Student Education Number
Marker Code
FA 'A VA E I L E A T UA S A M OA
GOVERNMENT OF SĀMOA
MINISTRY OF EDUCATION, SPORTS & CULTURE
SĀMOA SCHOOL CERTIFICATE EXAMINATION
ECONOMICS
2014
QUESTION and ANSWER BOOKLET
TIME ALLOWED
3 HOURS (plus 10 minutes reading time)
TOTAL MARKS
200
INSTRUCTIONS
1.
2.
This paper is in THREE sections.
ALL sections are COMPULSORY.
•
SECTION ONE
Part 1
Part 2
PRODUCTION
Multiple Choice Questions
Short Answers
60 marks
5 marks
55 marks
•
SECTION TWO
Part 1
Part 2
CONSUMPTION
Multiple Choice Questions
Short Answers
50 marks
5 marks
45 marks
•
SECTION THREE
Part 1
Part 2
THE MARKET
Multiple Choice Questions
Short Answers
90 marks
5 marks
85 marks
TOTAL
3.
4.
5.
6.
7.
8.
9.
10.
200 marks
Write your Student Education Number in the right-hand box above and on the flap page
at the back.
Write your Marker Code in the left-hand box above.
Answer Multiple Choice questions in the boxes provided.
Answer the Short Answers in the spaces provided for every question.
Spend at least one minute for a one-mark question.
If you require more paper, ask the supervisor for extra sheets.
Answer all questions with a blue or black ballpoint pen. Red pens and pencils are not
allowed.
Check that this booklet contains pages 1 to 31 plus the flap page at the back.
DO NOT TURN THIS PAGE UNTIL YOU ARE TOLD TO DO SO.
2
SECTION ONE
PART 1
PRODUCTION
60 MARKS
MULTIPLE CHOICE
(5 MARKS)
Select the BEST answer and write it in the appropriate box provided.
1.
Meti owns 5% of Money Corporation, a company that specializes in providing financial
assistance to individuals and businesses as well as saving facilities.
Which of the following service industries is Money Corporation a part of?
A.
B.
C.
D.
2.
Finance
Banking
Insurance
Accounting
In establishing their Law Firm, Rudy and Peter used a total of $500,000. Of this amount,
30% was contributed by Peter, 50% by Rudy and the rest was borrowed from ANZ Bank.
Which of the following gives an accurate account of the business equity?
A.
B.
C.
D.
3.
Outside equity = $400,000, owner’s equity $100,000
Outside equity = $100,000, owner’s equity $400,000
Outside equity = $250,000, owner’s equity $250,000
Outside equity = $150,000, owner’s equity $350,000
A new firm which enters the market for taro chips, drives the price of taro chips down.
Which of the following diagram represents the effect of this event?
A.
B.
S0
P($)
P($)
C.
S0
Q
S0
Q
S1
D.
S1
S0
P($)
P($)
Q
Q
Page 2
3
3
4.
Which of the following definitions best explains the term diminishing returns?
A.
B.
C.
D.
5.
When marginal output declines with each successive unit of a variable input.
When average output declines with each successive unit of a variable input.
When marginal output increases as input declines by one unit.
When average output increases as input declines by one unit.
Which of the following accurately states the disadvantages of a sole trader?
A.
B.
C.
D.
More capital, limited liability.
Difficulty to expand, unlimited liability.
Owner owns all profits; flexibility of owner’s working hours.
Responsibilities are divided; profits are shared between family members.
Page 3
2
4
PART 2
SHORT ANSWERS
Question 6
Services Industries
1.
[55 MARKS]
(17 marks)
Explain any TWO distinguishing characteristics of a private and public company.
(i)
__________________________________________________________________
__________________________________________________________________
(ii)
__________________________________________________________________
__________________________________________________________________
2 marks
2.
Using your knowledge of the service industry, explain why a company like BlueSky is
essential to your school and why BlueSky would be dependent on your school.
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
2 marks
3.
Below is a list of the different types of producers.
(i)
(ii)
For each of the photos given, state the type of producer from the list that it
represents. Note that not all terms in the list will be used.
Justify your response with a defining characteristic of each of the businesses in the
photos. Give a characteristic of each of the businesses in the photos that can justify
your response in Question 3(i) above.
Sole Trader
Government Department
Non-profit Organization
Private Company
Partnership
State-owned Enterprise
Cooperative
Public Company
Multinational Corporation
(a) Type of Producer: ______________________________
Justification:___________________________________
_____________________________________________
_____________________________________________
2 marks
Page 4
6
5
(b)
Type of Producer: ____________________________________
Justification
______________________________________________________
__________________________________________________________________
2 marks
(c)
Type of Producer ___________________________________
Justification
______________________________________________________
__________________________________________________________________
2 marks
(d)
Type of Producer ___________________________________
Justification
______________________________________________________
__________________________________________________________________
2 marks
Page 5
6
6
4.
Distinguish between corporatization and privatization as it applies to government
owned organizations.
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
3 marks
5.
Give a local example of each of the above processes as described in Question 4 above.
Corporatization
______________________________________________________
Privatization
______________________________________________________
2 marks
Q6
Page 4
+
6
Page 6
Page 5
=
+
6
5
17
7
Question 7
1.
Productivity
(14 marks)
Suppose you are the owner of a small bakery. Your business has been experiencing
diminishing returns which eventually led to a decline in productivity over time,
as shown in the following table.
Bakery X
(i)
Labor
Total Output
Total Cost
Productivity
1
50
$50
50
2
105
$100
52.5
3
150
$142
50
4
190
$180
Calculate the productivity for the 4th labor. (Show working).
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
2 marks
(ii)
After which levels of labor do the following occur?
(a)
Increasing returns
__________________________________________
(b)
Diseconomies of scale__________________________________________
2 marks
(iii)
Explain any TWO strategies that you as an owner would employ to increase the
productivity of your bakery.
(a)
____________________________________________________________
____________________________________________________________
(b)
____________________________________________________________
____________________________________________________________
2 marks
Page 7
6
8
(iv)
Give TWO possible reasons for the decline in productivity as shown in the table.
(a)
____________________________________________________________
____________________________________________________________
(b)
____________________________________________________________
____________________________________________________________
2 marks
(v)
Below are some of the resources used by your bakery. Classify these into the
correct categories by writing them under the appropriate type of resources given in
the table.
Flour
Butter
Natural
Land
Baker
Man-made
Manager
Water
Labor
Entrepreneurship
6 marks
6
Q7
Page 8
Page 7
+
8
=
14
9
Question 8
1.
Supply
(24 marks)
Define ceteris paribus with reference to supply.
________________________________________________________________________
________________________________________________________________________
1 mark
2.
Study the table below and answer the questions that follow.
Supply of Ice Pops by Ice Cool
(i)
Price $
Quantity (Bags)
20
50
25
60
30
70
35
85
With reference to the above table, explain what is meant by the Law of Supply.
__________________________________________________________________
__________________________________________________________________
1 mark
(ii)
Construct a fully-labelled supply curve using the above information.
7 marks
Page 9
9
10
(iii)
Explain what would happen if the government decided to raise the minimum wage.
__________________________________________________________________
__________________________________________________________________
1 mark
(iv)
Illustrate the effect of the above change on the supply curve you have drawn in (ii)
on page 9.
1 mark
(v)
Illustrate the effect of a price change from $30 to $20 on your graph in page 9.
1 mark
(vi)
Suggest any TWO reasons, specific to the supply of ice pops that would lead to an
increase in supply.
(a)
____________________________________________________________
(b)
____________________________________________________________
2 marks
(vii)
Distinguish between a movement along and a shift of the supply curve.
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
3 marks
(viii) Explain why producers tend to supply more when the price of a product is higher.
__________________________________________________________________
__________________________________________________________________
1 mark
(ix)
Define market supply with reference to individual supply.
__________________________________________________________________
__________________________________________________________________
1 mark
Page 10
10
11
3.
Lisa is an individual producer supplying both ice cakes and ice pops at the same time.
(i)
Explain how a decline in the price of ice pops would affect Lisa’s supply of ice
cakes and why.
Effect on the supply of ice cakes
__________________________________________________________________
Reason ____________________________________________________________
__________________________________________________________________
3 marks
(ii)
A sudden increase in the price of sugar also affects Lisa’s supply of both products.
Explain the effect of this event on both products giving justification for your
answer.
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
2 marks
Page 10
Page 9
9
+
10
Q8
Page 11
+
=
5
24
12
SECTION TWO
PART 1
CONSUMPTION
50 MARKS
MULTIPLE CHOICE
(5 MARKS)
Select the BEST answer and write it in the appropriate box provided.
1.
Which of the following gives the correct definition of demand?
A.
B.
C
D.
2.
The quantity a consumer is able to buy.
The quantity a consumer is willing to buy.
The quantity a consumer is willing and able to buy at a certain price.
The quantity a consumer is willing and able to buy regardless of the price.
Study the following diagram and answer the question which follows.
Demand for Havaianas Jandals
P($)
D1
D0
Qty
Which of the following could have caused the above change in demand?
A.
B.
C.
D.
3.
An increase in the population.
A reduction in the price of Roxy jandals.
An increase in the price of Havaianas jandals.
A reduction in the cost of producing Havaianas jandals.
What are consumption possibilities?
A.
B.
C.
D.
The possible combinations of two goods a producer can offer to
consumers for free.
The possible combinations of two goods a consumer can buy with
a limited income.
The possible combinations of two goods a consumer can buy with
unlimited income.
The possible combinations of two goods producers can produce for
consumers to purchase.
Page 12
3
13
4.
A point outside of the consumption possibility curve indicates
A.
B.
C.
D.
5.
idle income.
full-utilization of income.
under-utilization of income.
an impossible combination given the limited income.
In the market for Beats headphones, the Law of Demand states that as the price of Beats
headphones increases,
A.
B.
C.
D.
demand will decrease.
demand will also increase.
quantity demanded will decrease.
quantity demanded will also increase.
Page 13
2
14
PART 2
SHORT ANSWERS
[45 MARKS]
Demand
(15 marks)
Question 6
Study the following diagrams and answer the questions that follow.
In a hypothetical market for Good X, only 3 consumers exist to whom the demand curves below
belong.
Mila
Rona
Price
4 $
Price
4 $
Price
4$
3
3
3
2
2
2
1
1
1
0
0
0
1.
1
2
Quantity
3
4
Lani
0
0
1
2
3
4
Quantity
5
6
0
1
2
3
4
Quantity
5
6
Using the curves above, complete the Market Demand Schedule for Good X.
Market Demand for Good X
6 marks
Page 14
6
15
2.
Distinguish between individual and market demand.
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
2 marks
3.
Describe TWO specific reasons for the difference in demands between Rona, Mila and
Lani.
(i)
__________________________________________________________________
(ii)
__________________________________________________________________
2 marks
4.
Suppose a 4th consumer were to enter the market. Using the graph below sketch the effect
of this event on the demand for Good X.
Good X
P($)
D0
Q
1 mark
5.
Explain your response in Question 4 above.
________________________________________________________________________
________________________________________________________________________
_______________________________________________________________________
2 marks
Page 15
7
16
6.
Explain how a 100% increase in the price of Good Y, a substitute of Good X, would affect
the demand for Good X.
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
1 mark
7.
Illustrate your response to Question 6 above on the following graph.
Good X
P($)
D0
Q
1 mark
Page 15
Page 14
6
+
7
Question 6
Page 16
+
2
=
15
17
Question 7
Consumption Possibilities
(30 marks)
Study the table below and answer the questions that follow.
Tiana’s Consumption Possibility Curve for Doughnuts and Coke
Combination
A
B
C
D
E
F
G
H
I
J
K
1.
Doughnuts
20
18
16
14
12
10
8
6
4
2
0
Coke
0
1
2
3
4
5
6
7
8
9
10
Use the grid below to construct a fully-labelled Consumption Possibility Curve for Tiana.
Plot Doughnuts on the Y-axis and Coke on the X-axis.
11 marks
Page 17
11
18
2.
Explain ONE reason why the Consumption Possibility Curve in No. 1 would be useful to
Tiana.
________________________________________________________________________
________________________________________________________________________
1 mark
3.
Suppose that the price of a can of coke is $3. Use this and the information given on
page 17 to;
(i)
calculate Tiana’s total income. (Show working).
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
2 marks
(ii)
calculate the price of one doughnut. (Show working).
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
2 marks
4.
On your graph on page 17, label any TWO points X and Y where Tiana’s income is being
fully utilized.
2 marks
5.
Identify a combination where Tiana would have left-over income.
___________________ doughnut(s) AND __________________ coke(s)
6.
2 marks
Give a reason for your response above.
________________________________________________________________________
________________________________________________________________________
2 marks
Page 18
11
19
7.
Suppose Tiana buys 7 doughnuts and 9 cokes.
(i)
Plot this point on your curve on page 17. Label it Z.
1 mark
(ii)
Explain what would have to happen to enable Tiana to buy this combination.
__________________________________________________________________
__________________________________________________________________
2 marks
(iii)
8.
Illustrate the effect of the event in Question 7(ii) above on Tiana’s consumption
Possibility Curve on page 17.
3 marks
Calculate the opportunity cost of moving from point A to D.
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
2 marks
Page 17
11
Page 18
+
11
Question 7
Page 19
+
8
=
30
20
THE MARKET
90 MARKS
MULTIPLE CHOICE
(5 MARKS)
SECTION THREE
PART 1
Select the BEST answer and write it in the appropriate box provided.
1.
Which of the following best describes the 5-Sector Circular Flow Diagram?
A.
B.
C.
D.
2.
A diagram showing the flow of money within a closed economy.
A diagram showing the flows of money and goods within an economy.
A diagram showing the flows of money, goods and resources within an economy.
A diagram showing the flows of money, goods and resources in an open economy.
Good money must be available in a limited supply as having unlimited supply will lead to
a decline in its value.
Which two characteristics of money are described above?
A.
B.
C.
D.
3.
What would happen to the market JanSport schoolbags if the price of Adidas schoolbags
was to be slashed by 50%?
A.
B.
C.
D.
4.
Demand would increase causing price and quantity to increase.
Demand would decrease causing price and quantity to decrease.
Supply would increase causing price to decrease and quantity to increase.
Supply would decrease causing price to increase and quantity to decrease.
The market for mobile telecommunication services in Samoa is an example of what type
of market?
A.
B.
C.
D.
5.
Durable and divisible.
Portable and legal tender.
Scarce and stable in value.
Homogenous and acceptable.
Monopoly
Duopoly
Oligopoly
Monopolistic competition
To distinguish from Coca Cola products, Taxi soft drinks have produced flavours that are
not available in the Coca Cola range. This is an example of
A.
B.
C.
D.
Branding
Loyalty Programs
Product Variation
Product Differentiation
Page 20
5
21
PART 2
SHORT ANSWERS
Question 6
[85 MARKS]
Market Curves
(25 marks)
Study the following information and answer the questions that follow.
Market for Cupcakes
1.
Price
($)
Quantity
Demanded
Quantity
Supplied
3.50
3.00
2.50
2.00
1.50
1.00
0.50
5
15
25
45
60
100
200
90
80
65
45
30
5
0
Using the information above and the grid below, construct a fully-labelled set of market
curves for cupcakes.
11 marks
Page 21
11
22
2.
Explain in economic terms the situation occurring at a price of $2.
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
2 marks
3.
Suppose the government decides to set the maximum price at $1.50.
(i)
Illustrate the effect of this decision on your graph on page 21.
(ii)
Give a possible reason for such a decision.
2 marks
__________________________________________________________________
1 mark
(iii)
Explain with reference to the curve on page 21 what would happen to the market
for cupcakes as a result of the above decision.
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
2 marks
(iv)
Describe what would have to happen after the imposition of the maximum price in
order for the market to reach the equilibrium situation.
__________________________________________________________________
__________________________________________________________________
2 marks
4.
Alternatively, the government may decide to impose a subsidy on 30 sene a cupcake.
(i)
Illustrate the effect this decision may have on the curve(s) on page 21.
Label it X.
3 marks
(ii)
What has happened to the equilibrium quantity?
__________________________________________________________________
__________________________________________________________________
2 marks
+
11
Question 6
Page 22
Page 21
14
=
25
23
Question 7
1.
The Circular Flow
(15 marks)
Use your knowledge of the Samoan economy to complete the following diagram by
identifying one real local producer that is representative of each of the three missing
sectors.
savings
interest
(i)
(ii)
payments
subsidies
HOUSEHOLDS
public
goods and
services
taxes
tourism
payments
(iii)
(iv)
tourism
OVERSEAS
SECTOR
3 marks
2.
Identify the appropriate labels for the flows labelled (i) – (iv).
(i)
__________________________________________________________________
(ii)
__________________________________________________________________
(iii)
__________________________________________________________________
(iv)
__________________________________________________________________
4 marks
3.
Which of the above sectors represents the money market?
________________________________________________________________________
1 mark
Page 23
8
24
4.
Define the following and identify the flow from the diagram on page 23 which represents
each of them.
(i)
Gross National Expenditure
Definition__________________________________________________________
__________________________________________________________________
Flow______________________________________________________________
2 marks
(ii)
Gross Domestic Product
Definition__________________________________________________________
__________________________________________________________________
Flow______________________________________________________________
2 marks
(iii)
Gross National Income
Definition__________________________________________________________
__________________________________________________________________
Flow______________________________________________________________
2 marks
5.
What TWO sectors would need to exist in order for the equation GNE = GDP = GNI to
hold true?
________________________________________________________________________
1 mark
Question 7
Page 23
Page 24
+
8
7
=
15
25
Question 8
1.
(10 marks)
Each of the following terms represents a different stage in the development of money.
1.
2.
3.
4.
Barter system
Commodity Money
Goldsmiths
Notes and Coins
For any TWO of these stages,
(i)
(ii)
clearly describe what it means and
state ONE disadvantage people may encounter in using it in trade.
(a)
Stage ______________________________________
Definition____________________________________________________
____________________________________________________________
Disadvantage_________________________________________________
____________________________________________________________
2 marks
(b)
Stage ______________________________________
Definition____________________________________________________
____________________________________________________________
Disadvantage_________________________________________________
____________________________________________________________
2 marks
2.
A notable form of money used nowadays is debit cards.
(i)
Give ONE advantage and ONE disadvantage to consumers of using debit cards.
Advantage__________________________________________________________
__________________________________________________________________
Disadvantage_______________________________________________________
__________________________________________________________________
2 marks
Page 25
6
26
(ii)
State another alternative name given to debit cards.
__________________________________________________________________
1 mark
3.
One of the characteristics of good money is that it must be able to stand up to wear and
tear of being used frequently.
In your own words, explain what is meant by the phrase wear and tear.
________________________________________________________________________
________________________________________________________________________
1 mark
4.
State the term which represents the main disadvantage of the barter system.
________________________________________________________________________
1 mark
5.
Describe any ONE function of money as it is used nowadays.
________________________________________________________________________
________________________________________________________________________
1 mark
Question 8
Page 26
Page 25
=
+
6
4
10
27
Question 9
1.
The Quantity Theory of Money
(8 marks)
In a hypothetical economy, the money supply = $30 million, velocity = 4 and the quantity
of goods produced amounted to 15 million.
(i)
Calculate the average price level using the Equation of Exchange. (Show working).
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
2 marks
(ii)
In the following year, prices increased by 50% whilst velocity and quantity
remained fixed. Calculate the new level of M (money supply). (Show working).
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
2 marks
(iii)
Calculate how much the money supply has changed by AND state whether this
change is an increase or a decrease.
Calculation_________________________________________________________
Increase or Decrease? ________________________________________________
2 marks
2.
Identify the TWO components of the money supply (M1).
(i)
__________________________________________________________________
(ii)
__________________________________________________________________
2 marks
Question 9
8
28
Question 10
Inflation
(12 marks)
Study the following table and answer the questions that follow.
Year
Average Price
2010
94
2011
96
2012
100
2013
106
Base – 2010 = 1000
1.
Use the information provided in the table above to calculate the CPI figures for years
2011 – 2013.
Year
CPI
2010
1000
2011
2012
2013
3 marks
2.
Calculate the annual inflation rates for the following years. Round to the 1st decimal place.
Year
Inflation Rate
2010
-
2011
2.1%
2012
2013
2 marks
Page 28
5
29
3.
Explain what a CPI of 1021 means.
________________________________________________________________________
________________________________________________________________________
1 mark
4.
Distinguish between demand-pull and cost-push inflation.
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
2 marks
5.
Identify any ONE cause of each of two types of inflation below.
Demand Pull ____________________________________________________________
Cost Push
____________________________________________________________
2 marks
6.
Inflation is seen as an undesirable event as it can have adverse effects on both producers
and consumers. Describe how producers and consumers can be adversely affected during
times of inflation.
Producers________________________________________________________________
________________________________________________________________________
Consumers_______________________________________________________________
________________________________________________________________________
2 marks
Question 10
Page 28
5
Page 29
+
=
7
12
30
Question 11
1.
Types of Competition
(15 marks)
From your knowledge of the Samoan economy, define and give ONE example of a
market/industry that is representative of each of the following.
Perfect Competition
Definition
____________________________________________________________
____________________________________________________________
Example
____________________________________________________________
2 marks
Oligopoly
Definition
____________________________________________________________
____________________________________________________________
Example
____________________________________________________________
2 marks
Monopolistic Competition
Definition
____________________________________________________________
____________________________________________________________
Example
____________________________________________________________
2 marks
2.
A monopoly is a market structure whereby one firm supplies the whole market.
(i)
Describe TWO other characteristics of a monopoly.
(a)
____________________________________________________________
(b)
____________________________________________________________
2 marks
(ii)
Explain why a monopoly market would not be desirable in the eyes of the
consumers.
__________________________________________________________________
__________________________________________________________________
1 mark
Page 30
9
31
(iii)
Describe how a producer may stand to benefit if they were to become a monopoly.
__________________________________________________________________
__________________________________________________________________
1 mark
3.
Similar producers compete against each other through Price competition and Non-price
competition. Price competition however, may lead to a price war, which can lead to
consumer gains and producer losses.
(i)
Describe clearly what it means by the statement in bold above.
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
2 marks
(ii)
Identify any TWO types of non-price competition that supermarkets like Farmer
Joe’s and Frankie’s may use to compete for market shares.
(a)
____________________________________________________________
(b)
____________________________________________________________
2 marks
(iii)
Explain what is meant by product variation.
__________________________________________________________________
__________________________________________________________________
1 mark
Question 11
Page 30
9
Page 31
+
=
6
15
32
Student Education Number
FOR MARKER’S USE ONLY
SECTION ONE
Part 1
5
Part 2
55
SECTION TWO
Part 1
5
Part 2
45
SECTION THREE
Part 1
5
Part 2
85
TOTAL
Section One
60
Section Two
+
50 +
Section Three
90
=
200