Basic Economic Concepts Practice Questions — JAMB UTME — Page 2

Question 21Question →

The table below shows the distribution of weekly expenditures (in thousands of Naira, ₦'000) of a group of market traders:

Expenditure (₦'000)	Frequency ( $f$ )
10	5
20	8
30	$x$
40	4
50	3

If the mean weekly expenditure of the traders is ₦28,000 (represented as $28$ in the table units), find the value of $x$ .

Show answer & explanation

Answer: 20

Answer

The value of

x

is 20.

Using the arithmetic mean formula

\bar{x} = \frac{\sum fx}{\sum f}

, we set up the equation with the given mean of 28:

\frac{520 + 30x}{20 + x} = 28

. Cross-multiplying gives

520 + 30x = 560 + 28x

. Rearranging terms yields

2x = 40

, which gives

x = 20

.

Step-by-Step Solution

1

Sum all given frequencies including the unknown

x

to get the total frequency expression.

\sum f = 20 + x

The total number of observations is needed for the denominator of the arithmetic mean formula.

2

Multiply each expenditure value by its respective frequency and aggregate the terms.

\sum f x = 520 + 30x

The total weighted value of all expenditures is needed for the numerator of the mean formula.

3

Substitute the known mean value of 28 into the equation

\bar{x} = \frac{\sum f x}{\sum f}

and solve for

x

.

x = 20

Isolating

x

yields the exact missing frequency.

Key Concept

Finding a missing frequency from a frequency distribution given the arithmetic mean.

Question 22Question →

The table below presents the monthly Production Possibility Schedule for a manufacturing firm in Aba producing Leather Shoes and Leather Bags using a fixed quantity of labor and raw materials:

Production Combination	Leather Shoes (hundreds of pairs)	Leather Bags (hundreds of units)
P	$0$	$150$
Q	$20$	$140$
R	$40$	$120$
S	$60$	$90$
T	$80$	$50$
U	$100$	$0$

If the plant is currently producing at Combination Q ( $20$ hundred pairs of shoes and $140$ hundred bags) and reallocates its resources to increase shoe production to Combination T ( $80$ hundred pairs of shoes), what is the average opportunity cost of producing ONE additional pair of Leather Shoes over this range? Express your answer in units of Leather Bags foregone.

Show answer & explanation

Answer: 1.5

Answer

1.5 bags foregone per additional pair of shoes

Opportunity cost measures the sacrifice of one good required to obtain an additional quantity of another good. Moving from Combination Q to Combination T increases shoe production by 60 hundred pairs (from 20 to 80 hundred pairs) while reducing bag production by 90 hundred units (from 140 to 50 hundred units). The opportunity cost per additional pair of shoes is calculated as 90 hundred bags divided by 60 hundred pairs of shoes, yielding exactly 1.5 bags foregone per pair of shoes.

Step-by-Step Solution

1

Determine initial production at Combination Q

Shoes =

20

hundred pairs (

2,000

pairs), Bags =

140

hundred units (

14,000

bags)

Establishes the baseline output before resource reallocation.

2

Determine final production at Combination T

Shoes =

80

hundred pairs (

8,000

pairs), Bags =

50

hundred units (

5,000

bags)

Identifies the new production level after expanding shoe production.

3

Calculate the net gain in shoe production and net loss in bag production

Additional shoes =

80 - 20 = 60

hundred pairs; Bags foregone =

140 - 50 = 90

hundred bags

Opportunity cost evaluates the sacrifice required to gain additional units of the preferred good.

4

Calculate the unit opportunity cost

Opportunity cost per shoe pair =

\frac{90\text{ hundred bags}}{60\text{ hundred pairs}} = 1.5\text{ bags}

Divides the total quantity of the sacrificed good by the total gain of the produced good to get per-unit real cost.

Key Concept

Opportunity Cost / Marginal Rate of Transformation

Question 23Question →

A manufacturing enterprise operating in a developing economy is determining whether to utilize fully automated assembly lines or hire additional manual laborers to manufacture agricultural tools. Which basic economic problem of society is this enterprise primarily addressing?

How to produce

What goods and services to produce

For whom to produce

How to minimize explicit financial outlay

Show answer & explanation

Answer: How to produce

Answer

How to produce

The correct answer identifies the problem of 'How to produce', which deals with determining the specific combination of resources (labor vs. capital) and technological methods used in the production process.

Step-by-Step Solution

1

Analyze the decision facing the enterprise in the scenario.

The firm is choosing between two production techniques: capital-intensive machinery versus labor-intensive manual work.

Identifying the nature of the economic choice is necessary to categorize the underlying fundamental economic problem.

2

Relate the input combination choice to the fundamental economic questions.

The choice of input proportions and technical methods of production corresponds directly to the problem of technique selection.

Economic theory defines 'How to produce' as the decision regarding which combination of factors of production (capital vs. labor) to employ.

3

Select the option representing factor combination.

The firm is resolving 'How to produce'.

This directly matches the technical decision highlighted in the scenario.

Key Concept

Basic Economic Problems of Society - How to produce

Estimated Time:1m 0s

Question 24Question →

Match each type of economic system listed on the left with its corresponding primary mechanism of resource allocation on the right.

Click a left item, then click its matching right item

Show answer & explanation

Answer

Free Market Economy matches with resource allocation guided by consumer sovereignty, private ownership, and the price mechanism; Command Economy matches with resource allocation controlled entirely by a central planning authority and public ownership; Mixed Economy matches with resource allocation featuring the co-existence of private market forces and state intervention; Traditional Economy matches with resource allocation determined primarily by customs, habits, and ancestral traditions.

Each economic system is characterized by how it addresses the fundamental economic problems of what, how, and for whom to produce. Capitalist market systems rely on decentralized price signals, command economies use state planning directives, mixed economies integrate both market and government actions, and traditional economies depend on inherited social customs.

Step-by-Step Solution

1

Identify the defining allocation mechanism for Free Market Economy.

Free market systems rely on private property and price signals resulting from market forces.

Consumer sovereignty and price mechanisms drive market decisions in capitalism.

2

Identify the defining allocation mechanism for Command Economy.

Command systems are centrally planned by state directives rather than price indicators.

Socialism places resource control under government authority.

3

Identify the defining allocation mechanism for Mixed Economy.

Mixed economies balance market operations with government regulatory and public service roles.

It combines aspects of both private enterprise and state intervention.

4

Identify the defining allocation mechanism for Traditional Economy.

Traditional economies answer production questions through historical custom and social roles.

Heritage and non-market customs govern economic activity in traditional systems.

Key Concept

Types of Economic Systems and their Resource Allocation Mechanisms

Question 25Question →

A software engineer in Lagos currently earns a salary of $₦500,000$ per month. She is considering quitting her job for one year to pursue one of two mutually exclusive opportunities:

- Opportunity X: Establish an independent tech startup requiring an initial capital investment of $₦3,000,000$ , which she must withdraw from her fixed deposit account currently yielding $12\%$ per annum interest. The startup is expected to generate $₦15,000,000$ in total revenue over the year, with total operating expenses (office rent, server infrastructure, and wages) amounting to $₦6,500,000$ .
- Opportunity Y: Work as an overseas remote contractor earning a net salary of $₦900,000$ per month with zero capital investment required.

Calculate, in Naira ( $₦$ ), the economic opportunity cost of choosing Opportunity X for the year.

Show answer & explanation

Answer: 11160000

Answer

The economic opportunity cost of choosing Opportunity X for the year is ₦11,160,000.

The economic opportunity cost of an action is defined as the total benefit of the next best alternative foregone. By choosing Opportunity X, the software engineer gives up Opportunity Y (worth ₦900,000 × 12 = ₦10,800,000) as well as the interest her ₦3,000,000 capital would have earned in the fixed deposit account (12% of ₦3,000,000 = ₦360,000). Together, the total sacrificed value of this highest-ranked foregone package equals ₦10,800,000 + ₦360,000 = ₦11,160,000.

Step-by-Step Solution

1

Calculate the annual income of all alternative employment options available during the year.

Current Job annual income = ₦500,000 × 12 = ₦6,000,000. Opportunity Y annual income = ₦900,000 × 12 = ₦10,800,000.

Opportunity cost evaluates the sacrifice made regarding alternative choices foregone.

2

Calculate the foregone interest earned if funds remain in the fixed deposit account.

Foregone annual interest = 12% of ₦3,000,000 = ₦360,000.

Selecting Opportunity Y or retaining her current job would leave the ₦3,000,000 intact in savings, earning 12% interest.

3

Determine the net value of the single best foregone alternative option.

Value of Next Best Alternative (Opportunity Y + Savings Interest) = ₦10,800,000 + ₦360,000 = ₦11,160,000.

Economic opportunity cost is defined as the total value of the highest-valued alternative option foregone.

Key Concept

Opportunity Cost as the Next Best Alternative Foregone

Estimated Time:3m 0s

Question 26Question →

An agricultural officer recorded the annual yield of palm oil (in metric tons) produced by a commercial farm over a 5-year period as follows: $12$ , $16$ , $18$ , $20$ , and $24$ . What is the standard deviation of the annual palm oil yield in metric tons?

Show answer & explanation

Answer: 4

Answer

The standard deviation of the palm oil yield over the 5-year period is

4\text{ metric tons}

.

The standard deviation is calculated by determining the mean yield (

18\text{ metric tons}

), taking the sum of the squared deviations from the mean (

80

), dividing by the total number of observations (

5

) to obtain a variance of

16

, and then taking the square root of

16

, which equals

4\text{ metric tons}

.

Step-by-Step Solution

1

Calculate the arithmetic mean (

\mu

) of the data set.

\mu = \frac{12 + 16 + 18 + 20 + 24}{5} = 18\text{ metric tons}

.

The mean is required to determine the deviations of individual data values.

2

Determine the squared deviations from the mean for each yield value.

(12-18)^2 = 36

,

(16-18)^2 = 4

,

(18-18)^2 = 0

,

(20-18)^2 = 4

, and

(24-18)^2 = 36

. The sum of these squared deviations is

80

.

Squaring deviations eliminates negative values so that dispersion around the mean can be aggregated accurately.

3

Compute the variance (

\sigma^2

) of the dataset.

\sigma^2 = \frac{80}{5} = 16

.

Variance represents the average of the squared deviations from the mean.

4

Compute the standard deviation (

\sigma

) by taking the square root of the variance.

\sigma = \sqrt{16} = 4\text{ metric tons}

.

Standard deviation measures dispersion in the original units of the data.

Key Concept

Standard Deviation of Ungrouped Data

Question 27Question →

The table below shows the distribution of weekly cassava output (in bags) produced by a sample of farmers in a agricultural cooperative:

Output (Bags)	Number of Farmers ( $f$ )
$10 - 14$	$2$
$15 - 19$	$5$
$20 - 24$	$8$
$25 - 29$	$5$

What is the mean weekly output of cassava per farmer?

19.0\text{ bags}

19.5\text{ bags}

21.0\text{ bags}

23.0\text{ bags}

Show answer & explanation

Answer: $21.0\text{ bags}$

Answer

The mean weekly output of cassava per farmer is

21.0\text{ bags}

.

The correct output of

21.0\text{ bags}

is derived by determining the midpoint of each class interval (

12, 17, 22, 27

), multiplying each by its respective number of farmers, summing these products to get

420\text{ bags}

, and dividing by the total number of farmers (

20

).

Step-by-Step Solution

1

Calculate the class midpoint (

x

) for each class interval.

Midpoints are:

\frac{10+14}{2} = 12

,

\frac{15+19}{2} = 17

,

\frac{20+24}{2} = 22

, and

\frac{25+29}{2} = 27

.

For grouped data, the midpoint represents the central value of each class interval.

2

Multiply each midpoint (

x

) by its corresponding frequency (

f

) to obtain

f \times x

.

2 \times 12 = 24

,

5 \times 17 = 85

,

8 \times 22 = 176

,

5 \times 27 = 135

.

This determines the estimated total output within each interval.

3

Calculate the sum of frequencies (

\sum f

) and the sum of products (

\sum fx

).

\sum f = 2 + 5 + 8 + 5 = 20

;

\sum fx = 24 + 85 + 176 + 135 = 420

.

These totals are needed to apply the grouped mean formula.

4

Divide

\sum fx

by

\sum f

to compute the arithmetic mean (

\bar{x}

).

\bar{x} = \frac{420}{20} = 21.0\text{ bags}

.

The formula for the mean of grouped frequency distribution is

\bar{x} = \frac{\sum fx}{\sum f}

.

Key Concept

Arithmetic Mean of Grouped Data

Estimated Time:1m 30s

Question 28Question →

A cocoa farming cooperative in Ondo State receives an agricultural development grant of $\text{₦}5,000,000$ . The cooperative board evaluates two mutually exclusive projects: Option 1 is installing an automated processing plant estimated to generate $\text{₦}7,500,000$ in additional future revenue; Option 2 is constructing an irrigation canal system estimated to generate $\text{₦}6,800,000$ in additional future revenue. According to Lionel Robbins' definition of economics regarding scarcity and alternative uses, what constitutes the true economic cost of choosing to construct the irrigation canal system?

The

\text{₦}5,000,000

monetary outlay required to purchase materials and construct the irrigation canal system.

The foregone

\text{₦}7,500,000

additional revenue from the automated processing plant, representing the real alternative sacrifice made.

The net financial gain of

\text{₦}1,800,000

expected from the irrigation canal system after accounting for the initial grant.

An inward shift of the cooperative's production possibility curve resulting from funding allocation.

Show answer & explanation

Answer: The foregone $\text{₦}7,500,000$ additional revenue from the automated processing plant, representing the real alternative sacrifice made.

Answer

The foregone

\text{₦}7,500,000

additional revenue from the automated processing plant, which represents the next best alternative foregone (opportunity cost) when opting to construct the irrigation canal system.

Under Lord Lionel Robbins' formal definition, economics examines how rational agents allocate scarce means among competing ends. When two options are mutually exclusive, the true economic cost (opportunity cost) of selecting one project is the value of the next best alternative sacrificed. Choosing the irrigation canal means giving up the automated processing plant, which would have generated

\text{₦}7,500,000

in additional revenue.

Step-by-Step Solution

1

Analyze the core premise of economics according to Lionel Robbins.

Robbins defines economics as the science which studies human behavior as a relationship between ends and scarce means which have alternative uses.

Economic evaluation requires measuring decisions in terms of real alternative sacrifices rather than mere financial expenditures.

2

Identify the mutually exclusive options and their respective returns.

Option 1 yields

\text{₦}7,500,000

; Option 2 yields

\text{₦}6,800,000

. Selecting Option 2 means Option 1 must be sacrificed.

Opportunity cost is defined strictly as the value of the next best alternative foregone.

3

Differentiate opportunity cost from money cost and accounting profit.

The money cost is

\text{₦}5,000,000

, but the real economic opportunity cost of choosing the irrigation canal is the sacrificed return of

\text{₦}7,500,000

from the automated processing plant.

True economic evaluation measures scarcity by comparing sacrificed returns from alternative uses of resources.

Key Concept

Opportunity Cost and the Scope of Economics

Estimated Time:2m 0s

Question 29Question →

The table below shows the frequency distribution of prices (in ₦) for tubers of yam sold in an agricultural market:

Price (₦)	Frequency ( $f$ )
10 – 14	3
15 – 19	5
20 – 24	7
25 – 29	3
30 – 34	2

What is the mean price of a tuber of yam?

₦19

₦21

₦22

��23

Show answer & explanation

Answer: ₦21

Answer

The mean price of a tuber of yam is ₦21.

The mean price is calculated by multiplying each class interval midpoint by its frequency, adding these products together to obtain 420, and dividing by the total number of observations (20), giving ₦21.

Step-by-Step Solution

1

Determine the midpoint (

x

) for each price class interval.

Class 10–14:

x = 12

; Class 15–19:

x = 17

; Class 20–24:

x = 22

; Class 25–29:

x = 27

; Class 30–34:

x = 32

.

Midpoints represent the central value of grouped class intervals.

2

Multiply each midpoint (

x

) by its corresponding frequency (

f

) to find

fx

, and sum all products (

\sum fx

).

\sum fx = (12 \times 3) + (17 \times 5) + (22 \times 7) + (27 \times 3) + (32 \times 2) = 36 + 85 + 154 + 81 + 64 = 420

.

Weighting midpoints by frequency gives the total aggregate value.

3

Sum the total frequencies (

\sum f

) and calculate the mean (

\bar{x} = \frac{\sum fx}{\sum f}

).

\sum f = 3 + 5 + 7 + 3 + 2 = 20

. Therefore,

\bar{x} = \frac{420}{20} = 21

.

The grouped mean is total aggregate value divided by total number of items.

Key Concept

Calculation of the Arithmetic Mean from Grouped Frequency Data

Question 30Question →

The table below presents the frequency distribution of monthly sales revenue (in $₦\text{'000}$ ) recorded by a sample of $50$ retail traders in a urban commercial center:

Sales Revenue ( $₦\text{'000}$ )	Number of Traders ( $f$ )
10 �� 19	8
20 – 29	12
30 – 39	16
40 – 49	10
50 – 59	4

Calculate the estimated median sales revenue (in $₦\text{'000}$ ) for the traders.

Show answer & explanation

Answer: 32.63

Answer

The estimated median sales revenue is 32.63 thousand Naira (

₦32,625

).

To calculate the median of grouped data, determine the total frequency (

N = 50

) and the median position (

\frac{N}{2} = 25

). The cumulative frequency distribution shows that the

25\text{th}

observation falls within the

30\text{ – }39

interval. Using the lower class boundary

L = 29.5

, cumulative frequency of prior classes

F = 20

, median class frequency

f = 16

, and class length

c = 10

, the formula

\text{Median} = L + \left(\frac{\frac{N}{2} - F}{f}\right) \times c

yields

29.5 + \left(\frac{25 - 20}{16}\right) \times 10 = 32.625

, which equals

32.63

when rounded to two decimal places.

Step-by-Step Solution

1

Calculate the total frequency and median position

Total frequency

N = 50

, median rank =

\frac{N}{2} = 25

The median of a frequency distribution is located at the middle position

\frac{N}{2}

.

2

Determine cumulative frequencies and identify the median class

Cumulative frequencies are

8

,

20

,

36

,

46

, and

50

. The median class is 30 – 39

Since

20

items fall below

30

, the

25\text{th}

item lies within the

30\text{ – }39

class interval.

3

Extract interpolation parameters for the median class

Lower class boundary

L = 29.5

, preceding cumulative frequency

F = 20

, class frequency

f = 16

, class interval width

c = 10

The continuous class boundary between

29

and

30

is

29.5

, and interval width is

19.5 - 9.5 = 10

.

4

Compute the linear interpolation for grouped median

\text{Median} = 29.5 + \left(\frac{25 - 20}{16}\right) \times 10 = 29.5 + 3.125 = 32.625 \approx 32.63

Applying the standard grouped data median formula yields the precise interpolated value.

Key Concept

Grouped Data Median Calculation

Question 31Question →

An economic researcher in Port Harcourt observes that an upward adjustment in cold-room electricity tariffs increases the operational preservation cost per unit of fish, causing individual fish vendors to raise their retail prices to maintain profit margins. The researcher subsequently submits a report asserting that the Rivers State Government ought to provide targeted electricity subsidies to agricultural preservation vendors to safeguard household nutrition. Which of the following statements correctly categorizes the methodological nature and economic scope of the researcher's observation and assertion?

The observation falls under positive microeconomics, while the assertion represents a normative economic judgment.

The observation falls under normative macroeconomics, while the assertion represents a positive microeconomic statement.

Both the observation and the assertion belong exclusively to macroeconomics because state government tariff policies affect aggregate market price levels.

Both the observation and the assertion are positive statements within microeconomics because they analyze cause-and-effect relationships in a single commodity market.

Show answer & explanation

Answer: The observation falls under positive microeconomics, while the assertion represents a normative economic judgment.

Answer

The observation is a positive microeconomic statement because it objectively analyzes cause-and-effect relationships regarding individual firm costs and prices, whereas the policy proposal is a normative statement because it incorporates value judgments regarding what government policy ought to be.

The observation analyzes cause-and-effect relationships between production costs (electricity tariffs) and individual product prices (retail fish vendor prices), making it a positive microeconomic statement. In contrast, the report's assertion that the government 'ought to' grant subsidies reflects a value judgment on desirable public policy, placing it squarely in normative economics.

Step-by-Step Solution

1

Distinguish between Microeconomics and Macroeconomics in the context

Analyzing individual fish vendors, single commodity pricing, and specific cold-room electricity tariffs examines individual economic units, which strictly defines the scope of microeconomics.

Microeconomics focuses on individual consumers, firms, and specific product markets rather than aggregate economy-wide indicators.

2

Distinguish between Positive Economics and Normative Economics in the statements

The observation ('tariff increases raise preservation cost leading vendors to raise prices') is verifiable objective analysis (positive economics). The assertion ('government ought to provide targeted subsidies') expresses a value-laden policy recommendation (normative economics).

Positive economics deals with objective facts and empirical cause-and-effect ('what is'), while normative economics involves ethics, policy preferences, and value judgments ('what ought to be').

3

Synthesize the scope and methodological nature of both components

The observation is positive microeconomics, and the recommendation is a normative judgment.

Combining the scope (microeconomic level of individual market units) and methodology (objective analysis vs. prescriptive policy judgment) yields the exact classification.

Key Concept

Scope and Methodology of Economics (Micro vs. Macro, Positive vs. Normative)

Question 32Question →

A sample survey of 20 small-scale enterprises in an industrial cluster recorded their daily profit (in thousands of Naira, $\text{₦'000}$ ) with the following frequency distribution:

Daily Profit ( $x$ in $\text{₦'000}$ )	Number of Enterprises ( $f$ )
10	3
15	5
20	7
25	3
30	2

What is the mean daily profit of these enterprises in thousands of Naira?

Show answer & explanation

Answer: 19

Answer

The mean daily profit of the enterprises is 19 thousand Naira.

The arithmetic mean for a frequency distribution is calculated using

\bar{x} = \frac{\sum fx}{\sum f}

. Multiplying each daily profit by its frequency yields a total sum of

380

. Dividing by the total frequency of

20

enterprises gives a mean daily profit of

19

thousand Naira.

Step-by-Step Solution

1

Multiply each profit level by its corresponding frequency to get the total profit contribution per group

f \cdot x

values are 30, 75, 140, 75, and 60

Each profit value must be weighted by how many enterprises earned that amount

2

Sum all weighted profit values to find total combined profit

\sum fx = 380

The sum of

f \cdot x

gives the grand total daily profit for all surveyed enterprises

3

Sum all frequencies to obtain total count of enterprises

\sum f = 20

The mean requires dividing total profit by total sample size

4

Divide total weighted profit by total number of enterprises

\bar{x} = \frac{380}{20} = 19

Formula for discrete grouped mean is

\bar{x} = \frac{\sum fx}{\sum f}

Key Concept

Calculation of Mean from a Discrete Frequency Distribution

Question 33Question →

In a mixed economic system where private firms determine consumer goods production based on profit motives while the government controls social infrastructure, the state suddenly replaces the market price mechanism for basic food items with fixed administrative prices below market equilibrium. Which of the following is the most direct economic consequence of this intervention on the private sector's allocation of resources?

Price signals become distorted, leading to inefficient resource allocation and artificial market shortages.

Private firms automatically increase output to meet total consumer demand because marginal costs are reduced by government regulation.

The public sector automatically absorbs ownership of private farms, transforming the country into a pure command economy.

The basic economic problem of scarcity is resolved because official administrative prices guarantee equal consumer access.

Show answer & explanation

Answer: Price signals become distorted, leading to inefficient resource allocation and artificial market shortages.

Answer

Price signals become distorted, leading to inefficient resource allocation and artificial market shortages.

The correct answer highlights that market price controls distort the essential signaling role of prices in a mixed economy. When the government fixes prices below equilibrium, private producers facing reduced profit margins cut back production or divert capital to unpriced goods, resulting in artificial shortages and misallocated productive resources.

Step-by-Step Solution

1

Analyze the role of the price mechanism in the private sector of a mixed economic system.

In a mixed economy, the private sector relies on market prices to signal consumer demand, resource scarcity, and profitability.

Prices serve as the key coordinating mechanism guiding private producers on what, how, and for whom to produce.

2

Evaluate the impact of imposing fixed administrative prices below market equilibrium.

Artificially low prices suppress profit margins and misrepresent true market demand and scarcity.

When market price signals are overridden by government price ceilings, producers lack financial incentives to maintain production levels.

3

Determine the resource allocation outcome for private firms.

Private producers reduce supply or divert resources to unregulated goods, creating excess demand and artificial shortages.

Resource allocation becomes inefficient because production no longer aligns with consumer willingness to pay or producer costs.

Key Concept

Price Mechanism and State Intervention in Mixed Economies

Estimated Time:2m 0s

Question 34Question →

When a furniture manufacturing enterprise decides whether to assemble tables using skilled hand carpenters or fully automated woodworking machinery, which basic economic problem of society is it addressing?

How to produce

What to produce

For whom to produce

Where to produce

Show answer & explanation

Answer: How to produce

Answer

The economic problem addressed by choosing between manual labor and automated machinery is 'How to produce'.

The decision to use manual labor versus automated machinery is a choice between production methods (labor-intensive vs. capital-intensive technology). In economics, deciding the combination of resources and technology to manufacture goods answers the central question of 'how to produce'.

Step-by-Step Solution

1

Analyze the decision described in the scenario

The firm is choosing between using human labor (hand carpenters) or capital equipment (automated machinery).

Identifying the nature of the choice helps categorize it under fundamental economic questions.

2

Map the technical choice to the corresponding basic economic problem

Selecting the combination of inputs and production techniques (labor-intensive vs. capital-intensive) answers the question of 'how to produce'.

'How to produce' specifically governs the methods, techniques, and factor inputs utilized in output generation.

Key Concept

Basic Economic Problems of Society: How to Produce

Estimated Time:45s

Question 35Question →

An agricultural economist recorded the prices per bag of fertilizer (in thousands of Naira) across five regional markets as $₦12$ , $₦15$ , $₦18$ , $₦21$ , and $₦24$ . What is the mean deviation of the fertilizer prices (in thousands of Naira)?

Show answer & explanation

Answer: 3.6

Answer

The mean deviation of the fertilizer prices is

3.6

thousand Naira.

The mean deviation is

3.6

because the arithmetic mean of the prices is

18

. The absolute differences of the data values from

18

are

6

,

3

,

0

,

3

, and

6

. The sum of these absolute deviations is

18

, and dividing by

5

observations yields

3.6

.

Step-by-Step Solution

1

Calculate the arithmetic mean (

\bar{x}

) of the data set

\bar{x} = \frac{12 + 15 + 18 + 21 + 24}{5} = \frac{90}{5} = 18

The arithmetic mean provides the central reference point required to evaluate individual deviations.

2

Determine the absolute deviation

|x - \bar{x}|

for each value

|12 - 18| = 6

,

|15 - 18| = 3

,

|18 - 18| = 0

,

|21 - 18| = 3

,

|24 - 18| = 6

Mean deviation measures dispersion using absolute differences to prevent positive and negative deviations from canceling out.

3

Compute the average of the absolute deviations

\text{Mean Deviation} = \frac{6 + 3 + 0 + 3 + 6}{5} = \frac{18}{5} = 3.6

Dividing the sum of absolute deviations by the total number of observations gives the mean deviation.

Key Concept

Mean Deviation

Question 36Question →

A farmer operating on a fixed piece of farmland can cultivate either yam or cassava according to the following production schedule:

Production Option	Yam (bags)	Cassava (bags)
P	100	0
Q	75	20
R	45	35
S	0	45

If the farmer changes production from Option Q to Option R, what is the opportunity cost of producing the additional 15 bags of cassava, expressed in bags of yam foregone?

Show answer & explanation

Answer: 30

Answer

The opportunity cost of producing 15 additional bags of cassava when moving from Option Q to Option R is 30 bags of yam foregone.

Moving production from Option Q to Option R increases cassava production by 15 bags (from 20 to 35 bags), but requires reducing yam production from 75 bags to 45 bags. The reduction of 30 bags of yam represents the real cost or opportunity cost of producing the additional cassava.

Step-by-Step Solution

1

Find the quantity of yam produced under Option Q.

Yam output at Option Q = 75 bags.

Option Q yields 75 bags of yam and 20 bags of cassava.

2

Find the quantity of yam produced under Option R.

Yam output at Option R = 45 bags.

Option R yields 45 bags of yam and 35 bags of cassava.

3

Subtract the yam output of Option R from Option Q to find the foregone alternative.

75 - 45 = 30 bags of yam.

Opportunity cost measures the quantity of the sacrificed alternative (yam) needed to gain more of another commodity (cassava).

Key Concept

Opportunity Cost in Production Schedules

Question 37Question →

A local government council has a fixed capital budget of ₦50 million and must choose between constructing a township road network and rebuilding a community healthcare center. If the council resolves to rebuild the healthcare center, what is the real cost of this economic decision?

The township road network that was foregone

The financial outlay of ₦50 million spent on the healthcare center

An outward shift of the local government's production possibility curve

The total satisfaction gained by community members from improved healthcare

Show answer & explanation

Answer: The township road network that was foregone

Answer

The township road network that was foregone

In economic analysis, real cost (or opportunity cost) refers to the real goods or services given up in order to obtain something else. By selecting the healthcare center, the local government sacrificed the opportunity to construct the township road network, making the foregone road network the real cost of the decision.

Step-by-Step Solution

1

Identify the scarce resource and competing alternatives

Resource is ₦50 million budget; alternatives are township road network vs community healthcare center.

Scarcity of resources necessitates making a choice between alternative uses.

2

Distinguish between money cost and real cost

Money cost is ₦50 million, while real cost is the sacrificed alternative (the township road network).

In economics, real cost is expressed in terms of the next best alternative foregone, not monetary expenditure.

Key Concept

Money Cost versus Real Cost

Question 38Question →

A manufacturing enterprise operates under a strict budget constraint of $\text{\mathbb{N}}20\text{ million}$ and must choose among three mutually exclusive capital projects: Project X yields an expected net profit of $\text{\mathbb{N}}35\text{ million}$ , Project Y yields an expected net profit of $\text{\mathbb{N}}28\text{ million}$ , and Project Z yields an expected net profit of $\text{\mathbb{N}}22\text{ million}$ . If the firm decides to execute Project X, which statement accurately articulates the fundamental economic relationship between scarcity, choice, and opportunity cost in this scenario?

Scarcity of capital forces the firm to make a choice, resulting in an opportunity cost equal to the

\text{\mathbb{N}}28\text{ million}

net profit foregone from Project Y.

Scarcity of capital forces the firm to make a choice, resulting in an opportunity cost equal to the

\text{\mathbb{N}}20\text{ million}

financial outlay required to execute Project X.

Scarcity of capital forces the firm to make a choice, giving rise to an opportunity cost of

\text{\mathbb{N}}50\text{ million}

, which represents the combined net profit of Projects Y and Z.

Selecting Project X shifts the firm's production possibility curve outward, eliminating the opportunity cost associated with unselected projects.

Show answer & explanation

Answer: Scarcity of capital forces the firm to make a choice, resulting in an opportunity cost equal to the $\text{\mathbb{N}}28\text{ million}$ net profit foregone from Project Y.

Answer

Scarcity of capital forces the firm to make a choice, resulting in an opportunity cost equal to the

\text{\mathbb{N}}28\text{ million}

net profit foregone from Project Y.

Because human wants exceed limited resources (scarcity), economic agents are compelled to make a choice based on a scale of preference. When Project X is chosen, the firm sacrifices the benefits of all other options. In economics, opportunity cost is defined specifically as the value of the next best alternative sacrificed—in this case, Project Y, which yields

\text{\mathbb{N}}28\text{ million}

.

Step-by-Step Solution

1

Identify the resource constraint and available options

The firm faces capital scarcity (limited to

\text{\mathbb{N}}20\text{ million}

) and must rank mutually exclusive options: Project X (

\text{\mathbb{N}}35\text{ million}

), Project Y (

\text{\mathbb{N}}28\text{ million}

), and Project Z (

\text{\mathbb{N}}22\text{ million}

).

Scarcity mandates that not all desired projects can be funded simultaneously, necessitating a scale of preference.

2

Determine the choice made and identify all foregone alternatives

The firm chooses Project X. The unselected alternatives are Project Y and Project Z.

Economic choice involves selecting the option that maximizes net benefit according to the scale of preference.

3

Calculate the opportunity cost by locating the next best alternative

The next best alternative sacrificed is Project Y, valued at

\text{\mathbb{N}}28\text{ million}

.

Opportunity cost is defined strictly as the value of the single highest-ranked alternative foregone when a choice is made under scarcity.

Key Concept

Relationship between Scarcity, Choice, Scale of Preference, and Opportunity Cost

Question 39Question →

A baker has a limited quantity of flour that can be used to produce either 20 loaves of bread or 5 cakes. If the baker decides to bake 5 cakes, what is the opportunity cost of this choice?

The 20 loaves of bread foregone

The monetary cost of buying the flour

The 5 cakes produced

The financial profit earned from selling the cakes

Show answer & explanation

Answer: The 20 loaves of bread foregone

Answer

The 20 loaves of bread foregone

Opportunity cost is defined as the real cost of a choice expressed in terms of the next best alternative foregone. Since the baker used the available flour to produce 5 cakes instead of 20 loaves of bread, the 20 loaves of bread represent the opportunity cost.

Step-by-Step Solution

1

Identify the choice made and the alternative sacrificed due to limited resources.

The baker chose to produce 5 cakes, which required all available flour, sacrificing the production of 20 loaves of bread.

Because resources are scarce, choosing one option means forfeiting the benefit of the next best alternative.

Key Concept

Opportunity Cost

Estimated Time:45s

Question 40Question →

An economy operates along a linear-segmented Production Possibility Curve with full employment of resources, producing only Solar Panels ( $S$ ) and Wind Turbines ( $T$ ). Its production schedule is given in the table below:

Combination	Solar Panels ( $S$ )	Wind Turbines ( $T$ )
P	100	0
Q	85	10
R	65	20
S	40	30
U	0	40

If the society decides to reallocate its scarce resources to increase the output of Wind Turbines from $10$ units to $30$ units, what is the average opportunity cost per unit of Wind Turbine gained, expressed in terms of Solar Panels foregone?

Show answer & explanation

Answer: 2.25

Answer

2.25

Moving from Combination Q to Combination S increases Wind Turbine production from

10

to

30

units (a gain of

20

units). Simultaneously, Solar Panel production falls from

85

to

40

units (a loss of

45

units). The opportunity cost per unit of Wind Turbine gained is the total number of Solar Panels foregone divided by the total Wind Turbines gained:

45 \div 20 = 2.25

.

Step-by-Step Solution

1

Determine initial output of Solar Panels at

10

units of Wind Turbines

At

10

Wind Turbines (Combination Q), Solar Panel production is

85

units.

Establishing the baseline production combination before reallocation.

2

Determine new output of Solar Panels at

30

units of Wind Turbines

At

30

Wind Turbines (Combination S), Solar Panel production is

40

units.

Establishing the ending production combination after reallocation.

3

Calculate total sacrificed Solar Panels and total gained Wind Turbines

Solar Panels foregone =

85 - 40 = 45

units. Wind Turbines gained =

30 - 10 = 20

units.

Opportunity cost measures the sacrifice of alternative output necessary to obtain additional units of the target output.

4

Calculate marginal/average opportunity cost per unit gained

Average Opportunity Cost =

\frac{45 \text{ Solar Panels}}{20 \text{ Wind Turbines}} = 2.25

Solar Panels per Wind Turbine.

Dividing total units foregone by total units gained provides the unit opportunity cost.

Key Concept

Marginal Opportunity Cost along a Production Possibility Curve

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