Explanation:

The correct answer is:

C. Scarcity

Topic: Basic Economic Problems

The main cause of economic problems is scarcity. This means that the resources (like money, land, and labor) available to produce goods and services are limited. But people's wants and needs are endless, so societies have to make choices about how to use these limited resources.

Here's why the other answers are wrong:

• A. Poverty: Poverty is an effect of economic problems, not the main cause.


• B. Political instability: Political instability may make problems worse, but scarcity is the main cause of economic problems.


• D. Social unrest: Social unrest can happen because of economic problems, but it's not the root cause.

Explanation:

The correct answer is:

D. To produce more of one good, less of the other good must be produced.

Topic: Production Possibility Curve (PPC)

A point within the PPC shows inefficiency in production, meaning not all resources are being fully used. To produce more of one good, the economy must reduce the production of another good. This is a trade-off, as resources are limited and cannot be used for both goods at the same time.

Here's why the other answers are wrong:

• A. The efficient combinations of factor inputs: This refers to points on the curve, not inside it.


• B. More of the two goods can be produced: This would be true if the economy were operating on the curve, not inside it.


• C. Full employment of all factor inputs in production: Full employment happens on the curve, not inside it where resources are underutilized.

Explanation:

The correct answer is:

D. Iron ore

Topic: Factors of Production

Iron ore is a type of land whose supply is not fixed in the long run. While rice, natural gas, and coal are finite resources, iron ore can be mined and replaced. This means the supply of iron ore can increase over time through discovering new deposits or improving extraction methods.

Here's why the other answers are wrong:

• A. Rice: Rice is a renewable resource, but its supply depends on the land and climate, which are limited in the long run.


• B. Natural gas: Natural gas is a finite resource and cannot be replenished in the long run.


• C. Coal: Like natural gas, coal is a finite resource and its supply is limited over time.

Explanation:

The correct answer is:

B. Socialist economy

Topic: Economic Systems

A socialist economy is one in which the state owns and controls all the means of production, such as factories, land, and resources. This system aims to reduce inequality and provide equal access to resources for all citizens.

Here's why the other answers are wrong:

• A. Free enterprise: In a free enterprise system, private individuals own and control the means of production, not the state.


• C. Mixed economy: A mixed economy combines both private and government control of production, not full government control.


• D. Capitalist economy: In a capitalist economy, private individuals or businesses own and control the means of production.

Explanation:

The correct answer is:

C. Market forces in the economy

Topic: Capitalism and Market Forces

In capitalism, the prices of raw materials are mainly decided by supply and demand. This means how much of a raw material is available and how much people want it. If there's a lot of the material and not much demand, the price goes down. If it's rare and people want it, the price goes up.

Here's why the other answers are wrong:

• A. Production cost of industries: While production costs affect prices, they don't mainly decide the price of raw materials in capitalism.


• B. Planning authority of government: In capitalism, the government doesn't decide prices. Market forces do.


• D. Suppliers of the inputs: Suppliers may influence the price, but it's the overall market demand and supply that mostly sets the price.

Explanation:

The correct answer is:

C

Topic: Pie Chart Calculations

⭐ To find the total population of students, we use the following steps:

1. We know that 80 students are represented by 40 degrees in the pie chart.
2. So, the number of students represented by 1 degree on the chart is:
   
   $\frac{80\text{students}}{40\text{degrees}}$
   
   students per degree = 2 .



3. The total number of degrees in a full pie chart is 360 degrees, so the total number of students in the school is:
   
   = 2 students per degree × 360 degrees
   
   = 720 students.

Explanation:

The correct answer is:

D. Composite demand

Topic: Types of Demand

Composite demand happens when a product is needed for more than one use. For example, oil is used for making energy and also as an ingredient in products. Since the demand for oil is for different things, it is called composite demand. The total demand for oil comes from all these different uses.

Here's why the other answers are wrong:

• A. Derived demand: This is when the demand for something comes from the demand for another product (e.g., the demand for labor increases because people want more goods).


• B. Competitive demand: This is when two products compete with each other for the same resources, like two brands of smartphones.


• C. Joint demand: This happens when two goods are used together, like cars and fuel, but they are not needed for different purposes.

Explanation:

The correct answer is:

B. Elasticity of demand

Topic: Elasticity of Demand

Elasticity of demand is how much the quantity of a product people want changes when something that affects it changes, like price, income, or prices of related goods. If the amount people want changes a lot with a small price change, it’s called elastic demand. If the amount changes little, it’s inelastic demand.

Here's why the other answers are wrong:

• A. Law of demand: This shows that as prices go up, demand goes down, but it doesn't measure how much demand changes with price.


• C. Exceptional demand: This refers to situations where demand doesn't follow normal patterns, not the responsiveness to changes in price or other factors.


• D. Effective demand: This is the demand that people are willing and able to pay for, but it doesn’t measure responsiveness to changes in price.

Explanation:

The correct answer is:

C. Stop buying the commodity

Topic: Perfectly Elastic Demand

Perfectly elastic demand means that consumers will stop buying a product completely if the price goes up, even just a little. This happens because consumers are very sensitive to price changes. If the price increases, they will not buy the product at all.

Here's why the other answers are wrong:

• A. Buy smaller quantities of the commodity: In perfectly elastic demand, any price increase causes demand to drop to zero, not just a smaller amount.


• B. Buy larger quantities of the commodity: If demand is perfectly elastic, consumers will not buy more if the price rises.


• D. Demand for all the quantity supplied: This happens when there is perfectly inelastic demand, not perfectly elastic demand.

Explanation:

The correct answer is:

A. An increase in population of buyers

Topic: Factors Affecting Demand

If the population of buyers increases, more people want to buy the product, which shifts the demand curve to the right. This means that at the same price, there is a higher quantity demanded. This is the movement from point x to point y.

Here's why the other answers are wrong:

• B. A decrease in consumer's income: This would cause a decrease in demand (shift the demand curve to the left), not an increase in demand.


• C. An increase in price of milk: This would not shift the demand curve. It would just change the quantity demanded, causing movement along the curve, not a shift.


• D. An increase in tax on milk: This would likely increase the price, leading to a decrease in demand (leftward shift of the curve), not an increase.

Explanation:

The correct answer is:

C. Derived demand

Topic: Derived Demand

Derived demand is when the demand for one product (like flour) comes from the demand for another product (like bread). When more people want bread, the demand for flour also goes up because flour is needed to make bread. So, the demand for flour depends on the demand for bread.

Why the other answers are wrong:

• A. Competitive demand: This is when two goods are substitutes, like tea and coffee, and an increase in demand for one leads to a decrease in the demand for the other.


• B. Composite demand: This refers to a good that is used for multiple purposes, like oil for both energy and making plastic. Flour is only used for bread in this case.


• D. Complementary demand: This is when two goods are used together, like cars and petrol. Flour and bread are not exactly complementary in this way.

Explanation:

The correct answer is:

D. Inelastic demand

When demand is inelastic, people don’t reduce their purchases much even if the price goes up because of a tax. This means the government can collect more revenue from the tax, as the quantity demanded stays almost the same despite the price increase.

Why the other answers are wrong:

• A. Unit elastic demand: In this case, a price increase causes the quantity demanded to decrease in a way that the total revenue stays the same, so it wouldn't generate much more tax revenue.


• B. Elastic demand: If demand is elastic, consumers will reduce their purchases a lot when the price increases due to the tax, leading to less tax revenue.


• C. Perfectly elastic demand: In this case, any price increase causes the demand to drop to zero, so it would generate no tax revenue.

Explanation:

The correct answer is:

C. Medical doctors

Topic: Supply of Labor

Medical doctors have an inelastic supply in the short run. It takes many years of training to become a doctor, so the number of doctors cannot increase quickly to meet changes in demand.

Here's why the other answers are wrong:

• A. Taxi drivers: Taxi driving is relatively easy to start, and the number of drivers can change quickly based on demand.


• B. Crop harvesters: The supply of crop harvesters can vary depending on the time of year and seasonal factors.


• D. Sanitation workers: While important, the supply of sanitation workers can adjust quickly based on the needs of the community.

Explanation:

The correct answer is:

A. Joint supply

Topic: Supply of Commodities

Joint supply occurs when the supply of one product is linked to the supply of another because they are both made from the same raw material. If the price of one product falls, it can lead to more of the second product being supplied, as both share the same production process.

Here's why the other answers are wrong:

• B. Competitive supply: This refers to when two products compete for the same resources, meaning an increase in the supply of one decreases the supply of the other.


• C. Complementary supply: This is when two products are used together, so a change in the supply of one affects the demand for the other, not the supply.


• D. Composite supply: This refers to a situation where multiple products are combined to form a single good, which is not the case here.

Explanation:

The correct answer is:

C. Marginal utility

Topic: Demand and Utility

The amount of a product that people want to buy and how much they are willing to pay depends on how much satisfaction or happiness they get from using one more unit. This is called "marginal utility." If the extra satisfaction from one more unit is less, people will not want to pay as much.

Here's why the other answers are wrong:

• A. Packaging: Packaging can make a product more appealing, but it doesn't directly affect how much people are willing to pay for each extra unit.


• B. Designing: The design of a product can influence demand, but it doesn't explain how much people will pay for each extra unit.


• D. Total utility: Total utility is the total satisfaction from using all units of a product. Marginal utility, or satisfaction from just one more unit, is what affects the price people are willing to pay.

Explanation:

The correct answer is:

A. Diminishing marginal utility

Topic: Marginal Utility

The negative slope of the marginal utility curve shows the law of diminishing marginal utility. This law says that as a person uses more of something, the extra satisfaction they get from each additional unit becomes smaller.

Here's why the other answers are wrong:

• B. Diminishing total utility: Total utility refers to the overall satisfaction from all units, not just the extra satisfaction from one more unit.


• C. Decreasing marginal returns: This term is more about production, not about how much satisfaction you get from consuming more of a good.


• D. Increasing marginal utility: This is the opposite of what happens; marginal utility decreases as you consume more of something.

Explanation:

The correct answer is:

C. Price ceiling

Topic: Government Policies on Pricing

A price ceiling is a rule set by the government to stop prices from going too high. It is often used to control the price of essential goods like food so that they remain affordable for everyone, even if the supply or demand changes a lot.

Here's why the other answers are wrong:

• A. Minimum price legislation: This rule sets the lowest price a product can have, not the highest.


• B. Market price determination: This is how prices are usually set based on supply and demand, without government control.


• D. Minimum wage regulation: This is about setting a minimum wage for workers, not controlling product prices.

Explanation:

The correct answer is:

C. Be lower than equilibrium quantity

Topic: Price Controls

If the government sets the rent below the normal price of $250 (e.g., at $200), fewer apartments will be available for rent. This happens because landlords may not want to rent out apartments at the lower price, so the supply will be less than what it would be at the normal price, causing a shortage.

Here's why the other answers are wrong:

• A. Increase drastically: The supply won’t increase at a lower rent; landlords are less likely to offer apartments.


• B. Remain constant: The supply will change because landlords will respond to the lower rent by supplying fewer apartments.


• D. Be greater than equilibrium quantity: If the price is too low, the supply won’t be greater; there will be fewer apartments available.

Explanation:

The correct answer is:

B. Each worker is assigned a task that suits their skill

Topic: Division of Labour

Division of labour increases productivity because each worker does a job they are good at. This helps them work faster and better, leading to more output overall.

Here's why the other answers are wrong:

• A. It discourages the use of machinery: Division of labour does not stop the use of machines; it can actually make their use more effective.


• C. It promotes monotony of work: While it may feel repetitive, division of labour makes the work process more efficient, which is the goal.


• D. Small markets are catered for: This is unrelated to division of labour, which is about improving how tasks are done.

Explanation:

The correct answer is:

D. External economies of scale

Topic: Economies of Scale

External economies of scale happen when the whole industry grows. As the industry grows, companies can get things like better roads, better-trained workers, or cheaper supplies. These things help companies lower their costs and work more efficiently.

Here's why the other answers are wrong:

• A. Constant returns to scale: This means increasing production doesn't change the cost per item, which is not the same as benefits from industry growth.


• B. Returns to scale of production: This is a general idea about how production changes with inputs, but it’s not about the growth of the whole industry.


• C. Internal economies of scale: This happens when a company gets bigger and improves, not because the whole industry grows.

Explanation:

The correct answer is:

C. Increasing the inputs of labour and raw materials only

Topic: Short-Run Production

In the short run, a company can only increase production by adding more workers and raw materials. Things like buildings or machines (called "fixed factors") cannot be changed quickly, so the only way to make more is by using more of the things that can change easily, like workers and materials.

Here's why the other answers are wrong:

• A. Increasing both the fixed and variable factors: In the short run, the fixed factors (like buildings or machines) cannot be changed easily.


• B. Reducing the fixed factors only: You can’t reduce the fixed factors in the short run to increase production.


• D. Reducing the variable inputs only: Reducing the variable inputs would actually decrease production, not increase it.

Explanation:

The correct answer is:

C

⭐ To calculate the average cost, you use the following formula:

Substituting the values:

Average Cost = $15.

Explanation:

The correct answer is:

D. Price discrimination

Topic: Pricing Strategy

Price discrimination happens when the same product is sold at different prices to different people. This can happen based on things like age, location, or how much someone buys. The seller does this to make more money from different groups of people.

Here's why the other answers are wrong:

• A. Price regulation: This refers to setting a fixed price for a product, not charging different prices to different people.


• B. Exploitation of buyers: This suggests unfair treatment, but price discrimination can be legal and is based on different buying factors.


• C. Rationing of goods: Rationing involves limiting how much of something people can buy, not charging different prices for the same product.

Explanation:

The correct answer is:

B. Government's grant of exclusive right to production

Topic: Monopoly Market

In a monopoly, the government may give one company special rights, like a license or patent, to make and sell a product. This stops other companies from making the same product and entering the market.

Here's why the other answers are wrong:

• A. The competitive power of the monopolist: The monopolist doesn't face competition, so there’s no way to stop others from entering the market this way.


• C. The low price always charged by the monopolist: Monopolists usually charge higher prices, not low prices, so this doesn't stop other businesses from entering.


• D. The power given to the employers' association: This doesn't affect market entry barriers in a monopoly.

Explanation:

The correct answer is:

B

Topic: Features of Private Limited Company

A Private Limited Company cannot sell its shares on the stock exchange. This means that the shares are not available to the general public. Instead, shares are usually sold to a small group of people or private investors.

Here's why the other answers are wrong:

• A. It has a minimum of two shareholders: This is a feature of a Private Limited Company, as it requires at least two shareholders to operate.


• C. The company is managed by board of directors: A Private Limited Company is managed by directors, just like any other company.


• D. The company is a separate legal entity: A Private Limited Company is considered a separate legal entity, meaning it can own property and enter into contracts in its own name.

Explanation:

The correct answer is:

C

Topic: Advantages of Sole Proprietorship

In a sole proprietorship, the owner has full control over the business. This means they can make decisions quickly without needing to ask anyone else. This helps the business adapt faster to changes or new ideas.

Here's why the other answers are wrong:

• A. Ability to raise large capital: A sole proprietorship usually can't raise large amounts of money, as it depends on the owner's personal funds or small loans.


• B. Perpetual existence: A sole proprietorship ends when the owner decides to stop or passes away. It doesn’t last forever like some other business types.


• D. Economies of scale: Sole proprietorships don’t usually benefit from large-scale production cost savings because they’re often small businesses.

Explanation:

The correct answer is:

B

Wholesalers are the ones who provide warehousing. They store a lot of products in big spaces (warehouses) before sending them to shops or directly to customers. This helps make sure there is enough stock for sale when needed.

Here’s why the other answers are wrong:

• A. Supermarkets: Supermarkets sell products but don't store them in large warehouses for other businesses.


• C. Retailers: Retailers buy products to sell to customers but don't store large amounts of goods like wholesalers do.


• D. Consumers: Consumers buy products but don’t store them in warehouses for sale.

Explanation:

The correct answer is:

D. outbreak of diseases

Topic: Malthus' Population Theory

Malthus thought preventive checks were things people did to have fewer children, like getting married later, controlling their desires, or using family planning. The outbreak of diseases is not a way to control the number of births. It is a "positive check" that increases death rates, not a preventive measure.

Here’s why the other answers are wrong:

• A. Late marriages: This is a preventive check because it means people have fewer children by marrying later in life.


• B. Moral restraint: This means controlling yourself to not have too many children, which is a preventive check.


• C. Family planning: This is another way to prevent having too many children by planning when to have them.

Explanation:

The correct answer is:

A. an increase in immigration

Topic: Population Structure

When more young people move into a country (immigration), it can make the population younger. This happens because immigrants are often younger, which increases the number of young people in the country.

Here’s why the other answers are wrong:

• B. A fall in birth rate: A fall in birth rate means fewer children are born, which doesn’t help to have a youthful population.


• C. A decline in death rate of the aged: If older people live longer, the population becomes older, not younger.


• D. An increase in emigration of young people: If young people leave the country, it would reduce the number of young people, making the population less youthful.

Explanation:

The correct answer is:

C. output per man-hour

Topic: Worker Efficiency

The efficiency of a worker is best measured by how much they can produce in a given time. This is known as "output per man-hour," which shows how much work is done in one hour of work.

Here’s why the other answers are wrong:

• A. Wages paid to labour: Wages are the payment a worker receives, but they don’t show how efficient the worker is.


• B. Capital used by labour: This refers to the tools and machines a worker uses, but it doesn't directly measure their efficiency.


• D. Quantity of inputs used: Using more inputs doesn’t always mean the worker is more efficient. Efficiency is about producing more with less time and effort.

Explanation:

The correct answer is:

B. Land fragmentation

Topic: Mechanized Farming in West Africa

Land fragmentation means the land is divided into many small pieces. This makes it hard to use large machines for farming because they need big, continuous areas of land to work well.

Here's why the other answers are wrong:

• A. Lack of unskilled workers: The problem is not about workers being unskilled, it's about the small size of the land.


• C. Pests and diseases: While pests and diseases can damage crops, they do not make it hard to use big machines for farming.


• D. Urban-rural migration: People moving from cities to villages is not the main reason for problems with mechanized farming.

Explanation:

The correct answer is:

B. They cannot provide collateral security

Topic: Credit and Financing for Farmers

Farmers in West Africa often cannot get loans because they don't have enough assets to use as a guarantee. Banks need this guarantee, called collateral, to ensure the loan will be paid back. Without it, farmers cannot access credit.

Here's why the other answers are wrong:

• A. They are very poor: Being poor does not automatically stop farmers from getting credit if they have something valuable to use as collateral.


• C. There are not enough banks: While access to banks may be limited in some areas, the main problem is not having collateral.


• D. They are peasant farmers: The issue is not about being a peasant farmer, but the lack of collateral to secure a loan.

Explanation:

The correct answer is:

A. Residents at market prices

Topic: Gross Domestic Product (GDP)

GDP is the total value of all goods and services produced within a country by people living there. It includes the work of both citizens and non-citizens, but it focuses on what is produced inside the country's borders. It is measured at market prices.

Here's why the other answers are wrong:

• B. Citizens at market prices: GDP is not just for citizens; it includes anyone living in the country, not just citizens.


• C. Industries at factor cost: GDP uses market prices, not factor cost, to measure the total value.


• D. Nationals at factor cost: It focuses on residents and market prices, not just nationals and factor cost.

Explanation:

The correct answer is:

D. Daily wage

Topic: Transfer Payments

A transfer payment is money given without any work or service in return. Examples are pensions, charity, or pocket money. A daily wage is paid for work or services, so it is not a transfer payment.

Here's why the other answers are wrong:

• A. Monthly pension: A pension is money given regularly without requiring work, so it is a transfer payment.


• B. Money given to a beggar: This is a form of charity, which is also a transfer payment.


• C. Student's pocket money: Pocket money is given without expecting work, so it is also a transfer payment.

Explanation:

The correct answer is:

C. Calculating the gross domestic product per head

Topic: Standard of Living

The standard of living is often measured by the Gross Domestic Product (GDP) per person. This is also called GDP per capita. It shows the average amount of goods and services produced per person, which helps measure the overall wealth and quality of life in a country.

Here's why the other answers are wrong:

• A. Calculating the output of all industries: While this measures a country's total output, it does not show how wealth is distributed among people.


• B. Determining the volume of agricultural output: This only measures one part of the economy and does not fully reflect the standard of living.


• D. Determining the volume of imports into a country: The volume of imports does not directly measure the wealth or quality of life within the country.

Explanation:

The correct answer is:

A. Standard for deferred payment

Topic: Money and Credit

Money is used as a way to make payments later. When you buy goods on credit, you agree to pay in the future. Money’s role as a "standard for deferred payment" means it can be used to settle debts later, which makes buying on credit possible.

Here's why the other answers are wrong:

• B. Medium of exchange: This means money is used to buy goods and services right now, not to pay later.


• C. Unit of account: This means money helps measure the value of things, but it doesn’t explain how credit works.


• D. Store of value: This means money can be saved for future use, but it doesn't explain the idea of paying later for goods.

Explanation:

The correct answer is:

A. Income level is high

Topic: Transactions Demand for Money

When income is high, people and businesses make more transactions. This means more money is needed for everyday purchases and activities, which increases the demand for money in the economy.

Here's why the other answers are wrong:

• B. Family size is small: A smaller family size does not necessarily affect the amount of money needed for transactions.


• C. Interest rate on savings is high: High interest rates may affect saving behavior but do not directly influence the demand for money used in transactions.


• D. Unemployment level is high: High unemployment usually reduces spending and the need for money, so it lowers transaction demand.

Explanation:

The correct answer is:

B. A rise in the price of commodities

Topic: Inflation and Money Supply

If the money supply increases and there are fewer goods available, the demand for goods becomes higher than the supply. This causes prices to go up, leading to inflation. So, there will be a rise in the price of goods and services.

Here's why the other answers are wrong:

• A. Economic growth: Economic growth happens when both money supply and output increase. But in this case, the output is decreasing, which could lead to inflation instead of growth.


• C. A fall in the price of goods: With more money and less output, the price of goods is more likely to rise, not fall.


• D. Full employment: Full employment occurs when everyone who wants a job has one. An increase in money supply and decreased output does not automatically lead to full employment.

Explanation:

The correct answer is:

D. Formulating monetary policy

Topic: Functions of Commercial Banks

Commercial banks do not create or control monetary policy. This job is done by central banks, like the Central Bank of Liberia. Commercial banks help with things like distributing money, selling foreign exchange, and acting as trustees, but they don’t set the rules for money in the economy.

Here's why the other answers are wrong:

• A. Distribution of coins and currencies: Commercial banks do distribute coins and currencies to the public as part of their regular activities.


• B. Acting as trustees and executors: Commercial banks also provide services like acting as trustees for estates and managing assets for clients.


• C. Selling of foreign exchange: Commercial banks are involved in the buying and selling of foreign currencies to help with international trade and transactions.

Explanation:

The correct answer is:

C. Money in circulation is reduced

If the Central Bank makes banks keep more money in reserve (as cash), then there is less money available for people to borrow and spend. This means there is less money in the economy.

Here's why the other answers are wrong:

• A. Money in circulation is increased: More money is not in circulation. The cash-deposit ratio reduces how much money is available.


• B. Bank rate on loans is reduced: This is not directly related to the cash-deposit ratio. The ratio just affects how much money banks can lend.


• D. Interest paid on deposits is increased: Increasing the cash-deposit ratio does not automatically change the interest on deposits.

Explanation:

The correct answer is:

D. Total revenue is more than her total expenditure.

If a country’s income (from taxes and other sources) is greater than its spending, it has a budget surplus. This means the government has more money than it needs to spend.

Here's why the other answers are wrong:

• A. Total revenue equals her total expenditure: This is a balanced budget, not a surplus.


• B. Incomes from taxation and other sources are less than her expenditure: This would mean the country has a budget deficit, not a surplus.


• C. Incomes from exports are higher than payments on imports: This is about trade, not the country’s overall budget.

Explanation:

The correct answer is:

A. Perfectly inelastic

If demand is perfectly inelastic, consumers will buy the same amount of the product no matter how much the price goes up. So, if a tax makes the price higher, the consumer will still pay the higher price, and they will bear the full tax cost.

Here's why the other answers are wrong:

• B. Infinitely elastic: If demand were infinitely elastic, consumers would stop buying the product if the price increased at all, so the producer would bear the tax burden.


• C. Unit elastic: If demand is unit elastic, the tax burden is shared between the producer and consumer.


• D. Fairly inelastic: This would mean the consumer buys less if the price rises, so the producer would also share the tax burden.

Explanation:

The correct answer is:

C. Output of goods and services in a country

Economic growth means that a country is producing more goods and services over time. This is usually measured by an increase in GDP (Gross Domestic Product), which shows how much a country is producing and selling.

Here's why the other answers are wrong:

• A. Geographical size of a country: Economic growth isn't about the size of a country, but the amount it produces.


• B. Size of a country's population: More people doesn't directly mean more economic growth unless it leads to more production and services.


• D. Volume of a country's international trade: Trade can grow, but economic growth is more about how much the country produces itself.

Explanation:

The correct answer is:

B. Low per capita income

A developing country usually has a low per capita income. This means the average income of people is low because the country is still growing and improving in things like industry, infrastructure, and living standards. In developed countries, the average income is much higher.

Here's why the other answers are wrong:

• A. Low population growth rate: Developing countries often have higher population growth rates as their health systems and living conditions improve.


• C. High rate of industrialization: Developing countries tend to have lower levels of industrialization compared to developed nations.


• D. Highly diversified economy: Developing countries usually have economies that rely more on one or two industries, like agriculture or mining.

Explanation:

The correct answer is:

B. Balance of trade

The balance of trade is the difference between how much a country sells (exports) and buys (imports) in terms of physical goods like cars and machines. If a country sells more than it buys, it has a surplus. If it buys more than it sells, it has a deficit.

Here's why the other answers are wrong:

• A. Balance of payments: This is a bigger picture that includes all money transactions, not just goods.


• C. Balance on capital account: This is about money moving for investments, not goods.


• D. Balance on current account: This includes all things like goods and services, not just goods.

Explanation:

The correct answer is:

B. Reducing the value of the domestic currency

When a country has a deficit, it means it is spending more money than it is earning. To fix this, the country can lower the value of its currency. This makes the country's goods cheaper for other countries to buy, which can help increase exports and fix the deficit.

Why the other answers are wrong:

• A. Relaxing foreign exchange control: This doesn't solve the problem directly.


• C. Liberalizing imports of non-essential commodities: This would just increase imports, which makes the deficit worse.


• D. Placing embargo on the export of farm produce: Stopping exports would make the problem worse because the country would earn less money.

Explanation:

The correct answer is:

B. Make local industries charge higher prices.

Trade protection, like taxes on imports (tariffs), makes foreign goods more expensive. This gives local industries less competition, so they can raise their prices. With fewer cheap foreign options, people are more likely to buy local goods.

Why the other answers are wrong:

• A. Cause a fall in the price of imports: Trade protection makes imports more expensive, not cheaper.
• C. Increase the demand for imports: Protection actually makes imports less attractive by raising their prices.
• D. Increase domestic production of goods: While local production might go up due to less competition, this is not the main benefit of trade protection. The main benefit is higher prices for local industries.

Explanation:

The correct answer is:

A

In an economic union, countries agree to follow the same rules and policies. They work together on things like trade and money. This helps them become stronger as a group.

Why the other answers are wrong:

• B. A free trade area: Countries remove taxes on goods between them, but they don’t have to follow the same rules for everything.
• C. A customs market: This is about removing taxes on goods between countries, but it doesn’t need them to have the same rules.
• D. A common market: This allows goods, people, and services to move freely, but doesn’t require the countries to fully follow the same economic rules.

Explanation:

The correct answer is:

B

The IMF was not created to give long-term loans for big projects. It was set up to help countries when they have money problems, like when they don’t have enough foreign currency. It also helps to make sure money exchange between countries is stable.

Why the other answers are wrong:

• A. Stability of foreign exchange rates: One of the IMF’s jobs is to help countries keep their money systems stable, especially the value of their money.
• C. Temporary assistance: The IMF helps countries when they need quick help, like when they don’t have enough foreign money to pay for things.
• D. Balance of payments disequilibrium: The IMF also helps countries make sure they have a balance between what they buy and sell with other countries.

Explanation:

The correct answer is:

B. Royalties

Topic: Mining Payments

Mining companies pay royalties. This is money they give to the government or landowners for the right to take resources like gold or oil from the land.

Here’s why the other answers are wrong:

• A. Capital gains tax: This is a tax on money made from selling things, not from taking resources.


• C. Excise tax: This tax is on things that are sold, not on taking natural resources.


• D. Grants: Grants are money given for free, not something paid for using resources.