JAMB UTME Economics 2014 past questions and answers

1. Country L, because its opportunity cost of textiles is lower
2. Country L, because it produces fewer units of cocoa
3. Country K, because it can produce more textiles
4. Neither country, because both can produce textiles

Answer: A. Country L, because its opportunity cost of textiles is lower

One unit of textiles costs K 2 units of cocoa but costs L only 1 unit of cocoa, so L has the lower opportunity cost.

1. The domestic price of the imported good falls
2. The domestic price of the imported good rises
3. The good becomes exempt from customs duties
4. The tariff automatically eliminates every import

Answer: B. The domestic price of the imported good rises

A tariff adds a tax to the import cost and, when passed on, raises its domestic price.

1. 83.3
2. 100
3. 120
4. 275

Answer: C. 120

The terms-of-trade index is (export price index / import price index) x 100, which is (150 / 125) x 100 = 120.

1. It makes every country's opportunity cost identical
2. It removes the need for resources in production
3. It guarantees that imports will be unnecessary
4. It allows resources to be concentrated where their opportunity cost is lower

Answer: D. It allows resources to be concentrated where their opportunity cost is lower

Specialization directs resources toward goods each country can produce at relatively lower opportunity cost.

1. Exports of goods and services, income flows and current transfers
2. Only purchases of foreign shares by residents
3. Only changes in the central bank's gold reserves
4. The value of domestic currency notes in circulation

Answer: A. Exports of goods and services, income flows and current transfers

The current account records trade in goods and services as well as primary income and current transfers.