1) Adam Smith famously described the concept of the division of labour using the example of a pin
factory in Glasgow, in which the division of labour allowed production of pins per person to rise
24,000%.
A) Explain the term “division of labour”. (3 Marks)
Division of labour is the production process being broken down into a number of tasks, with each task being performed by a different worker. In the pin factory, quality control and packaging would be done in different stages by different workers who are specialised at that particular job, henceforth increasing productivity through higher specialist skill.
B) The division of labour in an economy requires the use of money so that goods and service can be traded. Which of the following is not a function of money? (1 Mark)
A: A store of value
B: A standard of deferred payment
C: A method of barter
D: A measure of value
One of the functions of money does not include C (a method of barter)
2) The diagram below shows a production possibility frontier for an economy.
B) The opportunity cost of a movement from point X to point Y is: (1 Mark)
A: 60 units of capital goods
B: 70 units of consumer goods
C: 20 units of consumer goods
D: 100 units of capital goods
The opportunity cost of a movement from point X to point Y is C (20 units of consumer goods)
C) Indicate an inefficient point of production on Diagram A above, using the letter Z. (1 Mark)
Any point marked Z inside the PPF is correct
3. In April 2015, Barack Obama (President of the USA) and Raul Castro (President of Cuba) shook hands at a meeting, the first hand-shaking between an American president and a Cuban president since the early 1960s, when Cuba became a command economy.
A) Explain the term “command economy”. (3 Marks)
B) Which of the following is not a characteristic of a free market economy? (1 Mark)
A: 60 units of capital goods
B: 70 units of consumer goods
C: 20 units of consumer goods
D: 100 units of capital goods
The opportunity cost of a movement from point X to point Y is C (20 units of consumer goods)
A) Explain the term “division of labour”. (3 Marks)
Division of labour is the production process being broken down into a number of tasks, with each task being performed by a different worker. In the pin factory, quality control and packaging would be done in different stages by different workers who are specialised at that particular job, henceforth increasing productivity through higher specialist skill.
B) The division of labour in an economy requires the use of money so that goods and service can be traded. Which of the following is not a function of money? (1 Mark)
A: A store of value
B: A standard of deferred payment
C: A method of barter
D: A measure of value
One of the functions of money does not include C (a method of barter)
2) The diagram below shows a production possibility frontier for an economy.
A) Define the term “opportunity cost”. (2 Marks)
A: 60 units of capital goods
B: 70 units of consumer goods
C: 20 units of consumer goods
D: 100 units of capital goods
The opportunity cost of a movement from point X to point Y is C (20 units of consumer goods)
C) Indicate an inefficient point of production on Diagram A above, using the letter Z. (1 Mark)
Any point marked Z inside the PPF is correct
3. In April 2015, Barack Obama (President of the USA) and Raul Castro (President of Cuba) shook hands at a meeting, the first hand-shaking between an American president and a Cuban president since the early 1960s, when Cuba became a command economy.
A) Explain the term “command economy”. (3 Marks)
B) Which of the following is not a characteristic of a free market economy? (1 Mark)
A: 60 units of capital goods
B: 70 units of consumer goods
C: 20 units of consumer goods
D: 100 units of capital goods
The opportunity cost of a movement from point X to point Y is C (20 units of consumer goods)
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