labour will decrease.*
46. *B. 22.5*
47. *A. P= MV/Q*
48. *D. tariff.*
49. *A. It will decrease.*
50. *A. Increase in taxes.*
JUPEB ECONOMICS THEORY
NUMBER 1
1A
An externality is an economic concept that refers to the unintended consequences or side effects of an economic activity or decision that affect third parties not directly involved in the activity or decision. These effects can be either positive (beneficial) or negative (harmful).
1B
1B
A negative externality is a cost imposed on a third party from producing or consuming a good.
This is a diagram for negative production externality. This shows the divergence between the private marginal cost of production and the social marginal cost of production.
A negative externality leads to overconsumption and deadweight welfare loss.
In a free market, the output is where S (PMC) = D (PMB) at Q1.
In a free market, it is assumed that people ignore the external costs. (e.g. when driving you consider the cost of petrol, but, not the fact that congestion and pollution increases causing problems for others.)
Because of externalities such as pollution, the social cost of driving is higher than the private cost. Therefore, in a free market we get overconsumption. This makes common sense, just think of rush hour traffic – there tends to be overconsumption of driving because people ignore the costs to others.
Socially efficient level of output
The socially efficient level of output occurs where the Social marginal cost (SMC) = Social Marginal Benefit (SMB). This occurs at output Q2.
1C
To solutions to Negative Externality are:
1. Taxation (Pigouvian Tax)
– Imposes a tax on the firm equal to the marginal external cost (MEC) of production
– Internalizes the externality, making the firm account for the social cost
– Reduces production to the socially optimal level
– Generates revenue for the government to address the externality
2. Regulation
– Sets a standard or limit on the firm’s behavior to control the externality
– Directly controls the externality through laws or rules
– Ensures compliance through monitoring and enforcement
– Can be more effective when the externality is severe or immediate action is needed
ECN 001
NUMBER 2
(a)
Market failure occurs when the allocation of goods and services by a free market is not efficient, leading to a net loss in social welfare. Here are three common causes of market failure:
-Externalities occur when the actions of individuals or firms have unintended side effects on third parties that are not reflected in market prices. Externalities can be either positive or negative.
– Example,:Pollution is a negative externality where a factory emits pollutants into the air, affecting the health of nearby residents who are not compensated by the factory. Conversely, a positive externality could be a beekeeper whose bees pollinate nearby crops, benefiting farmers without the beekeeper charging them for this service.
-Public Goods:Public goods are goods that are non-excludable (cannot prevent people from using them) and non-rivalrous (one person’s use does not reduce availability to others). Because these goods are freely accessible, private markets often fail to provide them in sufficient quantities.
Example,:National defense is a public good because one person’s protection does not diminish the protection available to others, and it is difficult to exclude non-payers from benefiting. As a result, markets may underprovide national defense if left to private enterprises.
-Market Power (Monopoly):Market power arises when a single firm or a group of firms control a large portion of the market, enabling them to influence prices, output, and other market conditions. This leads to inefficiencies as the monopolist might restrict output to raise prices, maximizing profits but reducing overall social welfare.
Example,A pharmaceutical company with a patent on a life-saving drug can set excessively high prices, limiting access for those unable to afford it. This monopolistic behavior creates inefficiency by reducing consumption below the socially optimal level.
b)
1. *Government Intervention*:
– *Regulation*: Governments can impose regulations to limit negative externalities, such as setting emission standards for pollutants or mandating the installation of pollution control devices.
– *Subsidies and Taxes*: To address externalities, governments can provide subsidies for activities that generate positive externalities (like education or vaccinations) and impose taxes on activities that generate negative externalities (like carbon taxes on polluting firms).
2. *Provision of Public Goods*:
– *Direct Provision*: The government can directly provide public goods that the market fails to supply efficiently, such as national defense, public parks, or street lighting. This ensures that these goods are available to everyone without exclusion or rivalry.
3. *Anti-Monopoly Laws and Regulations*:
– *Competition Policies*: Governments can implement anti-monopoly laws to promote competition, break up monopolies, prevent collusion, and protect consumer welfare. These laws can include measures such as price caps, breaking up companies, or blocking mergers that would create excessive market power.
4. *Market-Based Solutions*:
– *Tradable Permits*: In the case of pollution, governments can create a market for pollution permits that allows companies to buy and sell the right to emit a certain amount of pollutants. This encourages firms to reduce emissions if they can do so at a lower cost and allows those with higher abatement costs to buy permits, leading to an overall reduction in pollution.
NUMBER THREE
GRAPH
ECN 002
NUMBER 4
(a)
(i)
*Revenue allocation* refers to the process by which financial resources, particularly those generated from national income, are distributed among different levels of government (such as federal, state, and local governments) or different sectors within a country. This allocation is crucial for ensuring balanced economic development, funding public services, and maintaining equitable distribution of resources across regions or states.
(a)
(ii)
The *revenue allocation principles* in Nigeria are based on several criteria to ensure equitable distribution of national revenue among the federal, state, and local governments. Key principles include:
1. *Derivation Principle*: A portion of revenue generated from natural resources, such as oil and gas, is allocated to the state where the resources are extracted. Currently, 13% of the revenue from natural resources is returned to the producing states to compensate for environmental and infrastructural challenges.
2. *Population*: Allocation is partly based on the population size of each state or region. States with larger populations receive more revenue to meet the higher demand for public services.
3. *Equality of States*: This principle ensures that all states receive a basic minimum amount to promote uniform development across the country.
4. *Landmass and Terrain*: States with larger land areas or challenging terrains receive additional revenue to cater to the higher costs of providing infrastructure and services.
5. *Internal Revenue Generation*: States that generate more internal revenue may receive a higher allocation as an incentive for self-sustainability.
(b)
(i) Relative Income Hypothesis
The *Relative Income Hypothesis*, proposed by James Duesenberry, suggests that an individual’s consumption and saving decisions are influenced by their relative income compared to others in society, rather than their absolute income. According to this theory, people tend to maintain a standard of living comparable to their peers or social reference group. For example, if a person earns more than their neighbors, they may feel wealthier and spend more, even if their absolute income remains unchanged.
#### (ii) Permanent Income Hypothesis
The *Permanent Income Hypothesis*, developed by Milton Friedman, posits that an individual’s consumption choices are determined not by their current income but by their longer-term average income (permanent income). People tend to smooth their consumption over their lifetime, spending based on their expected lifetime income rather than current fluctuations. For example, a person may not significantly increase their consumption if they receive a temporary bonus because they perceive it as a short-term increase, not a permanent change in income.
#### (iii) Life Cycle Income Hypothesis
The *Life Cycle Income Hypothesis*, formulated by Franco Modigliani and Richard Brumberg, suggests that individuals plan their consumption and savings behavior over their lifetime. They aim to maintain a stable standard of living throughout their life, saving during their working years and dis-saving during retirement. For example, a young professional may save a portion of their income to fund their retirement, expecting that their earnings will decline in the future.
(iv) Absolute Income Hypothesis
The *Absolute Income Hypothesis*, proposed by John Maynard Keynes, states that an individual’s consumption is primarily determined by their absolute income level. As income increases, consumption also increases, but at a diminishing rate. This hypothesis implies that people spend a higher proportion of their income on consumption when their income is low, and as income rises, the proportion of income spent on consumption decreases. For instance, a person earning a low salary might spend nearly all their income on basic needs, while a wealthier person may save a larger portion of their income.
ECN 003
NUMBER 6
*International trade* refers to the exchange of goods, services, and capital between countries. It allows countries to expand their markets for both goods and services that otherwise may not have been available domestically. This trade is based on countries exporting what they produce efficiently and importing what other countries can produce more effectively.
(b)
*Advantages of International Trade:*
1. *Economic Growth*: International trade can stimulate economic growth by providing access to new markets. For example, countries like China and India have seen significant economic growth through exporting goods globally.
2. *Variety of Goods and Services*: Trade allows countries to access a variety of goods and services that they cannot produce themselves. For instance, West African countries import machinery and technology from developed countries, enhancing their production capabilities.
3. *Job Creation*: Export-oriented industries can create jobs and reduce unemployment. For example, the export of textiles and garments has created numerous jobs in Bangladesh.
4. *Technology Transfer*: Exposure to international markets can lead to the transfer of technology and innovation. This is evident in how countries like South Korea have advanced by integrating technologies from more developed countries.
*Disadvantages of International Trade:*
1. *Over-Reliance on Export Markets*: Countries heavily reliant on a few exports may suffer economic instability if global demand falls. For example, many West African countries heavily dependent on cocoa exports suffer economically when global cocoa prices drop.
2. *Fluctuating Prices*: The prices of commodities, especially agricultural products, can fluctuate due to factors beyond the country’s control, such as weather conditions or global market trends.
3. *Loss of Domestic Industries*: Domestic industries may struggle to compete with cheaper or better-quality imports, leading to the decline of local businesses. For instance, Nigeria’s textile industry has suffered due to cheaper imports from Asia.
4. *Exploitation Risks*: Developing countries may face exploitation by more developed countries, which can lead to unfavorable trade terms and economic dependence.
c)
The *law of comparative advantage* states that countries should specialize in producing and exporting goods and services for which they have a lower opportunity cost compared to other nations. This specialization allows all countries to benefit from trade, even if one country is more efficient at producing all goods.
*Example:*
Consider two countries, *Country A* and *Country B*:
– Country A can produce 10 units of wine or 5 units of cloth using the same resources.
– Country B can produce 6 units of wine or 4 units of cloth using the same resources.
Even though Country A is more efficient in producing both wine and cloth, it has a comparative advantage in producing wine because it gives up fewer units of cloth to produce additional units of wine. Conversely, Country B has a comparative advantage in producing cloth because it gives up fewer units of wine to produce additional units of cloth.
By specializing based on their comparative advantages, Country A would produce wine, and Country B would produce cloth. They could then trade, and both would benefit from increased overall production and consumption.
ECN 004
NUMBER 7
(a)
FDI refers to an investment made by a company or individual in one country into business interests located in another country. It involves establishing ownership or controlling interest in a foreign company, typically through the acquisition of assets, establishment of business operations, or a merger.
(b)
Two notable foreign investors in Nigeria are:
1. *Shell*: A multinational oil and gas company heavily involved in Nigeria’s oil sector.
2. *MTN Group*: A South African multinational mobile telecommunications company operating in Nigeria’s telecommunications sector.
(c) .
*Advantages*:
1. *Job Creation*: Companies like Shell and MTN provide employment opportunities for Nigerians, helping to reduce unemployment rates.
2. *Technology Transfer*: These companies bring in new technologies and expertise, which can improve local skills and increase productivity.
*Disadvantages*:
1. *Environmental Concerns*: Companies like Shell have been criticized for environmental degradation in the Niger Delta due to oil spills and gas flaring.
2. *Profit Repatriation*: A significant portion of the profits made by foreign companies is often repatriated to their home countries, which can limit the benefits to the Nigerian economy.
(d) *Highlight four reasons why foreign investors invest in another country.*
1. *Market Access*: To access new and potentially lucrative markets.
2. *Resource Acquisition*: To gain access to natural resources or raw materials not available in their home country.
3. *Cost Reduction*: To take advantage of lower production costs, including cheaper labor and raw materials.
4. *Diversification*: To diversify their investments and reduce risk by having operations in multiple countries.
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