JAMB Commerce 2005
Questions & Answers

One might think of Efficiency or Equilibrium when evaluating economic systems, but those relate to resource allocation or market balance rather than the core restriction itself. When limited resources meet unlimited wants, the fundamental condition created is scarcity, requiring choices. Common mistake: Confusing the outcome of resource limits with the tools used to manage them.

Options like Mining and Farming might look like valid economic activities, but they belong to primary industries. Tertiary industries provide services, like banking, which distinguishes them from primary or secondary sectors. Common mistake: Failing to categorize business sectors correctly into primary, secondary, and tertiary.

Students might miscalculate by forgetting to apply the cash discount or adding percentages instead of multiplying. To find the correct amount paid, first compute the trade discount of 15% on ₦200,000, which gives ₦30,000 and reduces the price to ₦170,000. Next, apply the 5% cash discount to ₦170,000 to get ₦8,500, resulting in an final amount paid of ₦161,500. Common mistake: Applying both discounts directly to the original price simultaneously rather than sequentially.

A test-taker might confuse this with a Partnership or Sole proprietorship, but those are primarily for profit generation by individuals or small groups. A business formed by a voluntary association of individuals with common economic, social, and cultural needs is a cooperative society, which prioritizes mutual welfare. Common mistake: Confusing the mutual social goals of cooperatives with standard profit-seeking partnerships.

One might mistakenly believe that Decisions require unanimous consent, but partnerships operate under a specific legal framework of delegation. Mutual agency allows each partner to act for the firm, binding all partners to business agreements. Common mistake: Assuming all partnership choices require every single partner to vote.

Options like Prospectus or Certificate of Incorporation might seem plausible for company setup, but they deal with public shares or official registration status. The document that outlines the rules and regulations governing the internal management of a company is the Articles of Association. Common mistake: Confusing the external formation documents with internal administrative bylaws.

Students could mix this up with Retailing or Wholesaling, but those involve buying and selling rather than the physical holding function. Warehousing stores goods for future demand, bridging the time gap between production and consumption. Common mistake: Confusing the physical storage function of trade with the distribution channels.

You might choose a Department store or Supermarket, but those carry a wide variety of merchandise rather than a narrow focus. A small retail business that focuses on selling a specific type of product is a specialty store. Common mistake: Confusing broad multi-department stores with niche retail outlets.

One might think specialization leads to self-sufficiency, but it actually increases interdependence among producers and workers. Specialization boosts production and efficiency via focused skills. Common mistake: Believing that narrowing down a task makes a person or business more independent.

Choices like Instability of value or Difficulty in portability are undesirable traits, which makes them incorrect. Durability ensures money withstands physical wear and tear over time. Common mistake: Selecting characteristics that make currency less reliable or functional.

A student might incorrectly calculate 25% of the selling price instead of the cost price, leading to the wrong figure. Given that the selling price equals 1.25 times the cost price (since selling price is cost plus 25% profit), dividing ₦500 by 1.25 gives a cost price of ₦400. Common mistake: Calculating the profit percentage using the selling price instead of the cost price base.

Options like Point-of-sale displays or Free samples are forms of below-the-line promotion because they involve direct or targeted marketing. Above-the-line promotion uses mass media, like television commercials. Common mistake: Confusing direct promotional incentives with mass media advertising.

One might guess that branding aims to reduce production cost, but marketing strategies rarely lower manufacturing expenses. Branding differentiates a product, fostering recognition and consumer loyalty. Common mistake: Linking marketing efforts directly to internal manufacturing efficiencies.

Students could pick Long-term investment decisions or Setting strategic direction, but those belong to top-level management. Middle-level management coordinates departmental activities and bridges upper management with lower staff. Common mistake: Confusing departmental coordination with executive long-term planning.

Options such as Debentures or Retained earnings represent long-term capital or internal long-term funding. A bank overdraft is a short-term, repayable-on-demand financing method. Common mistake: Confusing permanent capital structures with immediate short-term credit facilities.

One might mistakenly select Resources owned, which defines assets rather than obligations. Liabilities represent amounts owed by a business to external parties. Common mistake: Mixing up what a business owns with what it owes.

Students might think the NDIC regulates banks, but currency issuance is specifically a Central Bank function, making issuing currency the correct choice for what the NDIC does NOT do. Common mistake: Overlapping the duties of deposit insurance corporations with the central monetary authority.

A student might mistakenly include inventory in the calculation, using current assets directly without subtracting inventory first. Quick assets equal ₦250,000 minus ₦80,000, which gives ₦170,000, and dividing this by current liabilities of ₦100,000 yields a quick ratio of 1.7:1. Common mistake: Forgetting to remove less-liquid inventory from current assets when computing the quick ratio.

Options like Open market operations or Setting cash reserve ratio are monetary policy tools managed by the central bank. Fiscal policy uses government expenditure and taxation to influence the economy. Common mistake: Confusing central bank monetary tools with government budgetary and tax policies.

Students might mistakenly pick importing or imposing tariffs as methods, but international trade relies on countries focusing on what they make best. By concentrating on efficient production, nations can maximize output and trade effectively. Common mistake: Confusing absolute advantage with general trade barriers or universal importing.