Samoa Secondary Leaving Certificate — Economics

What is the basic economic problem that forces every society, including small island developing states such as Samoa, to make production choices?

• AScarcity of resources relative to unlimited wants
• BA permanent shortage of foreign tourists
• CThe legal requirement to use only imported capital goods
• DA government rule that every village must grow the same crop

Which list correctly names the four factors of production?

• AWages, rent, interest and profit
• BLand, labour, capital and enterprise
• CHouseholds, firms, government and overseas
• DPrimary, secondary, tertiary and quaternary

A family on Savai'i uses a coastal plot to grow taro and collect coconuts. In economics, that plot is best classified as which factor of production?

• ALabour, because family members work the plot
• BCapital, because the land can be sold for tālā
• CLand, because it is a natural resource used in production
• DEnterprise, because the family decides what to plant

A hotel in Apia pays room attendants a weekly wage to clean guest rooms. The attendants are an example of which factor of production?

• ALand
• BCapital
• CEnterprise
• DLabour

Which of the following is a capital good rather than a consumer good?

• AA family refrigerator used only at home in Vaitele
• BA commercial freezer bought by a fish exporter in Apia
• CA pair of school shoes bought for a Year 12 student
• DA takeaway meal purchased at the Savalalo market

What is the role of enterprise as a factor of production?

• ATo organise the other factors and bear the risk of production
• BTo provide the natural resources on which production depends
• CTo supply hours of paid work in return for a wage
• DTo act as a produced machine that raises output automatically

Harvesting taro, cutting copra and catching tuna for sale are all examples of production in which economic sector?

• ASecondary sector
• BTertiary sector
• CPrimary sector
• DPublic-sector administration only

A small plant at Vaitele presses copra into coconut oil for export. This activity belongs to which sector?

• APrimary sector, because copra comes from coconut trees
• BTertiary sector, because the oil will later be exported
• CQuaternary sector, because oil chemistry is involved
• DSecondary sector, because a raw material is being processed

A beach fale on the south coast of Upolu that sells overnight stays and meals to visitors is mainly operating in which sector?

• ATertiary sector
• BPrimary sector
• CSecondary sector
• DOnly the subsistence sector, because the fale is family-owned

In economics, opportunity cost is best defined as:

• AThe money price paid for a good in the market
• BThe value of the next-best alternative that is given up
• CThe total of every possible alternative that could have been chosen
• DThe accounting profit left after all bills are paid

A family can use the same half-hectare for only one of these options in a year: grow taro and earn SAT 8,000; grow cocoa and earn SAT 11,000; or run two guest fales and earn SAT 14,000. What is the opportunity cost of choosing the guest fales?

• ASAT 8,000
• BSAT 14,000
• CSAT 19,000
• DSAT 11,000

On a production possibility curve (PPC) for taro and hotel rooms, what does a point strictly inside the curve show?

• AProductive efficiency, because both goods are being produced
• BAn unattainable combination given current resources
• CInefficient or underemployed use of resources
• DThat opportunity cost has become zero

A combination of output that lies outside a country’s current PPC is:

• AInefficient but currently attainable
• BThe only combination that maximises employment
• CUnattainable with present resources and technology
• DEvidence that opportunity cost is constant

A bowed-out (concave to the origin) PPC shows that opportunity cost is:

• AZero, because both goods can increase together
• BConstant, because resources are equally good in both uses
• CDecreasing as more of one good is produced
• DIncreasing as more of one good is produced

An outward shift of Samoa’s PPC for consumer goods and capital goods is the diagram for:

• AA rise in unemployment with no change in capacity
• BDemand-pull inflation in the tourist season
• CEconomic growth — an increase in productive capacity
• DA movement from a point on the curve to a point inside it

Labour productivity is best measured as:

• ATotal hours worked in the economy
• BThe number of people of working age
• CThe wage bill paid by firms
• DOutput per worker, or output per hour worked

Plant A packs 2,400 baskets of taro with 8 workers. Plant B packs 2,000 baskets with 10 workers. Which statement is correct?

• APlant B is more productive because it uses more workers
• BThe two plants are equally productive because both pack taro
• CPlant A is more productive: 300 baskets per worker against 200
• DPlant B is more productive: 2,000 is closer to a round number

Specialisation in production means that workers or firms:

• AEach produce a little of every good the village needs
• BConcentrate on a limited range of tasks or products
• CRefuse to trade so that they remain self-sufficient
• DAlways operate in the public sector rather than the private sector

A country has a comparative advantage in a good when it can produce that good:

• AUsing absolutely fewer resources than every other country
• BAt a lower opportunity cost than another country
• COnly if it refuses to import anything in return
• DOnly in the primary sector and never in services

Country X uses fewer hours than Country Y to produce both taro and shirts. Country X still gains from trade if:

• AIt has an absolute advantage in both goods and therefore should not trade
• BThe two opportunity-cost ratios are identical, so specialisation is pointless
• CIt specialises in the good in which its opportunity-cost advantage is greater
• DIt produces only shirts and destroys any leftover taro

The law of diminishing marginal returns says that, in the short run, as extra units of a variable factor are added to a fixed factor:

• ATotal product immediately falls to zero
• BAverage fixed cost begins to rise
• CThe extra output from each additional variable unit will eventually fall
• DLong-run average cost must be increasing

In the short run, a bakery in Apia can hire extra staff but cannot enlarge its oven room. This means:

• AEvery factor of production is variable
• BAt least one factor is fixed, so the short-run production period applies
• CThe bakery has already reached the long run
• DOpportunity cost is no longer relevant

How can a non-economic government function such as public education raise future production?

• AIt immediately prints more tālā, which is the same as producing more goods
• BIt replaces all private firms, which is required for growth
• CIt has no link to production because education is not an industry
• DIt improves the quality of labour, raising productivity and shifting the PPC outward over…

A severe cyclone destroys fishing boats and damages hotel buildings. Other things equal, the PPC is most likely to:

• AShift inward because the capital stock has fallen
• BShift outward because reconstruction spending is counted as growth
• CStay fixed, with only a movement along the same curve
• DBecome a straight line because opportunity cost disappears

A village PPC shows two efficient points: A is 80 crates of taro and 20 fine mats; B is 50 crates of taro and 35 fine mats. What is the opportunity cost of moving from A to B?

• A15 fine mats
• B50 crates of taro
• C80 crates of taro
• D30 crates of taro

Eight workers pack 960 cartons of nonu juice in a week. After training, the same eight workers pack 1,200 cartons. What happened to labour productivity?

• AIt stayed at 960 cartons because employment did not change
• BIt rose from 120 to 150 cartons per worker, a 25 percent increase
• CIt rose from 960 to 1,200 cartons per worker
• DIt fell because workers had to work with the same building

Samoa takes 2 days to produce one tonne of taro and 4 days to produce one tonne of fish. A trading partner takes 3 days for taro and 5 days for fish. Who has the comparative advantage in taro?

• AThe partner, because it uses more days for every good
• BNeither, because Samoa has an absolute advantage in both
• CSamoa, because its opportunity cost of taro is 0.5 tonnes of fish, which is lower than th…
• DThe partner, because 3 divided by 5 is smaller than 2 divided by 4

A coconut-oil mill keeps the same number of workers but installs extra pressing machines. Labour productivity is most likely to rise because of:

• ACapital deepening — more capital per worker
• BA larger labour force with the same capital stock
• CA movement to a point inside the PPC
• DA fall in the quality of the capital stock

Temporary employment schemes in New Zealand and Australia can reduce unemployment in Samoa, but they can also create a production problem at home. Which statement is the most accurate economic analysis?

• AThey have no production effect because the work is done overseas
• BThey can withdraw working-age labour from local farms, hotels and building sites, leaving…
• CThey automatically shift Samoa’s PPC outward in the short run by removing workers
• DThey convert all remaining domestic production into public goods

A PPC table for a small island is: Taro (tonnes): 0, 10, 20, 30, 40 Fish (tonnes): 100, 90, 75, 55, 30 What is the opportunity cost of increasing taro from 20 to 30 tonnes, and what does the table show?

• A10 tonnes of fish; constant opportunity cost
• B30 tonnes of fish; decreasing opportunity cost
• C55 tonnes of fish; zero opportunity cost
• D20 tonnes of fish; increasing opportunity cost

In the circular flow of income, households mainly:

• ASupply factor services and spend income on goods and services
• BPrint legal tender and set the cash reserve ratio
• CProduce all capital goods without using labour
• DCollect VAGST on behalf of overseas firms only

Consumption, in economics, means:

• AThe using-up of goods and services to satisfy wants
• BThe building of new factories and roads
• CThe transfer of land from one village to another
• DThe payment of interest by the Central Bank of Samoa

The main determinant of how much a household can consume is usually:

• AThe colour of banknotes in circulation
• BThe number of political parties in Parliament
• CThe household’s income (including transfers such as remittances)
• DThe length of the school year

Money sent home by Samoans working in New Zealand or Australia is best described as:

• AA merchandise export of goods from Samoa
• BA household remittance — a private transfer that raises family income
• CForeign aid paid by a government to another government
• DA capital good produced inside Samoa

If a household earns SAT 900 and spends SAT 720 on goods and services, its saving is:

• ASAT 900
• BSAT 720
• CSAT 1,620
• DSAT 180

Which of the following is an indirect tax in Samoa?

• APAYE income tax deducted from a teacher’s salary
• BA company tax assessed on a firm’s profits
• CVAGST added to the price of groceries at the checkout
• DA poll tax paid as a fixed amount per adult, independent of spending

Which pair is the best example of a need followed by a want?

• AA luxury watch; then a bag of rice
• BBasic drinking water; then a designer sports shirt
• CA concert ticket; then hospital treatment
• DA second family car; then shelter from the rain

A portable radio that lasts several years is a consumer durable. Which item is a non-durable consumer good?

• AA family car used for five years
• BA refrigerator in a kitchen
• CA loaf of bread eaten the day it is bought
• DA washing machine expected to last a decade

A person is unemployed, in the usual labour-force sense, when that person is:

• AWithout work, available for work, and actively seeking work
• BRetired and no longer wanting a job
• CA full-time student who is not looking for work
• DEmployed part-time but wishing for more hours only

The law of demand states that, other things equal:

• AA higher price leads to a higher quantity demanded
• BA lower price leads to a lower quantity demanded
• CA higher price leads to a lower quantity demanded
• DQuantity demanded is independent of price

The price of bottled water at a roadside stall falls, and customers buy more bottles. This is shown as:

• AA rightward shift of the demand curve caused by a non-price factor
• BA movement down along the same demand curve
• CA leftward shift of the supply curve
• DA movement up along the same demand curve

Several families in a village receive larger remittances and buy more imported chicken at the same price. The correct diagram change is:

• AA rightward shift of the demand curve for imported chicken
• BA leftward shift of the demand curve for imported chicken
• CA movement up along an unchanged demand curve
• DA movement down along an unchanged demand curve

If the price of breadfruit rises and households buy more taro instead, taro and breadfruit are:

• AComplementary goods
• BInferior goods in every income range
• CSubstitute goods
• DPublic goods

Outboard fuel and small fishing boats are complements. If the price of outboard fuel rises sharply, demand for small fishing boats is most likely to:

• AIncrease, because the goods are substitutes
• BStay exactly the same, because complements ignore price
• CIncrease, because fuel is a normal good
• DDecrease, because using a boat becomes more expensive

A good is inferior if, when household income rises:

• ADemand for the good increases
• BDemand for the good decreases
• CThe good becomes a public good
• DPrice elasticity of demand becomes zero

Diminishing marginal utility means that as a consumer eats more ice blocks on a hot afternoon:

• AEach extra ice block adds less additional satisfaction than the one before
• BTotal utility must be falling from the first ice block
• CThe market price of ice blocks must fall automatically
• DThe ice blocks become complementary with each other

A household has SAT 800 to spend this week. Taro costs SAT 4 per kilogram and chicken costs SAT 16 per kilogram. If the household first buys 50 kg of taro, what is the maximum whole number of kilograms of chicken it can still buy?

• A50 kg
• B40 kg
• C37 kg
• D16 kg

A household’s income rises by SAT 200 and its consumption rises by SAT 160. What is the household’s marginal propensity to consume (MPC)?

• A0.20
• B0.80
• C1.25
• DSAT 40