Basic Economic Concepts Practice Questions — JAMB UTME — Page 4

Question 61Question →

Match each basic economic problem of society on the left with its corresponding core decision or determining factor on the right.

Click a left item, then click its matching right item

Show answer & explanation

Answer

'What to produce' matches with determining the composition of goods and services; 'How to produce' matches with choosing production techniques based on factor costs; 'For whom to produce' matches with output distribution according to purchasing power or equity; 'Efficient resource allocation' matches with optimizing productive inputs to maximize welfare without waste.

Each basic economic problem directly addresses a fundamental constraint created by scarcity. 'What to produce' specifies the output basket, 'How to produce' selects factor proportions, 'For whom to produce' specifies output distribution, and 'Efficient resource allocation' ensures inputs are fully and optimally utilized without waste.

Step-by-Step Solution

1

Analyze the scope of 'What to produce'.

Identified as the choice of commodities and quantities to produce to satisfy societal wants.

Scarcity requires prioritizing certain consumer and capital goods over others.

2

Analyze the scope of 'How to produce'.

Identified as the selection of technological combinations (capital vs. labor intensity).

Producers must choose the most cost-effective method given relative factor availability.

3

Analyze the scope of 'For whom to produce'.

Identified as the distribution problem determining who gets the final goods.

Output allocation depends on purchasing power in market economies or administrative distribution in planned economies.

4

Analyze the scope of 'Efficient resource allocation'.

Identified as attaining maximum possible production efficiency without resource waste.

Economic efficiency requires operating on the production possibility frontier.

Key Concept

Basic Economic Problems of Society

Estimated Time:1m 30s

Question 62Question →

A national planning committee must decide whether to allocate a newly reclaimed tract of fertile land primarily to growing staple food crops for domestic consumption or cultivating cocoa for international export. Which fundamental economic problem of society is directly addressed by this decision?

What to produce

How to produce

For whom to produce

At what financial cost to produce

Show answer & explanation

Answer: What to produce

Answer

The decision directly addresses the fundamental problem of 'What to produce'.

The decision of allocating limited land between staple food crops and cocoa crops involves choosing which specific goods to manufacture or cultivate with scarce resources, which defines the basic economic problem of 'What to produce'.

Step-by-Step Solution

1

Identify the core decision presented in the scenario.

The committee is choosing between two alternative output types: staple food crops vs. cocoa export crops.

Because resources (land) are scarce relative to unlimited human wants, society must determine which goods to create.

2

Map the identified decision to the basic economic problems of society.

Choosing the combination and quantity of goods and services to produce corresponds to 'What to produce'.

'How to produce' deals with techniques, and 'For whom to produce' deals with distribution.

Key Concept

Basic Economic Problems of Society: What to produce

Question 63Question →

The weekly milk yields (in liters) of six dairy cows on a commercial farm were recorded as follows: $8$ , $10$ , $14$ , $16$ , $22$ , and $26$ . What is the median weekly milk yield for the cows?

14 liters

15 liters

16 liters

17 liters

Show answer & explanation

Answer: 15 liters

Answer

15 liters

For an even number of observations (

n = 6

), the median is defined as the mean of the two middle values after arranging the dataset in order. The middle values in

8, 10, 14, 16, 22, 26

are

14

and

16

. Computing their average yields

\frac{14 + 16}{2} = 15

liters.

Step-by-Step Solution

1

Arrange the data in ascending order and count the number of observations

Ordered dataset:

8, 10, 14, 16, 22, 26

. Total observations (

n

) =

6

(an even number).

The median requires ordered data. For an even number of observations, the median is the average of the two central terms.

2

Identify the two central observations

The 3rd term is

14

and the 4th term is

16

.

The central positions correspond to

\frac{n}{2} = 3\text{rd}

and

\frac{n}{2} + 1 = 4\text{th}

values.

3

Calculate the arithmetic average of the two central terms

\text{Median} = \frac{14 + 16}{2} = 15

liters.

Taking the midpoint of the two central values gives the exact median of the dataset.

Key Concept

Calculation of median for an even number of ungrouped observations

Estimated Time:45s

Question 64Question →

The monthly revenue collection (in millions of Naira, $\text{₦'million}$ ) from six regional revenue offices of a state government was recorded as $14$ , $18$ , $12$ , $x$ , $22$ , and $16$ . If the arithmetic mean of the revenue collected across all six offices is $\text{₦}17\text{ million}$ , what is the value of $x$ ?

Show answer & explanation

Answer: 20

Answer

The value of

x

is

20\text{ million Naira}

(or simply

20

).

The arithmetic mean is defined as

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

. For

n = 6

offices with a mean of

17\text{ million}

, the total sum must be

6 \times 17 = 102\text{ million}

. Summing the known values gives

14 + 18 + 12 + 22 + 16 = 82

. Subtracting

82

from

102

yields

x = 20\text{ million Naira}

.

Step-by-Step Solution

1

Calculate the sum of all observations in terms of

x

Sum

= 14 + 18 + 12 + x + 22 + 16 = 82 + x

The mean formula requires the total sum of all values divided by the number of observations.

2

Set up the mean equation using

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

\frac{82 + x}{6} = 17

$

The question specifies that the arithmetic mean across the 6 regional offices is 17.

3

Solve for the unknown value

x

82 + x = 102 \implies x = 20$

Subtracting the sum of the five known values (82) from the total required sum (102) yields the missing observation.

Key Concept

Calculation of a Missing Value from the Arithmetic Mean

Question 65Question →

The table below shows the distribution of monthly fuel consumption (in liters) for a sample of $50$ commercial transport vehicles operated by a logistics firm in Lagos:

Fuel Consumption (Liters)	Frequency ( $f$ )
10 – 19	8
20 – 29	13
30 – 39	16
40 – 49	9
50 – 59	4

Calculate the median fuel consumption (in liters) for this sample of vehicles.

Show answer & explanation

Answer: 32

Answer

The median fuel consumption for the sample of vehicles is

32

liters.

The median of a grouped frequency distribution is computed using continuous class boundaries. With

N=50

, the median position is

25

. The

30–39

class has lower boundary

29.5

, frequency

16

, preceding cumulative frequency

21

, and class interval

10

. Substituting these values gives

29.5 + \frac{25 - 21}{16} \times 10 = 32

liters.

Step-by-Step Solution

1

Calculate the total frequency (

N

) and construct cumulative frequencies (

cf

).

Total frequency

N = 8 + 13 + 16 + 9 + 4 = 50

. Cumulative frequencies are: 10–19 (

cf = 8

), 20–29 (

cf = 21

), 30–39 (

cf = 37

), 40–49 (

cf = 46

), 50–59 (

cf = 50

).

Cumulative frequencies are required to identify the class containing the median value.

2

Locate the median position and determine the median class parameters.

Position

= \frac{N}{2} = \frac{50}{2} = 25

. The

25^{\text{th}}

item falls in the

30 - 39

class. Lower boundary (

L

)

= 29.5

, preceding cumulative frequency (

cf_p

)

= 21

, median class frequency (

f_m

)

= 16

, class width (

c

)

= 10

.

The median class is the first class whose cumulative frequency meets or exceeds

N/2

.

3

Substitute the parameters into the grouped median formula.

\text{Median} = L + \left(\frac{\frac{N}{2} - cf_p}{f_m}\right) \times c = 29.5 + \left(\frac{25 - 21}{16}\right) \times 10 = 29.5 + \left(\frac{4}{16}\right) \times 10 = 29.5 + 2.5 = 32

.

Linear interpolation within the median class yields the precise median measurement.

Key Concept

Median of Grouped Data using Class Boundaries and Linear Interpolation

Estimated Time:2m 0s

Question 66Question →

In economic analysis, every society faces core economic problems due to resource scarcity. Match each economic problem description on the left with the corresponding core economic question or objective on the right.

Click a left item, then click its matching right item

Show answer & explanation

Answer

Determining commodity types and quantities matches 'What to produce'; selecting factor proportions and technology matches 'How to produce'; allocating total output among consumers matches 'For whom to produce'; and ensuring full non-wasteful factor employment matches 'Efficient resource utilization'.

Each fundamental economic problem reflects a distinct resource allocation decision: selecting output types defines 'What to produce', choosing technical methods defines 'How to produce', determining output distribution defines 'For whom to produce', and preventing factor waste ensures 'Efficient resource utilization'.

Step-by-Step Solution

1

Analyze commodity selection and quantitative planning.

Assigning scarce resources to produce consumer versus capital goods answers 'What to produce'.

Scarcity forces societies to prioritize certain outputs over others.

2

Analyze technique selection and resource combinations.

Choosing between labor-intensive and capital-intensive methods answers 'How to produce'.

Producers aim for cost minimization and appropriate technology utilization.

3

Analyze national output distribution.

Distributing generated goods among members of society answers 'For whom to produce'.

Final consumption depends on purchasing power, price signals, or central distribution mechanisms.

4

Analyze factor efficiency and capacity utilization.

Preventing factor unemployment and wasteful allocation achieves 'Efficient resource utilization'.

Societies strive to maximize welfare by operating on their production possibility frontier.

Key Concept

Basic Economic Problems of Society

Estimated Time:1m 0s

Question 67Question →

The reported mean monthly wage of $50$ employees in a manufacturing firm was recorded as $42$ (in thousands of Naira, $\text{₦'000}$ ). During an internal audit, two transcription errors were discovered: a wage of $\text{₦}64,000$ was incorrectly recorded as $\text{₦}46,000$ , and a wage of $\text{₦}28,000$ was incorrectly recorded as $\text{₦}82,000$ . Additionally, $10$ new workers were recruited at an average monthly wage of $\text{₦}57,000$ (recorded as $57$ in $\text{₦'000}$ ). What is the corrected mean monthly wage (in $\text{₦'000}$ ) for the entire workforce of $60$ employees?

Show answer & explanation

Answer: 43.9

Answer

The corrected mean monthly wage for the entire workforce of 60 employees is 43.9 in thousands of Naira (₦'000), which represents ₦43,900.

The initial reported wage sum of ₦2,100,000 (

2100

in

\text{₦'000}

) is adjusted by adding

\text{₦}18,000

for the under-recorded entry and subtracting

\text{₦}54,000

for the over-recorded entry, giving a corrected baseline sum of

\text{₦}2,064,000

(

2064

in

\text{₦'000}

). Adding the

\text{₦}570,000

(

570

in

\text{₦'000}

) earned by the

10

new recruits gives a total aggregate wage sum of

\text{₦}2,634,000

(

2634

in

\text{₦'000}

) across

60

total employees. Dividing

2634

by

60

gives an exact corrected mean of

43.9

in

\text{₦'000}

(or

\text{₦}43,900

).

Step-by-Step Solution

1

Find initial reported total wage expenditure

50 × 42 = 2100 (in ₦'000)

Total value equals sample size multiplied by reported arithmetic mean.

2

Calculate net error adjustment

(64 - 46) + (28 - 82) = +18 - 54 = -36 (in ₦'000)

Under-recorded item adds +18, while over-recorded item subtracts -54.

3

Adjust initial total wage expenditure

2100 - 36 = 2064 (in ₦'000)

Correcting errors adjusts the sum of the original 50 workers' wages.

4

Calculate wage expenditure of new workers

10 × 57 = 570 (in ₦'000)

Total earnings of additional workers equal number of recruits times their mean wage.

5

Compute total combined expenditure and workforce size

Total sum = 2064 + 570 = 2634 (in ₦'000); Total N = 50 + 10 = 60

Combine corrected original wage sum with new recruitment total.

6

Calculate final corrected combined mean

2634 / 60 = 43.9 (in ₦'000)

Divide aggregate wage sum by aggregate total number of employees.

Key Concept

Corrected Mean and Weighted Combined Mean

Question 68Question →

The mean daily production cost of five small poultry farms in Ogun State is $\text{₦}45,000$ . If the daily production costs of four of the farms are $\text{₦}38,000$ , $\text{₦}42,000$ , $\text{₦}46,000$ , and $\text{₦}50,000$ , what is the daily production cost (in $\text{₦}$ ) of the fifth farm?

Show answer & explanation

Answer: 49000

Answer

The daily production cost of the fifth farm is

\text{₦}49,000

.

The arithmetic mean formula is

\bar{X} = \frac{\sum X}{N}

. For 5 farms with a mean of

\text{₦}45,000

, the total combined cost is

5 \times \text{₦}45,000 = \text{₦}225,000

. Summing the four given farm costs yields

\text{₦}38,000 + \text{₦}42,000 + \text{₦}46,000 + \text{₦}50,000 = \text{₦}176,000

. The cost for the fifth farm is

\text{₦}225,000 - \text{₦}176,000 = \text{₦}49,000

.

Step-by-Step Solution

1

Calculate total production cost of all 5 farms

Total cost =

\text{₦}225,000

Using the arithmetic mean formula

\bar{X} = \frac{\sum X}{N}

, the total sum

\sum X = N \times \bar{X} = 5 \times 45,000 = 225,000

.

2

Sum the daily production costs of the four known farms

Known total =

\text{₦}176,000

38,000 + 42,000 + 46,000 + 50,000 = 176,000

.

3

Determine the unknown fifth farm cost by subtraction

Fifth farm cost =

\text{₦}49,000

Subtracting the sum of the four known values from the overall total:

225,000 - 176,000 = 49,000

.

Key Concept

Calculating a missing value using the total sum property of the arithmetic mean

Estimated Time:1m 15s

Question 69Question →

The table below shows the frequency distribution of weekly cocoa bean output (in metric tonnes) produced by 40 agricultural cooperative societies in Southwestern Nigeria:

Output Range (Tonnes)	Number of Cooperatives ( $f$ )
$10 - 19$	$4$
$20 - 29$	$10$
$30 - 39$	$16$
$40 - 49$	$8$
$50 - 59$	$2$

What is the estimated median weekly cocoa output of the cooperatives?

33.25

tonnes

33.75

tonnes

32.88

tonnes

34.50

tonnes

Show answer & explanation

Answer: $33.25$ tonnes

Answer

The estimated median weekly cocoa output is

33.25

tonnes.

The option stating

33.25

tonnes is correct because the median class is

30 - 39

with lower boundary

L = 29.5

, cumulative frequency prior

F = 14

, class frequency

f_m = 16

, and class width

c = 10

. Substituting into

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

yields

29.5 + \left(\frac{20 - 14}{16}\right) \times 10 = 33.25

.

Step-by-Step Solution

1

Determine the median position and identify the median class

Total frequency

N = 4 + 10 + 16 + 8 + 2 = 40

. Median position is

\frac{N}{2} = \frac{40}{2} = 20^{\text{th}}

item. Cumulative frequencies are:

10-19: 4

;

20-29: 14

;

30-39: 30

. The

20^{\text{th}}

item lies within the

30 - 39

interval.

The median class is the class interval containing the

\frac{N}{2}

position.

2

Identify the required statistical parameters for grouped median formula

Lower class boundary (

L

) =

29.5

; Cumulative frequency before median class (

F

) =

14

; Frequency of median class (

f_m

) =

16

; Class width (

c

) =

39.5 - 29.5 = 10

.

Grouped data estimation requires exact continuous boundaries rather than discrete limits.

3

Apply the grouped median interpolation formula

\text{Median} = L + \left(\frac{\frac{N}{2} - F}{f_m}\right) \times c = 29.5 + \left(\frac{20 - 14}{16}\right) \times 10 = 29.5 + \left(\frac{6}{16}\right) \times 10 = 29.5 + 3.75 = 33.25

.

Interpolates the exact median position within the continuous interval of the median class.

Key Concept

Calculation of Median from Grouped Frequency Distribution

Question 70Question →

In a centrally planned economic system, decisions regarding what to produce, how to produce, and for whom to produce are executed entirely by a state planning authority. What primary structural limitation is inherent in relying exclusively on this mechanism for resource allocation?

Inefficiency in resource allocation caused by the absence of market price signals to reflect consumer preferences and scarcity.

Distortion of resource distribution resulting from unrestricted price mechanism operations and private profit motives.

Failure of private entrepreneurs to provide merit goods due to high capital requirements and lack of profit incentive.

Over-reliance on market-clearing mechanisms that trigger periodic hyperinflation and business cycle fluctuations.

Show answer & explanation

Answer: Inefficiency in resource allocation caused by the absence of market price signals to reflect consumer preferences and scarcity.

Answer

Inefficiency in resource allocation caused by the absence of market price signals to reflect consumer preferences and scarcity.

In a command economy, state planners determine output levels and prices administratively. Because free market price signals (which reflect relative scarcity and consumer demand) are absent, planners struggle to correctly measure consumer preferences and cost relationships. This results in widespread inefficiency, chronic shortages of demanded goods, surpluses of unintended items, and a lack of consumer sovereignty.

Step-by-Step Solution

1

Identify the defining features of a centrally planned (command) economic system.

Recognized that state bodies determine all production goals, pricing, and resource distribution rather than market demand and supply.

Understanding the foundational mechanism of resource allocation in command economies.

2

Analyze the primary economic drawback of eliminating private enterprise and the price mechanism.

Determined that without market prices set by demand and supply, planners lack precise information regarding consumer needs and opportunity costs.

Linking institutional structure to resource allocation outcome.

3

Select the option that accurately describes this structural defect.

Identified that the lack of market price signals causes misallocation of resources, shortages, surpluses, and reduced consumer sovereignty.

Distinguishing command economy flaws from market economy defects.

Key Concept

Disadvantages of Centrally Planned (Command) Economic Systems

Question 71Question →

A textiles trader in Kano has a budget of $\text{₦}200,000$ and wants to buy both a modern sewing machine and additional fabric stock. However, because the total cost of both items is $\text{₦}350,000$ , she chooses to purchase only the fabric stock after ranking her pressing needs. Which fundamental aspect of the definition and scope of Economics does this decision best illustrate?

Economics studies human behavior as a relationship between unlimited ends and scarce means that have alternative uses.

Economics is primarily concerned with calculating the total money cost and financial expenditure incurred in business operations.

Economics focuses strictly on how government interventions cause an outward shift in a nation's production possibility curve.

Economics is defined exclusively as the scientific inquiry into the accumulation of physical wealth and material commodities.

Show answer & explanation

Answer: Economics studies human behavior as a relationship between unlimited ends and scarce means that have alternative uses.

Answer

Economics studies human behavior as a relationship between unlimited ends and scarce means that have alternative uses.

The correct answer accurately states the widely accepted modern definition of Economics formulated by Lionel Robbins. The trader's situation highlights how human beings must choose between competing wants (ends) using limited funds (scarce means) that could be used for other purposes.

Step-by-Step Solution

1

Identify the key elements in the scenario

The trader has limited financial resources (

\text{₦}200,000

) relative to her total desires (

\text{₦}350,000

), forcing her to prioritize and select one item.

Recognizing scarcity and choice is the foundation of economic definitions.

2

Relate the scenario to formal economic definitions

Lord Lionel Robbins defined Economics in 1932 as 'the science which studies human behavior as a relationship between ends and scarce means which have alternative uses.'

The trader's funds represent scarce means with alternative uses, while the desired inventory items represent ends.

3

Evaluate the correct statement

The choice emphasizing human behavior, unlimited ends, and scarce means directly describes the core definition and scope of Economics.

It captures both the micro-level choice context and the universal scope of economic inquiry.

Key Concept

Definition and Scope of Economics (Robbins Definition)

Estimated Time:1m 0s

Question 72Question →

A state government with a fixed capital expenditure allocation of $\text{N}800\text{ million}$ must choose between two mutually exclusive development projects: constructing a regional specialist hospital costing $\text{N}800\text{ million}$ or building an agricultural processing export terminal costing $\text{N}750\text{ million}$ that is projected to generate substantial trade revenues. If the government selects and constructs the regional specialist hospital, what is the real cost (opportunity cost) of this decision?

The foregone agricultural processing export terminal and the trade benefits it would have yielded.

The total monetary expenditure of

\text{N}800\text{ million}

incurred to build the specialist hospital.

The

\text{N}50\text{ million}

unspent balance remaining from the allocated capital budget.

An inward contraction of the state's Production Possibility Curve caused by capital expenditure.

Show answer & explanation

Answer: The foregone agricultural processing export terminal and the trade benefits it would have yielded.

Answer

The foregone agricultural processing export terminal and the trade benefits it would have yielded.

In economics, scarcity forces decision-makers to choose among competing alternatives. The real cost (opportunity cost) of choosing one option is the satisfied need or benefit of the next best alternative that is sacrificed. By choosing to build the hospital, the government gives up the opportunity to build the agricultural processing export terminal and capture its trade benefits.

Step-by-Step Solution

1

Identify the fundamental economic problem presented in the scenario.

The state government faces scarcity of capital resources (

\text{N}800\text{ million}

available) and must make a choice between competing projects.

Scarcity necessitates choice, which gives rise to opportunity cost.

2

Distinguish between money cost and real (opportunity) cost.

The money cost is the financial outlay of

\text{N}800\text{ million}

. The real cost is the alternative project sacrificed.

Economic analysis defines real cost as the benefit of the next best alternative sacrificed when a choice is made.

3

Determine the specific opportunity cost of selecting the hospital project.

Selecting the hospital means completely forfeiting the construction and economic revenues of the agricultural processing export terminal.

The export terminal represents the next best alternative option sacrificed due to limited financial capital.

Key Concept

Difference between Money Cost and Opportunity Cost in Resource Allocation

Question 73Question →

Complete the statement below regarding the scope of economic analysis.

Fill in the blanks below

The branch of economics that examines the decision-making of individual units such as consumers and firms is known as economics, whereas the branch that deals with aggregate economic performance such as general price levels and total national output is called economics.

Show answer & explanation

Answer

The statement is completed using 'micro' (or 'microeconomics') for blank 1, and 'macro' (or 'macroeconomics') for blank 2.

Microeconomics focuses on individual decision-makers (such as individual consumers, workers, households, and single firms) and specific market price determination. In contrast, macroeconomics looks at aggregate economic variables including national income, aggregate demand, total employment, and inflation across the broader economy.

Step-by-Step Solution

1

Analyze the first part of the statement focusing on individual economic decision-making units.

Individual units like households, buyers, and firms fall under microeconomics.

Microeconomics studies small-scale economic behavior and individual market interactions.

2

Analyze the second part of the statement focusing on economy-wide aggregates.

Aggregates such as national output, gross domestic product, and general price level fall under macroeconomics.

Macroeconomics studies the structure, performance, and decision-making of an entire economy.

Key Concept

Branches of Economic Analysis (Microeconomics vs. Macroeconomics)

Estimated Time:1m 0s

Question 74Question →

Match each economic scenario in Column A with its corresponding economic concept in Column B.

Click a left item, then click its matching right item

Show answer & explanation

Answer

Resource insufficiency corresponds to Scarcity; ordering wants by importance corresponds to Scale of Preference; selecting one item over another corresponds to Choice; and the foregone alternative corresponds to Opportunity Cost.

Each economic scenario correctly maps to its foundational economic concept: resource insufficiency defines Scarcity; prioritizing wants constitutes building a Scale of Preference; picking one item over another represents Choice; and the sacrificed alternative defines Opportunity Cost.

Step-by-Step Solution

1

Identify the fundamental cause of economic decision-making in the first scenario.

Insufficient resources to satisfy unlimited wants represents Scarcity.

Scarcity is the core reason individuals and societies must make economic decisions.

2

Analyze the preparation of a list based on priority in the second scenario.

Ordering items by importance represents a Scale of Preference.

A scale of preference helps decision-makers systematically satisfy their most urgent wants first.

3

Examine the act of selection in the third scenario.

Selecting a textbook over shoes represents Choice.

Because of scarcity, decision-makers are compelled to choose among competing wants.

4

Identify what is sacrificed in the fourth scenario.

The shoes given up represent the Opportunity Cost.

Opportunity cost is defined specifically as the alternative foregone when a choice is made.

Key Concept

Basic Economic Concepts: Scarcity, Choice, Scale of Preference, and Opportunity Cost

Question 75Question →

Match each economic scenario or description on the left with its corresponding foundational concept of scarcity and choice on the right.

Click a left item, then click its matching right item

Show answer & explanation

Answer

The household listing wants by priority matches Scale of Preference; the government selecting one project over another matches Economic Choice; the foregone alternative worker sacrifice matches Real Cost (Opportunity Cost); and limited resources relative to unlimited desires matches Scarcity.

Each economic scenario corresponds precisely to its core foundational concept: listing unsatisfied wants by importance forms a scale of preference; selecting between mutually exclusive options due to resource limits demonstrates economic choice; the foregone alternative represents real cost (opportunity cost); and the fundamental imbalance between finite resources and infinite desires defines scarcity.

Step-by-Step Solution

1

Analyze the first scenario regarding listing wants in order of importance.

Identified as Scale of Preference.

A scale of preference is a list of unsatisfied wants arranged in order of relative priority.

2

Analyze the government's decision to pick one project over another.

Identified as Economic Choice.

Choice is the act of selecting among alternative uses of limited resources.

3

Analyze the worker's foregone alternative.

Identified as Real Cost (Opportunity Cost).

Opportunity cost represents the next best alternative foregone when a decision is made.

4

Analyze the description of limited resources versus unlimited wants.

Identified as Scarcity.

Scarcity is the basic economic problem of finite resources relative to infinite wants.

Key Concept

Interrelationship among Scarcity, Choice, Scale of Preference, and Opportunity Cost

Question 76Question →

A tailor with a limited quantity of fabric must decide whether to sew school uniforms or evening gowns. If the tailor chooses to produce school uniforms, what constitutes the real cost of this production decision?

The money spent on purchasing the fabric used for the uniforms

The quantity of evening gowns that could not be sewn as a result

The total sales revenue expected from selling the school uniforms

An outward expansion of the tailor's overall production capacity

Show answer & explanation

Answer: The quantity of evening gowns that could not be sewn as a result

Answer

The quantity of evening gowns that could not be sewn as a result

Real cost (opportunity cost) refers to the alternative commodity or satisfaction sacrificed when limited resources are allocated to a particular line of production. Sacrificing evening gowns to produce uniforms represents the real cost of the choice.

Step-by-Step Solution

1

Identify the resource constraint and choice

The quantity of fabric is limited, making it impossible to produce both uniforms and gowns to full capacity simultaneously.

Scarcity of resources forces economic agents to make choices.

2

Apply the definition of real cost

Real cost (opportunity cost) is defined as the real goods or services foregone when a decision is made.

Distinguishing real cost from financial outlay is essential in economic reasoning.

3

Determine the foregone alternative

Choosing to devote the limited fabric to school uniforms means giving up the evening gowns that could have been produced.

The unproduced evening gowns represent the true sacrifice or real cost of producing uniforms.

Key Concept

Real Cost vs Money Cost

Estimated Time:1m 0s

Question 77Question →

A poultry farmer in Abakaliki spends $\text{₦}150,000$ to purchase automated feeding equipment instead of expanding his battery cage capacity. According to Lionel Robbins' definition of economics, which of the following represents the real economic cost of this decision?

The expansion of the battery cage capacity that was sacrificed

The monetary expenditure of

\text{₦}150,000

incurred on the feeding equipment

An outward shift of the poultry farm's production possibility curve

The total financial profit expected from operating the automated feeder

Show answer & explanation

Answer: The expansion of the battery cage capacity that was sacrificed

Answer

The expansion of the battery cage capacity that was sacrificed represents the real economic cost.

According to Lionel Robbins, economics focuses on allocating scarce resources among competing ends. The true economic cost of acquiring the automated feeding equipment is the next best alternative that had to be foregone—namely, the expansion of the battery cage capacity.

Step-by-Step Solution

1

Identify the core subject of Lionel Robbins' definition of economics.

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

Economic decision-making requires choosing between competing ends due to scarcity.

2

Distinguish between money cost and real (opportunity) cost in the scenario.

The financial cost is

\text{₦}150,000

, but the real economic cost is the alternative project given up (battery cage expansion).

Opportunity cost evaluates the sacrificed satisfaction of the next best alternative rather than the cash paid.

Key Concept

Lionel Robbins' Definition of Economics and Opportunity Cost

Estimated Time:1m 0s

Question 78Question →

Match each economic action on the left with the corresponding basic economic concept it demonstrates on the right.

Click a left item, then click its matching right item

Show answer & explanation

Answer

Arranging wants in priority order matches with Scale of preference; selecting the top item matches with Economic choice; giving up the next best alternative matches with Opportunity cost.

A scale of preference ranks unsatisfied wants according to their urgency, allowing a consumer to make a choice. The alternative item that is given up as a result of that choice represents the opportunity cost.

Step-by-Step Solution

1

Identify the concept associated with ranking wants by importance.

Listing items according to urgency forms a scale of preference.

Consumers use a scale of preference to organize their desires before making spending decisions.

2

Identify the concept for picking a preferred item from the list.

Selecting the most pressing need is the act of economic choice.

Scarcity forces consumers to choose specific items over others.

3

Identify the concept for the sacrificed alternative.

The next best item forgone is the opportunity cost.

Opportunity cost is defined by the satisfaction sacrificed from the unchosen alternative.

Key Concept

Scale of Preference

Question 79Question →

Match each consumer action regarding a scale of preference on the left with its underlying economic significance on the right.

Click a left item, then click its matching right item

Show answer & explanation

Answer

The correct pairings match: arranging wants by urgency with establishing a framework for rational decision-making; selecting the top item with maximizing utility from limited income; forgoing the second item with incurring real opportunity cost; and re-ordering items during price changes with adjusting priority to reflect budget constraints.

Constructing a scale of preference enables consumers to make rational economic choices. The item placed at the top yields highest satisfaction, while the second-ranked item left unpurchased constitutes the real opportunity cost of the selection. Shifts in market prices require adjusting priority ordering to remain within budget limits.

Step-by-Step Solution

1

Analyze the purpose of listing wants in descending order of importance.

Pairs with establishing a framework for rational decision-making under scarcity.

Scale of preference organizes subjective human wants so that limited means are applied systematically to pressing needs.

2

Determine the outcome of fulfilling the top item on the preference schedule.

Pairs with maximizing total utility from limited monetary income.

A rational consumer allocates income to the most urgent item first to attain maximum total satisfaction.

3

Identify the economic concept associated with the second item on the scale that remains unfulfilled.

Pairs with incurring the real opportunity cost of the choice made.

Opportunity cost is defined as the next best alternative sacrificed, which is the second item on a scale of preference.

4

Examine how relative price variations impact consumer preference rankings.

Pairs with adjusting consumer priority to reflect modified budget constraints.

When price changes affect affordability, rational consumers re-evaluate their list of wants to optimize expenditure within budget limitations.

Key Concept

Scale of Preference and Opportunity Cost

Estimated Time:1m 30s

Question 80Question →

A commercial printing firm with a capital budget of $\text{N}500,000$ intends to acquire equipment to expand production. The proprietor constructs a scale of preference listing potential acquisitions in descending order of priority as follows:

1. Industrial Paper Cutter ( $\text{N}300,000$ )
2. High-Speed Digital Printer ( $\text{N}200,000$ )
3. Heavy-Duty Binding Machine ( $\text{N}200,000$ )
4. Lamination Machine ( $\text{N}100,000$ )

If the proprietor acts rationally by allocating the budget strictly according to this scale of preference, what is the opportunity cost of the decision?

The Heavy-Duty Binding Machine

The monetary outlay of

\text{N}500,000

spent on equipment

Both the Heavy-Duty Binding Machine and the Lamination Machine combined

The Industrial Paper Cutter and the High-Speed Digital Printer

Show answer & explanation

Answer: The Heavy-Duty Binding Machine

Answer

The Heavy-Duty Binding Machine

A scale of preference lists wants in order of priority. Given a budget constraint of

\text{N}500,000

, a rational producer purchases the top priority items: the Industrial Paper Cutter (

\text{N}300,000

) and the High-Speed Digital Printer (

\text{N}200,000

). The next best alternative foregone—which is the item immediately following the last purchased item on the scale of preference—is the Heavy-Duty Binding Machine. Therefore, the Heavy-Duty Binding Machine constitutes the opportunity cost of the choice.

Step-by-Step Solution

1

Determine the items purchased using the scale of preference under the budget constraint

With a budget of

\text{N}500,000

, the firm selects item 1 (Industrial Paper Cutter at

\text{N}300,000

) leaving

\text{N}200,000

, and then item 2 (High-Speed Digital Printer at

\text{N}200,000

), leaving

\text{N}0

.

Rational economic agents allocate limited funds starting from the highest priority item on their scale of preference.

2

Identify the unselected items remaining on the scale of preference

The unselected items are item 3 (Heavy-Duty Binding Machine) and item 4 (Lamination Machine).

Budget depletion prevents the purchase of remaining items on the list.

3

Apply the definition of opportunity cost to determine the correct alternative foregone

The opportunity cost is the next best alternative foregone, which is the Heavy-Duty Binding Machine.

Opportunity cost is measured by the real sacrifice of the single highest-ranked alternative that cannot be satisfied due to scarcity.

Key Concept

Opportunity Cost derived from a Scale of Preference under Budget Constraints

Estimated Time:1m 30s

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