CXC past paper, January 2001, General Proficiency, Question 6.

This question is based on economies and diseconomies of scale and mechanisation.

Company XYZ Ltd. manufactures and markets a range of candles of different shapes
and lengths. Since its incorporation in 1989, sales volume has increased tenfold. In
order to meet demand, the company has had to expand its production capacity and
support systems considerably.

(a) List FOUR internal economies of scale the company might experience. (4 marks)

(b) Identify FOUR diseconomies of scale the company might experience. (4 marks)

Expansion has invariably led to increased mechanisation of various aspects of a

business.

(c) (i) Explain FOUR benefits the company might experience because of
mechanisation. (8 marks)

(ii) Discuss TWO negative effects the introduction of mechanisation might have on
the company. (4 marks)

Total: 20 marks

DISCUSSION AND GUIDELINES ANSWER

(a) You will remember that economies of scale refers to advantage to a firm or
company from going into large-scale production. The economies of scale include:

Technical economies/economies in the use of factors of production.

Managerial economies/economies in administration.

Research and development economies.

Financial economies.

Marketing economies/commercial economies.

Social economies.

Risk-bearing economies etc.

Any FOUR economies or advantage may be listed.

(b) Diseconomies of scale refers to the disadvantages to a firm or company from

large-scale production. The diseconomies include:

Increased costs, e.g. increased marketing and financial costs.

 Red tape, which is the elaborate and time-consuming procedures through
which consumers must pass.

Changing techniques of production may cause expensive machinery to lay

idle.

Larger businesses often result in loss of coordination and lack of control, e.g.
communication between management and workers may slow down,
wastages of factors, etc.

Any FOUR diseconomies or disadvantages may be listed.

(c) (i) Recall that mechanisation means partially replacing human or animal muscle
power by a machine, e.g., a tailor buying a sewing machine instead of sewing by
hand. The benefits of mechanisation include:

Output increases because work is speeded up and more can be produced in

less time.

Fewer workers are needed as machines can do the work of a number of

persons.

Costs are saved. These costs that are saved can be transferred to the market
in the form of lower prices to consumers.

The quality of output often increases.

It encourages more skilled workers to enter the workforce, i.e., workers who
can operate specific machinery etc.

Any FOUR benefits can be explained. For full marks, the benefits must be brought
out clearly.

(ii) The negative effects of the introduction of mechanisation on the company might
include:

Unemployment caused by the fact that less labour is required than when
work is done entirely by hand, therefore, the excess labour is normally laid
off.

Some machines are of a technical nature and require skilled persons to

operate them. In some cases these skilled persons are hard to find.

When machines are out of service, overhead cost increase.

Machines may be costly to maintain, as in some cases parts may have to be

imported with the use of scarce foreign exchange.
As in (c) (i) above, the negative effects of mechanisation must be properly
discussed in order to gain full marks.

CXC past paper, January 2001, General, question 8

The Caribbean island of Green Mountain is having problems with its financial
institutions. Customers of some banks are adding to the problems as many have
withdrawn their deposits from the banks. The government has asked the central
bank to do all it can to prevent a collapse of the commercial banking sector.

(a) State FOUR characteristics of money. (4 marks)

(b) List TWO functions or services offered by commercial banks. (2 marks)

(c) For EACH of the functions mentioned above, explain what benefit customers
obtain from using these functions. (4 marks)

(d) List FOUR features of central banks. (4 marks)

(e) Select THREE of the features of central banks you mentioned above, and explain
how they help to promote smooth operation of the banking system in your
country. (6 marks)

Total marks: 20

DISCUSSION AND GUIDELINE ANSWER

(a) You must be careful not to confuse the characteristics of money with the
functions of money.

The characteristics of money are the features of money. Money should be:

Generally acceptable

Durable or long-lasting

Homogeneous

Divisible into large and small units

 Scarce or limited in supply

Portable

Any FOUR characteristics may be stated.

(b) The functions or services offered by commercial banks today are many and
varied. They include the following:

Accept deposits from customers for safekeeping and makes these deposits
available to customers when needed.

Lend money to qualified customers at interest.

Allow standing order payments at customers requests.

Make the use of the cheque as a means of payment possible.

Sell travellers cheques and buy and sell foreign currency.

Give financial advice to customers.

Help customers to open letters of credit.

Act as agents in collecting dividends on behalf of their customers.

Act as executors and trustees to the written wills of their customers.

Allow customers use of the banks safety deposit boxes and night safe
facilities etc.

Any TWO functions or services may be listed.

(c) Whichever TWO functions you choose to explain, you must ensure that you
properly explain the benefits of them to the customer. For example:

The function of accepting deposits from customers benefits the customers in that it
allows them to keep their money in a safe place instead of keeping it at home. In
addition, for most deposit accounts, the customer earns interest on his deposits and
this encourages him to save with commercial banks.

Commercial banks lend money to qualified customers by opening loan accounts, by

means of overdrafts and by discounting bills of exchange. Whatever the method,
customers are granted loans and benefit from large sums of money, which they
perhaps could not save for, while they benefit in being able to pay back loans in
small installments. Customers benefit in getting loans for various purposes including
education, vacation and for purchasing cars and other assets.

(d) The features of the central bank includes:

 Carrying out governments monetary policies.

Control and monitoring of commercial banks and other financial institutions.

Issuing notes and coins and recalling them from circulation when necessary.

Being banker to commercial banks and to the government.

Negotiating on behalf of the government in international financial

agreements, e.g. with the IMF, etc.

Any FOUR features may be listed.

(e) Again, in explaining the THREE chosen features, you must be careful to show
how they promote smooth operations of the banking system. For example, in
monitoring the commercial banks and other financial institutions, the central bank
ensures that governments monetary policies are carried out and that they are not
promoting the opposite policy which would cause chaos in the financial system and
in the country. You must explain THREE features in like manner.

CXC past paper, May/June 2005, general, question 9

The question, reproduced below, surrounds the topic of international trade and
balance of payments:

The following information was taken from the final accounts of Tropicalo, a country
in the Caribee Isles. The figures are quoted in US ($M).

$US

Visible trade

Exports 24 000

Imports 26 000

Invisible (net)

Exports 20 000

Imports 15 000

(a) (i) Differentiate between a countrys terms of trade and its balance of trade. (3
mks)

(ii) Calculate Tropicalos balance of trade using the figures given above. (2 mks)

(b) Calculate Tropicalos current account balance using the figures given above. (3
mks)

You are not required to explain the calculations in (a) (ii) and (b).
(c) Identify two ways in which a country may have a surplus on its current
account. (4 mks)

(d) (i) Explain what is meant by balance of payment. (2 mks)

(ii) Discuss three ways by which a country would be able to finance the deficit in its
balance of payments. (6 mks)

Total 20 marks

DISCUSSION AND GUIDELINE ANSWER

(a) (i) A countrys terms of trade refers to the rate at which its goods and services
exchange for the goods and services of another country. It is calculated as:

Index of export prices x 100

Index of import prices

Whereas, a countrys balance of trade is the difference between the countrys

imports and exports of goods only. To properly differentiate between the two terms,
the candidate should use terms such as on the other hand, while, whereas, etc.

(ii) The balance of trade in this case is:

24,000
26,000

-2,000 US ($M)

(minus 2,000 US($M) )

(b) The current account balance takes into consideration the visible trade balance
and the invisible trade balance. From (a) (ii) we found the visible trade balance
(balance of trade) to be minus 2,000 US ($M). The invisible trade balance is plus
5,000 US ($M). This is the difference between invisible exports and invisible imports.
The current account balance is plus 3,000 US ($M).

(c) Exporting more goods and services than it imports

Import less than it exports

If the positive visible balance exceeds the negative invisible balance

(d) (i) A countrys balance of payments is its annual record of trading with other
countries in terms of income from exports and expenditure for imports.

(ii) To finance a deficit is different from correcting the deficit. To finance the deficit,
the country must find ways to make the balance of payments balance by covering
the deficit. This includes:
 Importing the deficit amount on credit

Loans from other countries

Loans from international financial institutions e.g., International Monetary

Fund and the World Bank.

Debit the foreign reserves account

Grants from other countries

Sell gold reserves, etc.

Any short-term solution which results in the amount of money to cover the deficit, if
properly discussed, will earn two marks each.

CXC past paper May/June 2003 (General) Question 5.

The following information appeared in a daily newspaper.

Property Services, No. 56 Newpark Saletown

Public Auction Sale
On January 25, 2002 at 10:00 a.m.
I will offer for sale on the date and at the place mentioned above the following
vehicle: One l999 Toyota Mini Bus
Terms of Sale:

Strictly cash on the fall of the hammer.

Vehicle on view on the morning of the sale.

Vehicle will be sold as is where is.

John Brown, Auctioneer.

Tom Phillip who lived 20 miles away, drove to the address on the date specified with
the intention of purchasing the minibus.

On arrival, he was told by the auctioneer that the minibus was no longer available
and was removed from the items to be auctioned.

Tom Phillip became furious, threatened to sue for breach of contract and demanded
a refund of his traveling expenses

(a) Define the term contract. (2 marks) (b) (i) By attending the public auction
sale, did Tom Phillip accept a firm offer? (1 mark)
(ii) Give ONE reason for your answer in (b)(i) above (2marks)
(c) What do you understand by vehicle will be sold as is where is? (2 marks)

(d) (i) Define the term breach of contract. (2 marks)

(ii) State ONE way in which a court may settle a breach of contract.
(1 mark)

(e) State TWO ways by which a contract can be terminated or discharged (4 marks)

(f) (i) Should John Brown refund Tom Phillips traveling expenses? (1mark)

(ii) Give ONE reason for your answer to (f)(i) above. (2 marks)

(g) (i) Advise Tom Phillip whether he will succeed in court against John Brown. (1
mark)

(ii) Give ONE reason for your advice in (g)(i) above. (2 marks)

Total 20 marks

DISCUSSION AND GUIDELINE ANSWER

* (a) You must be careful to define a contract, and not an agreement. A contract is
defined as a legally binding agreement or an agreement that is created with legal
intentions.

If you state that a contract is an agreement without stating any legal aspect, you
may only score half of the marks, since all contracts are agreements, but not all
agreements are contracts.

* (b) (i) The answer to this part of the question is simply NO.

(ii) The vehicle was not offered for sale, therefore, one cannot accept an offer that
was not made. An acceptance MUST be to a firm offer.

* (c) This means that the vehicle is to be sold in the condition that it is presently in
at the place or physical locality that it is at.

(d) (i) Breach of contract means that a party or parties to the contract fail to keep
their part or parts to the contract.

(ii) The court can rule that the party that has breached the contract be forced to
abide by their side of the contract. Or, with the injured parties agreement, the
existing contract can be terminated and a new one can come into existence that
satisfies all parties.

* (e) There are a number of ways in which a contract can be discharged or

terminated. You are asked to state TWO ways. Some ways are suggested below:
* By death of either party to the contract

* By bankruptcy, which must be proven in the legal sense.

* By frustration, which means that something, which was possible at the time the
contract was made, now becomes impossible .

* The agreed time for the contract to elapse has passed.

* By agreement of all concerned parties

* By breach. However, in this case the contract can only be terminated with the
permission of the injured party.

* By law. This is when something that was legal at the time the contract was made
now becomes illegal by law. Therefore, the contract must come to an end.

* (f) (i) No, John Brown should not refund Tom Phillip?s traveling expenses.

(ii) There was no contract and no breach of contract.

Tom Phillip took it upon himself to make the journey to the auction and so the cost
of doing so must fall on his own shoulders

(g) (i) Tom Phillip will NOT succeed in court against John Brown.

(ii) There was no contract and there was no breach of contract. He would win the
case if an existing contract had been breached.