WAEC Economics 2018 Theory Past Questions

Model answer

(a) Visible exports = Crude oil + Groundnuts + Bauxite = $120,000,000+$40,000,000+$80,000,000 = $240,000,000. (b) Visible imports = Rice & Flour + Petroleum product + Vehicles = $140,000,000+$80,000,000+$50,000,000 = $270,000,000. Balance of trade = visible exports − visible imports = $240,000,000 − $270,000,000 = $30,000,000 deficit. (c) Invisible exports: Tourism, Shipping & Insurance. Invisible imports: Banking services, Freight & Insurance. (d) Total exports = $240,000,000+$45,000,000+$60,000,000 = $345,000,000. Total imports = $270,000,000+$60,000,000+$40,000,000 = $370,000,000. Current account balance = $345,000,000 − $370,000,000 = $25,000,000 deficit. (e) The country is developing, because it runs both a deficit balance of trade and a deficit current account balance — a common feature of developing economies.

Model answer

(a)(i) Marginal Revenue (ΔTR/ΔOutput) between successive outputs works out to $2 at each interval (e.g. (30−0)/(15−0)=2; (70−30)/(35−15)=2; (120−70)/(60−35)=2; (170−120)/(85−60)=2). (ii) Marginal Cost (ΔTC/ΔOutput): between 0–15: (45−15)/15=$2.00; 15–35: (70−45)/20=$1.25; 35–60: (90−70)/25=$0.80; 60–85: (105−90)/25=$0.60. (b)(i) Break-even is where Total Revenue = Total Cost, i.e. $70=$70 at 35 units of output. (ii) Profit = TR−TC at each level: 0:(15), 15:(15), 35:0, 60:30, 85:65. The highest profit ($65) is made at 85 units of output. (iii) Equilibrium (profit-maximising output) is achieved where MR=MC; from the table this occurs at 35 units (MR=MC=$2), though the highest observed profit is at 85 units given the discrete data provided. (c) The firm operates in an imperfect market, because profit can still be increased by selling more units rather than being fixed at a single competitive price.

Model answer

(a) Optimum population is the level of population which ensures the maximum/most efficient use of all the available resources of the economy. (b) Rapid population growth can slow down economic development by: destabilising economic planning; placing more pressure on infrastructure; leading to overpopulation and its associated social problems. (c) Measures to control rapid population growth: ensuring family planning; encouraging late marriage; enforcement of laws to regulate family size.

Model answer

(a) State-owned enterprises (public corporations) are institutions established by an Act of Parliament, funded with taxpayers' money, and owned and managed by the state. (b) Reasons for establishment: to provide employment opportunities to citizens; to provide social services at affordable prices to citizens; to improve the general welfare of the populace. (c) Problems: mismanagement and corruption; inefficiency of staff; politicisation of policies; inadequate government funding.

Model answer

(a) Unemployment is a situation where able and qualified people are not able to get paid employment, while underemployment is a situation where labour is being used at a wrong/below-capacity post. (b)(i) Seasonal unemployment: unemployment resulting from a fall in demand due to season, e.g. farmers being unemployed in the dry season. (ii) Structural unemployment: unemployment resulting from structural changes in the economy, e.g. workers laid off as an economy shifts from manual to digital processes. (iii) Frictional unemployment: unemployment resulting from a change of job or movement of labour from one job to another, e.g. a fresh graduate temporarily searching for their first job. (iv) Cyclical unemployment: unemployment that occurs as a result of the business cycle, e.g. workers laid off during a recession, who regain jobs once the economy recovers.

Model answer

(a) Commodity money is any commonly accepted product or material that can be used as a means of settling debts and payments (e.g. cowries, gold). (b) Problems of barter: the problem of double coincidence of wants; the problem of measurement of value; the problem of store of value. (c) Money solves barter's problems by: removing the need for a double coincidence of wants (money can be used to settle any type of debt and make any form of payment); providing a good, common measure of value for all commodities; serving as a store of value, unlike perishable barter goods.

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(a) A demand schedule is a tabular presentation of the quantity demanded of a good at different price levels. (b) The law of demand states that the higher the price of a commodity, the lower the quantity demanded, and vice versa (ceteris paribus). (c)(i) Competitive demand: a type of demand where two goods are demanded inversely — increased demand for one leads to reduced demand for the other, e.g. Milo and Bournvita. (ii) Derived demand: demand for one factor of production that arises from the demand for another related factor, such as land and labour. (iii) Joint demand: when two goods are demanded together because they cannot be separated in use, e.g. demand for liquid milk and the tin it is packaged in. (iv) Composite demand: a situation where a single commodity can be used to satisfy more than one want, e.g. petroleum used as fuel for cars and generators.

Model answer

(a) A tax is a compulsory levy imposed by the government on individuals, corporate bodies, goods and services. (b)(i) Progressive tax: a tax in which the amount paid, or rate of tax paid, increases as income increases. (ii) Proportional tax: a tax system in which the rate paid as tax is the same regardless of income level. (iii) Regressive tax: a tax system in which the rate paid as tax decreases as income increases. (c)(i) Equity: this principle states that taxes collected from people of the same category should be the same, and should be based on each person's ability to pay. (ii) Convenience: this principle states that taxes should be collected at the time and in the manner that is most convenient for the taxpayer. (iii) Economy: this principle states that the cost of collecting a tax should not be excessive compared to the amount that will be realised from that tax.