Marker Code Student Education Number

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. This paper is in THREE sections.
2. ALL sections are COMPULSORY.

• SECTION ONE PRODUCTION 60 marks

Part 1 Multiple Choice Questions 5 marks
Part 2 Short Answers 55 marks

• SECTION TWO CONSUMPTION 50 marks

Part 1 Multiple Choice Questions 5 marks
Part 2 Short Answers 45 marks

• SECTION THREE THE MARKET 90 marks

Part 1 Multiple Choice Questions 5 marks
Part 2 Short Answers 85 marks
TOTAL 200 marks
3. Write your Student Education Number in the right-hand box above and on the flap page
at the back.
4. Write your Marker Code in the left-hand box above.
5. Answer Multiple Choice questions in the boxes provided.
6. Answer the Short Answers in the spaces provided for every question.
7. Spend at least one minute for a one-mark question.
8. If you require more paper, ask the supervisor for extra sheets.
9. Answer all questions with a blue or black ballpoint pen. Red pens and pencils are not
allowed.
10. 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 PRODUCTION 60 MARKS

PART 1 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. Finance
B. Banking
C. Insurance
D. Accounting

2. 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. Outside equity = $400,000, owner’s equity $100,000

B. Outside equity = $100,000, owner’s equity $400,000
C. Outside equity = $250,000, owner’s equity $250,000
D. Outside equity = $150,000, owner’s equity $350,000

3. 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. S0 B. S0

P($) P($)

Q Q
S0 S1
C. S1 D. S0
P($)
P($)

Q Q

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4. Which of the following definitions best explains the term diminishing returns?

A. When marginal output declines with each successive unit of a variable input.
B. When average output declines with each successive unit of a variable input.
C. When marginal output increases as input declines by one unit.
D. When average output increases as input declines by one unit.

5. Which of the following accurately states the disadvantages of a sole trader?

A. More capital, limited liability.

B. Difficulty to expand, unlimited liability.
C. Owner owns all profits; flexibility of owner’s working hours.
D. Responsibilities are divided; profits are shared between family members.

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PART 2 SHORT ANSWERS [55 MARKS]

Question 6 Services Industries (17 marks)

1. 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) 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.
(ii) 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 Private Company Cooperative

Government Department Partnership Public Company
Non-profit Organization State-owned Enterprise Multinational Corporation

(a) Type of Producer: ______________________________

Justification:___________________________________
_____________________________________________
_____________________________________________
2 marks

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(b)

Type of Producer: ____________________________________

Justification ______________________________________________________
__________________________________________________________________
2 marks

(c)

Type of Producer ___________________________________

Justification ______________________________________________________
__________________________________________________________________
2 marks

(d)

Type of Producer ___________________________________

Justification ______________________________________________________
__________________________________________________________________
2 marks

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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
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6 6 5 17
 7

Question 7 Productivity (14 marks)

1. 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

Labor Total Output Total Cost Productivity

1 50 $50 50

2 105 $100 52.5

3 150 $142 50

4 190 $180

(i) 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

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(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 Land Manager

Butter Baker Water

Natural Man-made Labor Entrepreneurship

6 marks

Q7
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 9

Question 8 Supply (24 marks)

1. 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

Price $ Quantity (Bags)

20 50

25 60

30 70

35 85

(i) 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

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 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

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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

Q8
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 12

SECTION TWO CONSUMPTION 50 MARKS

PART 1 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. The quantity a consumer is able to buy.

B. The quantity a consumer is willing to buy.
C The quantity a consumer is willing and able to buy at a certain price.
D. The quantity a consumer is willing and able to buy regardless of the price.

2. 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. An increase in the population.

B. A reduction in the price of Roxy jandals.
C. An increase in the price of Havaianas jandals.
D. A reduction in the cost of producing Havaianas jandals.

3. What are consumption possibilities?

A. The possible combinations of two goods a producer can offer to

consumers for free.
B. The possible combinations of two goods a consumer can buy with
a limited income.
C. The possible combinations of two goods a consumer can buy with
unlimited income.
D. The possible combinations of two goods producers can produce for
consumers to purchase.
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4. A point outside of the consumption possibility curve indicates

A. idle income.
B. full-utilization of income.
C. under-utilization of income.
D. an impossible combination given the limited income.

5. In the market for Beats headphones, the Law of Demand states that as the price of Beats
headphones increases,

A. demand will decrease.

B. demand will also increase.
C. quantity demanded will decrease.
D. quantity demanded will also increase.

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PART 2 SHORT ANSWERS [45 MARKS]

Question 6 Demand (15 marks)

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.

Rona Mila Lani

Price Price Price
4 $ 4 $ 4$

3 3 3

2 2 2

1 1 1

0 0 0
0 1 2 3 4 0 1 2 3 4 5 6 0 1 2 3 4 5 6
Quantity Quantity Quantity

1. Using the curves above, complete the Market Demand Schedule for Good X.

Market Demand for Good X

6 marks

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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

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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

Question 6
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6 7 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 Doughnuts Coke

A 20 0
B 18 1
C 16 2
D 14 3
E 12 4
F 10 5
G 8 6
H 6 7
I 4 8
J 2 9
K 0 10

1. 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

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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) 2 marks

6. Give a reason for your response above.

________________________________________________________________________
________________________________________________________________________
2 marks

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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) Illustrate the effect of the event in Question 7(ii) above on Tiana’s consumption
Possibility Curve on page 17.
3 marks

8. Calculate the opportunity cost of moving from point A to D.

________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
2 marks

Question 7
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 20

SECTION THREE THE MARKET 90 MARKS

PART 1 MULTIPLE CHOICE (5 MARKS)

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. A diagram showing the flow of money within a closed economy.

B. A diagram showing the flows of money and goods within an economy.
C. A diagram showing the flows of money, goods and resources within an economy.
D. A diagram showing the flows of money, goods and resources in an open economy.

2. 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. Durable and divisible.

B. Portable and legal tender.
C. Scarce and stable in value.
D. Homogenous and acceptable.

3. What would happen to the market JanSport schoolbags if the price of Adidas schoolbags
was to be slashed by 50%?

A. Demand would increase causing price and quantity to increase.

B. Demand would decrease causing price and quantity to decrease.
C. Supply would increase causing price to decrease and quantity to increase.
D. Supply would decrease causing price to increase and quantity to decrease.

4. The market for mobile telecommunication services in Samoa is an example of what type
of market?

A. Monopoly
B. Duopoly
C. Oligopoly
D. Monopolistic competition

5. 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. Branding
B. Loyalty Programs
C. Product Variation
D. Product Differentiation

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PART 2 SHORT ANSWERS [85 MARKS]

Question 6 Market Curves (25 marks)

Study the following information and answer the questions that follow.

Market for Cupcakes

Price Quantity Quantity

($) Demanded Supplied
3.50 5 90
3.00 15 80
2.50 25 65
2.00 45 45
1.50 60 30
1.00 100 5
0.50 200 0

1. Using the information above and the grid below, construct a fully-labelled set of market
curves for cupcakes.

11 marks

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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. 2 marks

(ii) Give a possible reason for such a decision.

__________________________________________________________________
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

Question 6
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Question 7 The Circular Flow (15 marks)

1. 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 taxes
goods and
services
tourism
(iii) payments

(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

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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
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Question 8 (10 marks)

1. Each of the following terms represents a different stage in the development of money.

1. Barter system
2. Commodity Money
3. Goldsmiths
4. Notes and Coins

For any TWO of these stages,

(i) clearly describe what it means and

(ii) 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

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(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
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Question 9 The Quantity Theory of Money (8 marks)

1. 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
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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

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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
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 30

Question 11 Types of Competition (15 marks)

1. 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

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(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
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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 Section Two Section Three

+
60 50 + 90
=
200