Kiribati National Certificate
ECONOMICS
2012
QUESTION and ANSWER BOOKLET
Time allowed: 3 hours (plus 10 minutes reading time)
Marks
105
INSTRUCTIONS:
1. This exam consists of SIX COMPULSORY Sections.
Section A: The Economic System and The Economic Problem 10 marks
Part I Multiple Choice 5 Marks
Part II Short Answer 5 Marks
Section B: Production and Producer’s Decisions 28 marks
Part I Multiple Choice 5 Marks
Part II Short Answer 23 Marks
Section C: Consumption and Consumer’s Decisions 23 marks
Part I Multiple Choice 5 Marks
Part II Short Answer 18 Marks
Section D: Business and The Accounting System 12 marks
Part I Multiple Choice 5 Marks
Part II Short Answer 7 Marks
Section E: International Trade and Role of Government 12 marks
Part I Multiple Choice 5 Marks
Part II Short Answer 7 Marks
Section F: Money, Banking and The Market 20 marks
Part I Multiple Choice 5 Marks
Part II Short Answer 15 Marks
2. For Part I, circle the letter of your chosen answer and for Part II, write your answers on the spaces provided for each question.
SECTION A: THE ECONOMIC SYSTEM AND THE ECONOMIC PROBLEM (10 MARKS)
1) A situation in which people’s wants exceed their resources is called
A. abundance B. allocation C. choice D. scarcity
2) Which of the following is true about an entrepreneur?
A. Assumes the risk and bears the loss if the business fails B. Does not support the idea that gives rise to the business C. Is non-innovative in developing the business
D. Makes no decision in running the business
Use the information below to answer Q3 and Q4
3) The opportunity cost of a local council decision is
A. extending the library B. fixing the sewerage C. keeping the money D. setting up a park
4) The most satisfactory definition of opportunity cost is the
A. loss suffered by consumers
B. first opportunity foregone after a choice is made C. sacrifice of any alternative choice
D. sacrifice of the next most desired alternative
5) Capital, is a factor of production that refers to
A. entrepreneurship B. human resources C. man-made resources D. natural resources
Part I: Multiple Choice Questions (5 marks)
Circle the letter of your chosen answer
A local council has to decide between extending a library, setting up a park and fixing the sewerage. They decide on fixing the sewerage followed by the library extension.
Question 6. Circular Flow Model (5 marks) The items listed below are the parts of a simple circular flow model:
Producers
Households
Factors of production
Factor rewards
Use the information above to answer the following questions: (a). Distinguish between households and producers.
__________________________________________________________________________________________________ __________________________________________________________________________________________________ __________________________________________________________________________________________________
(2 marks)
(b). Show the relationship between households and producers using a simple circular flow model
(3 marks) Part II: Short Answer Questions (5 marks)
Attempt all Questions and write your answer on the space provided for each question
5
5 Part II 5 = Total 10
SECTION B: PRODUCTION AND PRODUCERS’ DECISIONS (28 MARKS)
1) Division of Labour is seen when workers undertake A. dual operations
B. specialized tasks C. trade union activities D. unskilled tasks
2) Production in a subsistence economy is determined by
A. commodities people are prepared to pay for B. commodities people want to make
C. overall planning targets
D. resources available in the surrounding area
3) A shift of the supply curve for a good is caused by a change in the
A. consumers’ income B. demand for the good
C. price of a complement to the good D. price of another good the firm produces
4) Which ONE from the following is an example of a public producer?
A. Central government B. Co-operatives C. Firms
D. Voluntary organizations
5) The difference between renewable and non-renewable resources is
A. non-renewable resources last for ever B. non-renewable resources are man-made C. renewable resources are sustainable D. renewable resources are in shortage supply
Part I: Multiple Choice Questions (5 marks)
Circle the letter of your chosen answer
Question 6: Types of Industries (5 marks) (a) The photograph below shows the Transport Industry.
(Source: Economics Studies by K. Jones, et. al.)
(i). Explain how the business and the transport are inter-dependent?
__________________________________________________________________________________________________ __________________________________________________________________________________________________ __________________________________________________________________________________________________ (2 marks)
(b) Classify the following people according to whether they work in primary, secondary or tertiary industries.
(i). Rental Car operator: ___________________________________________________ (1 mark)
(ii). Vegetable Farmer: ___________________________________________________ (1 mark)
(iii). Brick Layers: _______________________________________________________ (1 mark)
Part II: Short Answer Questions (23 marks)
Attempt all Questions and write your answer on the space provided for each question
Question 7. Productivity (6 marks) (a). Use the information below to answer the questions follow:
(i). Describe how each of the following can benefit from an increase in productivity:
Workers
__________________________________________________________________________________________________ __________________________________________________________________________________________________ __________________________________________________________________________________________________
(1 mark) Government
__________________________________________________________________________________________________ __________________________________________________________________________________________________ __________________________________________________________________________________________________
(1 mark)
……….QUESTION 7 CONTINUES NEXT PAGE…….
Week Output per week
1 40
2 48
3 52
4 68
Tom and Terri have recently started up a business producing photo albums. Currently they are the only two (2) workers producing the product. Their output over a four-week period is shown in the table below. The workers pay their taxes from their income.
(ii). Calculate the productivity of labour for Week 1 and for Week 4. Show your working
(4 marks)
Question 8. Concept of Integration (3 marks)
(a). The following table can help illustrate the concept of integration. Use it to answer the question below
(i). Indicate the type of integration for each of the situations below.
Situation Type of integration
(backward, forward, vertical, horizontal) Firm P2 takes over P1 and P3
Firm S2 merges with P2
Firm S3 takes over T3
(3 marks)
Sector Firms
Primary P1 P2 P3 P4
Secondary S1 S2 S3 S4
Tertiary T1 T2 T3 T4
Question 9. Supply of goods and services (9 marks)
(a). Using the axes provided below to draw Cameron’s weekly supply curve for cucumber. Fully label your graph.
Title: ____________________________________________
(4 marks)
…………QUESTION 9 CONTINUES NEXT PAGE……….. Cameron’s weekly supply schedule for cucumber
Price per kg ($) Quantity supplied
6.00 70
7.00 80
8.00 100
9.00 130
Cameron sells cucumber at the local farmers’ market. Her weekly supply schedule is shown below.
(b). On your graph on page 7, show the effect of a price decrease from $8.00 to $7.00 per kg. Fully label the changes.
(2 marks)
(c). Explain why the supply curve is upward sloping?
__________________________________________________________________________________________________ __________________________________________________________________________________________________ __________________________________________________________________________________________________ (1 mark)
(d). Economic factors like price of substitutes for cucumber and costs of production might be the causes of an increase in the supply of cucumber in the market.
Describe how the price of substitutes for cucumber and costs of production causes an increase in the supply for cucumber in the market?
__________________________________________________________________________________________________ __________________________________________________________________________________________________ __________________________________________________________________________________________________ __________________________________________________________________________________________________
(2 marks)
Due to the growing number of sellers of cucumber at the farmer’s market, Cameron has had to drop her price to remain competitive.
5
= + Part II
SECTION C: CONSUMPTION AND CONSUMER’S DECISIONS (23 MARKS)
1) Which of the following provides the best definition of money? A. Articles exchanged for a cheque
B. Items recognized as medium of exchange C. Items that the banks are willing to accept D. Particulars which are accepted by retailers
2) The method of payment whereby a consumer will own the good only after fully paid its price through installment is
A. cheque B. credit card C. hire purchase D. lay buy
3) One advantage of using the barter system as a means of exchange is
A. cheaper form of exchange B. does not allow buying on credit C. some goods are not portable D. some goods cannot be stored
4) Which of the following is NOT a factor that determines value?
A. Culture B. Honesty C. Gender D. Religion
5) The relationship between level of income and the demand for goods is that
A. An increase in income will increase the demand for both normal good and inferior good
B. A decrease in income will increase the demand for normal good and decrease the demand for inferior good
C. A decrease in income will decrease the demand for inferior good and decrease the demand for normal good
D. An increase in income will increase the demand for normal good and decrease the demand for inferior good
Part I: Multiple Choice Questions (5 marks)
Circle the letter of your chosen answer
Question 6. Consumer Protection (3 marks) (a). Use the information in the box to answer the questions follow
(i). Why does Sarah looked into the Consumer Guarantee Act?
__________________________________________________________________________________________________ __________________________________________________________________________________________________ __________________________________________________________________________________________________
(1 mark)
(ii). Describe how does the Consumer Guarantee Act helps Sarah?
__________________________________________________________________________________________________ __________________________________________________________________________________________________ __________________________________________________________________________________________________
(2 mark)
Part II: Short Answer Questions (18 marks)
Attempt all Questions and write your answer on the space provided for each question
Sarah buys a new shirt and finds the stitching is coming undone after only a few days. She takes it back but the sales assistant says there is nothing they can do. However, Sarah looked into the Consumer Guarantee Act.
Question 7. Consumer Demand (4 marks) Suppose compact disks and compact disk player are both sold in the market and the demand on those goods by consumers are investigated or studied to determine their relationships. The Price of compact disks and compact disk player is the main tool used during the study.
Use your understanding from the information to answer the following questions:
(a). On Graph A, illustrate and label the effect of a fall in the price of compact disks
Graph A: Demand curve for Compact disks
(1 mark)
(b). On Graph B, illustrate and label the effect of a fall in the price of compact disks player Graph B: Demand curve for Compact disks
(1 mark) (c). Using appropriate economic terms to explain your answer in Q7 (a) and (b) above
__________________________________________________________________________________________________ __________________________________________________________________________________________________ __________________________________________________________________________________________________ __________________________________________________________________________________________________
(2 marks) D
Quantity Price ($)
D
Quantity Price ($)
Question 8: Consumer Budget (8 marks) (a). Read the information carefully before answering the questions follow.
Mere has a full time job and she earns $250, she also has a secondary employment which gives her $50. Below are her main expenses and the amount she will spend on each item:
Clothing $20.00
Eating in a restaurants $10.00
electricity bills $70.00
entertainment $30.00
rent $100.00
(i). Construct Mere’s Budget. Specify the sources of income, necessary expenses and the discretionary expenses.
(4 marks)
(ii). Explain whether Mere have a budget deficit or budget surplus.
__________________________________________________________________________________________________ __________________________________________________________________________________________________ __________________________________________________________________________________________________
(2 marks)
(iii). Differentiate between discretionary expenses and necessary expenses.
__________________________________________________________________________________________________ __________________________________________________________________________________________________ __________________________________________________________________________________________________ __________________________________________________________________________________________________
(2 marks)
Question 9. Patterns of Household Spending (3 marks) Study the pattern of spending shown in the table below and answer the questions follow.
Aggregate pattern of spending
(a). Who has the highest income from the table above?
__________________________________________________________________ (1 mark)
(b). If Mere has a salary of $5000. What will be the amount of her saving?
(2 marks)
Mere Tom Terri
Food 30% 15% 45%
Housing 30% 30% 30%
Other 25% 30% 20%
Saving 15% 25% 5%
3 Amount of saving = _________________
5 18
23
Total =
Part II +
SECTION D: BUSINESS AND THE ACCOUNTING SYSTEM (12 MARKS)
1) A business which has several owners who are liable to the business debts is
A. cooperative B. company C. partnership D. sole trader
The information below is for Question 2 and Question 3. The business has the following assets and liabilities:
- Cash at bank $2,000 - account receivable $1,500
- Creditors $2,800 - bank loan $10,000
- Motor vehicle $20,000 - office equipment $8,500 2) What is the amount of the owner’s equity?
A. $12,800 B. $19,200 C. $20,500 D. $32,000
3) In a fully classified balance sheet, creditors will be always classified as
A. current assets B. current liability C. non-current assets D. non-current liability
4) The people who receives profit in a registered company are called
A. managers B. owners C. partners D. shareholders
5) The following are the sources of finance for a sole trader, EXCEPT
A. Bank loans B. Inheritance C. Marketing D. Savings
Part I: Multiple Choice Questions (5 marks)
Circle the letter of your chosen answer
Question 6. Management Structure of a Business (7 marks)
(a). Explain the difference between centralized management structure control and decentralized management structure control
__________________________________________________________________________________________________ __________________________________________________________________________________________________ __________________________________________________________________________________________________ __________________________________________________________________________________________________
(2 marks)
(b). Draw up a possible organizational chart for KT Metal Ltd.
(5 marks)
Part II: Short Answer Questions (7 marks)
Attempt all Questions and write your answer on the space provided for each question
K T Metal Limited is a company which manufactures aluminum buckets. It is a family business and all the shares are owned by family members. The company used Centralized management structure. Kate is the General Manager and she likes to have control over all the activities that are happening in the firm. There is an Accounts Manager, Sales Manager and Production Manager. These managers must check with Kate before any major decisions are made.
7
5 7
Total =
Part II +
SECTION E: INTERNATIONAL TRADE AND ROLE OF GOVERNMENT (12 MARKS)
1) International trade occurs when a
A. nation produced goods and services in a year
B. nation trades its goods and services within its boundary C. nation trades its goods and services outside its boundary D. ship delivers goods and services only to outer-island
The table below is for Question 2 and Question 3.
Exports and Imports commodities of Kiribati
2) The major export commodity of Kiribati is
A. Fish B. Seaweed C. Copra D. Shark fin
3) The major import commodity of Kiribati is
A. Chemicals B. Machinery C. Oil
D. Foods
Exports % Imports %
Fish 20% Chemicals 10%
Seaweed 20% Machinery 21%
Copra 50% Oil 49%
Shark fin 10% Foods 20%
Part I: Multiple Choice Questions (5 marks)
Circle the letter of your chosen answer
4) The government always provides financial supports to old people who have reached 67 years and above. This government’s intervention refers to
A. Regulation B. Subsidy C. Taxation
D. Transfer payments
5) Which ONE from the list below is not a method of taxation?
A. Progressive taxation B. Proportional taxation C. Recessive taxation D. Regressive taxation
Question 6. Balance of Payment (3 marks) (a). Study the Balance of Payment Account below and answer the questions follow.
Balance of Payment Account
(i). Calculate the Balance of Trade from the table above. Show your working.
(2 marks)
(ii). Explain the effect of a deficit in the balance of trade to the economy.
__________________________________________________________________________________________________ __________________________________________________________________________________________________ __________________________________________________________________________________________________
(1 mark)
Part II: Short Answer Questions (7 marks)
Attempt all Questions and write your answer on the space provided for each question
Export of goods $22,500
Export of services $ 7,000 Import of services $ 8,600 Import of goods $ 21,000
Balance of Trade = _____________
Question 7. Role of Government in the Economy (4 marks) (a). Explain the following main roles of a government in an economy.
(i). Allocative role
__________________________________________________________________________________________________ __________________________________________________________________________________________________ ___________________________________________________________ ______________________________________
(1 mark) (ii). Distributive role
__________________________________________________________________________________________________ __________________________________________________________________________________________________ _________________________________________________________________________________________________
(1 mark) (iii). Regulatory role
__________________________________________________________________________________________________ __________________________________________________________________________________________________ __________________________________________________________________________________________________
(1 mark) (iv). Stabilization role
__________________________________________________________________________________________________ __________________________________________________________________________________________________ __________________________________________________________________________________________________
(1 mark)
4
5 7
SECTION F: MONEY, BANKING AND THE MARKET (20 MARKS)
1) W
1) Which of the following is an example of non-price competition?
A. Discounts B. Location C. Loss leader D. Sale prices
2) Product differentiation is best defined as
A. differentiating products in terms of their prices B. buying different products at different prices C. producing a completely different product D. the creation of real differences in the product
3) Consumer protection laws are designed to
A. define the rights of the buyers and sellers B. prevent consumers wasting their money C. protect consumers who buy on impulse D. stop consumers buying harmful products
4) Which of the following is correct about minimum price control?
A. Minimum price control must be set below equilibrium price to be effective B. Minimum price control must be set above equilibrium price to be effective C. Minimum price control must be set below equilibrium quantity to be effective D. Minimum price control must be set above equilibrium quantity to be effective
5) A market tend to return to market equilibrium because
A. consumers want stability
B. excess demand will lead to an increase in price C. excess supply will lead to an increase in price D. the government makes it to return
Part I: Multiple Choice Questions (5 marks)
Circle the letter of your chosen answer
Question 6. Characteristics and Functions of Money. (6 marks) The characteristics of money are given below.
(a). Describe the following characteristics of money:
(i). Recognizable
__________________________________________________________________________________________________ __________________________________________________________________________________________________
(1 mark)
(ii). Portable
__________________________________________________________________________________________________ __________________________________________________________________________________________________
(1 mark)
(b). Explain one situation or use an example to show that money is considered ‘portable’?
__________________________________________________________________________________________________ __________________________________________________________________________________________________ __________________________________________________________________________________________________
(2 marks)
(c). Classify the two situations below by putting a tick (√) if it is a function of money and a cross (X) if it is not a function of money. Use the box to put a tick or cross.
(i). Mele buys goods from Taotin Trading on credit and paid her debts the next day.
(ii). During inflation, George can only buy 1 shirt (instead of 3 shirts) using his $10 note.
(2 marks)
Part II: Short Answer Questions (15 marks)
Attempt all Questions and write your answer on the space provided for each question
Acceptable durable divisible recognizable Portable scarce stable in value
Question 7. Market equilibrium (9 marks) (a). Study the information in the table below and answer the questions that follow.
Demand and Supply Schedule for Good X Price ($) Quantity demanded
(Units of Good X)
Quantity supplied (Units of Good X)
1 50 30
2 45 35
3 40 40
4 35 45
5 30 50
(i). What is the equilibrium price and quantity for Good X?
Equilibrium price: __________ Equilibrium quantity: ________ (2 marks)
(ii). Complete the table below using the information in the table above. An example has been done for you.
(
(4 marks)
Price ($) Shortage or Surplus Amount
1 Shortage 20
2
4 10
5 Surplus
(iii). Explain how the market response to a shortage and a surplus?
__________________________________________________________________________________________________ __________________________________________________________________________________________________ __________________________________________________________________________________________________
(2 mark)
(iv). Explain how the market equilibrium is achieved?
__________________________________________________________________________________________________ __________________________________________________________________________________________________ __________________________________________________________________________________________________
(1 mark)
3
5 + Part II = Total
Part I 15
