Quiz 6 of 14

2018 Economics WAEC Theory Past Questions

Responses

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Question 1

The table below shows the composition of exports and imports in a hypothetical country. Use the information in the table to answer the questions that follow.

ExportsAmount $ImportsAmount $
Crude oil120,000,000Rice and flour140,000,000
Groundnuts40,000,000Petroleum product30,000,000
Tourism45,000,000Vehicles/accessories50,000,000
Shipping and insurance60,000,000Banking services60,000,000
Bauxite80,000,000Freight/insurance40,000,000

 

(a) Calculate the value of visible exports.

Solution

Value of visible exports = crude oil + groundnuts + bauxite

Value of visible exports = $120,00,000 + $40,000,000 + $80,000,000

Value of visible exports =  $ 240,000,000  

 

(b) Calculate the balance of trade for the country

Solution

Balance of trade = visible exports – visible imports

Value of visible exports = Rice and flour   + Petroleum products  + Vehicles and accessories

Value of visible exports = $140,00,000 + $80,000,000  + $50,000,000

Value of visible exports =  $ 270,000,000

Visible exports = $240,000,000

Balance of trade = $240,000,000 – $270,000,000 = -$30,000,000  

 

(c) List the items of invisible exports and imports.

Answer

 List of items of invisible exports and imports

Invisible ExportsInvisible Imports
TourismBanking services
Shipping and InsuranceFreight and Insurance

 

(d) Calculate the current account balance of the country.

Solution

Current account balance = Value of total exports – Value of total imports

Visible of Exports$
Crude Oil120,000,000
Groundnut40,000,000
Tourism45,000,000
Shipping & Insurance60,000,000
Bauxite80,000,000
Total345,000,000

 

Value of Imports$
Rise & Flour140,000,000
Petroleum products80,000,000
Vehicle & accessories50,000,000
Freight & insurance60,000,000
Bauxite40,000,000
Total370,000,000

  Current account balance = $345,000,000 – $370,000,000 = -$25,000,000  

 

(e) Is the country developed or developing? Give one reason for your answer.

Answer

(i) Its exports are made up only of unprocessed primary products

(ii) Its imports are made up mainly of finished products

(iii) Its balance of trade is unfavourable

(iv) Its balance of payment is a deficit

Question 2

The cost and output schedule of a firm are shown in the table below.

Output (kg)015356085
Variable cost ($)030557590
Total cost ($)15457090105
Total revenue ($)03070120170

(a) Using the data in the table, at each level of output, calculate the firm’s

 

(i) Marginal revenue

Solution

Marginal revenue = \( \frac{\Delta TR}{\Delta Q (Output)} \)

MR15  = \( \frac{30 \: – \: 0}{15 \: – \: 0} \)

= \( \frac{30}{15} \) = $2

MR35  = \( \frac{70 \: – \: 30}{35 \: – \: 15} \)

= \( \frac{40}{20} \) = $2

MR60  = \( \frac{120 \: – \: 70}{60 \: – \: 35} \)

= \( \frac{50}{25} \) = $2

MR85  = \( \frac{170 \: – \: 120}{85 \: – \: 60} \)

= \( \frac{50}{25} \)

= $2

(ii) Marginal Cost

Solution

Marginal Cost = \( \frac{\Delta TC}{\Delta Q (Output)} \)

MC15  = \( \frac{45 \: – \: 15}{15 \: – \: 0} \)

= \( \frac{30}{15} \) = $2

MC35  = \( \frac{70 \: – \:45}{35 \: – \: 15} \)

= \( \frac{25}{20} \) = $1.25

MC60  = \( \frac{90 \: – \: 70}{60 \: – \: 35} \)

= \( \frac{20}{25} \)

= $0.80

MC85  = \( \frac{105 \: – \: 90}{85 \: – \: 60} \)

= \( \frac{15}{25} \)

= $0.60  

Output(kg)VC($) TC($) TR($)MR($)MC($)
      0      0      15       0      –       –
      15      30      45      30      2       2
      35      55      70      70      2      1.25
      60      75      90      120      2      0.80
      85      90      105     170      2      0.60

 

(b) At what output level did the firm:

(i) break even

Answer

The firm’s break even point is

B.E.P = TR – TC

= $70 – $70 = $0

Therefore, the firm’s break-even point is at output level 35.  

(ii) Make the highest profit

Answer

The firm makes the highest at profit) = TR – TC

π 0  = 0 – 15 = -15

π 15  = 30 – 45 = -15

π35  =  70 – 70 = 0

π60 = 120 – 90 = $30

π 85  = 170 – 105 = $65

The highest output of the firm is made at output 85

(iii) attain equilibrium

Answer

The firm attains equilibrium at output level 15 where MC = MR  

 

(c) Identify the market structure in which the firm operates

Answer

The firm is operating in a perfectly competitive market

Question 3

(a) Define optimum population.

Answer

The optimum population is the best type of population which when combined with available resources and level of technology will yield the highest output per head

 

(b) In what three ways can rapid population growth slow down the rate of economic development?

Answer

(i) There will be low savings and capital formation

(ii) There may be a balance of payment problems due to an increase in import bills to meet the shortfall in local production

(iii) There is likely to be a high level of unemployment

(iv)There will be urban congestion with its attendant social vices

(v) There will be congestion on land which will affect productivity in agriculture

(vi) Per capita income will fall which result in a low standard of living

(vii) There will be a high dependency ratio

(viii) There is likely to be a high level of unemployment

(ix) There will be pressure on resources as amenities will be on the increase

 

(c) Describe any three measures that can be adopted to control rapid population growth.

Answer

Measures that can be adopted to control rapid population growth are

(i) Family planning

(ii) Discouraging early marriages

(iii) Discouraging polygamy

(iv) Encouraging a child’s education especially the girl’s education

(v) Making the cost of child-raising high by abolishing free education

(vi) Implementation of tighter immigration measures

(vii) Incentives for smaller family sizes e.g tax relief

(viii) Enactment and enforcement of laws to regulate family size

(ix) Strengthening social security systems for the aged to forestall the need for large families

Question 4

(a) What are state-owned enterprises?

Answer

State-owned enterprises are business organizations established under an act of parliament with the aim of providing essential services to the members of the public at a reduced cost

 

(b) State any three reasons for the establishment of state-owned enterprises.

Answer

Reasons for the establishment of state-owned enterprises are

(i) To protect consumers against exploitation in the lands of private investors

(ii) To provide essential services at a reduced cost. These essential services are water, electricity, security e.t.c

(iii) Huge capital involved: There are certain projects that are highly capital intensive and which the private individuals may not be able to muster the resources e.g Nigerian Railway Corporation, PHCN, NNPC e.t.c

(iv) To have better control of the economy. These are certain services that are so vital and strategic to the economy.

(v) Provision of unemployment: One of the reasons for setting up a public corporation is to generate employment for the citizens of the country

(vi) To avoid foreign domination in the economy

(vii) To minimize wastages and duplication of human and material resources

(viii) To foster rapid economic planning and development

(ix) To raise the general standard of living

 

(c) Highlight any four problems associated with state-owned enterprises

Answer

Problems of state-owned enterprises are

(i) Lack of effective and efficient control

(ii) Unnecessary bureautic delays: There is usually unnecessary and official delays

(iii) Frequent government and political interference

(iv) Lack of interest and sense of responsibility

(v) Nepotism, favouritism, and preferential treatment

(vi)  Poor remuneration and late payment of salary

(vii) A high rate of corruption and embezzlement

(viii) The problems of funds getting to the corporation

Question 5 

(a) Differentiate between unemployment and underemployment.

Answer

Unemployment occurs where people who are mentally and physically fit to work are actively searching for work but fail to get paid job

Underemployment: This occurs where a worker is not fully employed. It arises where there is underutilization of the potentials of a worker

 

(b) With one example each, explain the following

(i) Seasonal unemployment

Answer

Seasonal unemployment: This is usually caused by a trend of events resulting from changes in season. For example, farmers who stay idle after the farming season waiting for the next season

(ii) Structural unemployment

Answer

Structural unemployment: This arises as a result of a change in demand for labour because of changes in a country’s industrial structure and technique of production. For example changes in the production of agricultural products to manufacturing is most likely to cause unemployment due to the mad rush for white-collar jobs.

(iii) Frictional unemployment

Answer

Frictional unemployment: This occurs when a worker deliberately leaves his work with intention of getting a better ore in the near future or when there is a change in the industrial structure e.g a fresh graduate searching for a job

(iv) Cyclical unemployment

Answer

Cyclical unemployment: This is the type of unemployment created by fall in demand for finished products. For example, when aggregate demand falls, firms need to reduce workforce

Question 6

(a) What is commodity money?

Answer

Commodity money: This refers to all types of money that serve as both money as well as a commodity such money has dual value e.g gold, diamond, and other precious commodities

 

(b) Identify any three problems associated with trade by barter.

Answer

The problems of a trade by barter are:

(i) Double coincidence of wants: For an exchange to take place during the era of a barter system, the traders must not only have what each other wants but must also want what each other  wants

(ii) Lack of specialization: In order to satisfy ones wants, there is a need for one to be engaged in all aspects of production

(iii) Indivisibility of commodities: It was very difficult for the commodities exchanged to be divided into smaller units in order to meet one’s needs.

(iv) Lack of storability: The commodities used as a medium of exchange could not be stored for over a long period of time

(v) Lack of future trade: Barter trade failed to give any room for a credit transaction

(vi) Lack of portability: Goods used were bulky and conveyance was difficult

(vii) The problem of exchange rate makes it difficult to determine how many of one commodity was to be exchanged for another commodity

 

(c) Explain any three ways by which the advent of money has solved the problems of the barter system.

Answer

(i) Money has solved the problem of double coincidence of wants because with money you can buy all you want or sell what you want anytime

(ii) Money has solved the problem of indivisibility because it can be divided into smaller units or denomination

(iii) With money, goods and services can be bought now and payment made in the future

(iv) Money serves as a means of payment and settlement of debt

(v) Money is the means of quoting prices, valuing goods and services and in keeping financial records of all business transaction

(vi) Money can be saved for future use without suffering a physical loss of value. This makes it possible for the accumulation of wealth

Question 7

(a) What is a demand schedule?

Answer

A demand schedule is a table which shows the relationship between the price of a commodity and the quantity demanded at any point in time. It is used to illustrate the law of demand. There are two types of demand schedule namely;

Individual demand schedule and Market demand schedule

Demand schedule

 

Price (#)

 

Quantity demanded (kg)

              1               50
              2               40
              3               30
              4               20
              5               10

 

(b) State the law of demand.

Answer

The Law of demand states that the higher the price of the commodity, the lower the quantity demanded and the lower the price, the higher the quantity demanded. That is, more goods are bought at a lower price and vice versa

 

(c) Using appropriate examples, explain the following types of demand:

Answer

(i) Competitive demand

Competitive demand: This refers to the demand for two or more goods that serve as close substitutes to one another e.g butter and margarine, meat and fish e.t.c

(ii) Derived demand

Answer

Derived demand: This is the demand for a commodity not for its sale but for the sake of what it provides e.g money is demanded by the goods and services it provides. The demand for factors of production is derived demand

(iii) Joint demand

Answer

Joint demand: This is the demand for two or more commodities that are used together. For example, the demand for cars leads to the demand for petrol

(iv) Composite demand

Answer

Composite demand: This refers to the demand for a commodity which serves different purposes to different people. For example, flour may be demanded by baking bread, cake, meat pie, or any other snack

(a) What is a tax?

Answer

Tax is a compulsory levy imposed by the government on the income of individuals, corporate bodies, properties and goods and services to enable the government to generate revenue for its economic and political activities

 

(b) Describe the following rates of taxation.

(i) Progressive tax

Answer

Progressive tax: This is a method of imposing tax whereby the amount levied as taxpayer’s income increases e.g Pay As You Earn (PAYE)

(ii) Proportional tax

Answer

Proportional tax: This is a tax system where every taxpayer pays the same proportion of his her income as tax e.g poll tax

(iii) Regressive tax

Answer

Regressive tax: This is the method of imposing tax whereby the amount levied as tax increases as the taxpayer’s income decreases. That is, the poor pay more than the rich in tax.

 

(c) Explain the following principles of a good tax system:

(i) Equity

Answer

Equity: This principle says that the taxpayers should be levied according to their ability to pay tax

(ii) Convenience

Answer

Convenience: This emphasizes the appropriateness of a good tax system. It simply says that the taxpayers should be levied at such a time and place which are most appropriate for them to pay their taxes

(iii) Economy

Answer

Economy: This lays emphasis on the cost-effectiveness of any good tax system.

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