Ch.

9 Production & Specialisation

Paper I

1995-2
In the production of textbooks, different people perform different duties. For example, there are
editors, typists, proofreaders etc.

What economic principle is illustrated by this practice? Suggest THREE reasons why the
application of this principle can increase labor productivity. (4 marks)

1996-2
‘Spaghetti House’ is a fast-food shop selling pizzas and other Italian dishes. Name and explain
the type(s) of production that the shop is engaged in. (4 marks)

1997-10-c
Give TWO reasons why specialization can raise the average labour productivity of a country.
(4 marks)
2001-1
Give THREE reasons why division of labor can increase labor productivity. (3 marks)

2004-9-d
Explain which type of production car agents belong to. (2 marks)

2005-10-b-iii
With international trade, both countries increase their degree of specialization. Explain how this
would
(I) increase their labour productivity.
(II) reduce their average costs of production. (4 marks)

DSE-Practice Paper II-11-a

The prices of textbooks for senior secondary education have increased sharply because textbook
publishers have to publish new textbooks for the new curriculum.

The production of textbooks involves various experts, including authors, editors, graphic
designers, etc. What economic principle is illustrated? Give THREE reasons to explain why this
principle can raise labour productivity. (4 marks)

DSE-2013-10-a
There are cooks, waiters, managers and receptionists working in restaurants.
What economic principle is illustrated by the above phenomenon? List THREE reasons why the
principle can increase labour productivity. (4 marks)

1
 Ch.9 Production & Specialisation

DSE-2015-2-a
Many electronic product retailers are located in Mong Kok.
To which type of production do electronic product retailers belong? Explain your answer.
(2 marks)

DSE-2016-13-a
The airport corporation of Country H is a public corporation which hires different people to
operate the airport. For example, there are security guards, technicians, engineers and financial
managers.

What economic principle is illustrated by this practice? Suggest THREE reasons why the
application of this principle can increase labour productivity. (4 marks)

DSE-2017-13-a-i
To which type of production does elderly care service belong? (1 mark)

DSE-2019-5-a
Wong’s family and Chan’s family live next door to each other. State ONE economic concept
involved in each of following arrangements and explain why the arrangement is beneficial to
both families.

Mr Wong teaches the children from both families English while Mrs Chan teaches them
Japanese. (3 marks)

DSE-2021-1-b
Explain whether the smartphones and motorcycles of the riders are consumer goods or capital
goods. (2 marks)

2
 Ch.9 Production & Specialisation

MCQ
Meaning of production
1. The basic purpose of all production is (1985)
A. make profit.
B. provide employment.
C. generate income.
D. satisfy wants.

2. From the point of view of society, the ultimate purpose of production is to (1986)
A. provide employment.
B. make profit.
C. satisfy consumers’ demand.
D. reduce opportunity cost.

3. Which of the following activities is NOT classified as production in economics? (1989)

A. a housewife cooking food for her family
B. a student watching television
C. a teacher giving lessons to a class
D. a driver taking tourists to the airport

4. Which of the following activities is NOT classified as production? (1994)

A. a mother teaching her child to read
B. a son helping his mother to serve dinner at home
C. a father repairing a TV set at home
D. a daughter playing with her cat at home

5. Which of the following statements about production is correct? (2002-12)

A. Developed countries have no primary production.
B. Students selling flags for charity organizations are engaging in production.
C. An Indian restaurant engages in tertiary production only.
D. The car repair work belongs to secondary production.

6. Which of the following activities are classified as production in economics? (2003-15)

(1) a man delivering newspaper
(2) a girl sewing her own dress
(3) a boy selling pirated compact discs (CD)
A. (1) and (2) only
B. (1) and (3) only
C. (2) and (3) only
D. (1), (2) and (3)

3
 Ch.9 Production & Specialisation

Consumer goods vs. Capital goods

1. Which of the following is a consumer good? (1985)

A. beef used in McDonald’s
B. flour used in Pizza Hut
C. butter used in a bakery
D. sugar used in a household

2. Which of the following is a consumer good? (1986)

A. a country’s communication network
B. an air-conditioner at home
C. a TV set in a house for the aged
D. a vending machine in a theatre lobby

3. Air conditioners used in restaurants can be classified as (1992)

(1) capital goods.
(2) consumer goods.
(3) scarce goods.

A. (1) and (2) only

B. (1) and (3) only
C. (2) and (3) only
D. (1), (2) and (3)

4. Electric fans installed in classroom are classified as (1995)

(1) consumer goods.
(2) capital goods.
(3) economic goods.

A. (1) only
B. (2) only
C. (1) and (3) only
D. (2) and (3) only

5. A department store reduced the price of its television sets but there was still unsold stock.
These television sets are (1996)
A. free goods because the quantity supplied is greater than the quantity demanded.
B. consumer goods because they are sold at a department store.
C. capital goods because they are man-made.
D. economic goods because people have to pay a price for them.

4
 Ch.9 Production & Specialisation

6. Jenny won a cooking competition and was awarded a famous brand micro-wave oven. This
microwave oven is (1999)
A. a free good because Jenny does not need to pay for it.
B. a consumer good because it is a prize in the competition.
C. an economic good because other competitors want to have it.
D. a capital good because it has a market value.

7. Flour is a ________ when _______________. (2007-12)

A. capital good… it is used by Mrs. Chan to make a cake for her daughter’s birthday
B. consumer good… it is for sale in the market
C. capital good… it is used in a cooking program shown on the television
D. consumer good… it is packed for delivery to customers

8. During the Hong Kong Computers and Communication Festival, the organisers distribute
USB flash drivers to the participants as gifts. To the organisers, these USB flash drivers are
__________. (DSE-2016-2)
(1) economic goods
(2) producer goods
(3) consumer goods
A. (2) only
B. (3) only
C. (1) and (2) only
D. (1) and (3) only

9. Which of the following statements about the exhibits in the Louvre Museum is correct?
(DSE-2018-5)
A. They are public goods because the Louvre Museum is open to the public.
B. They are capital because they are man-made resources used in production.
C. They are consumer goods because more of them are preferred.
D. They are economic goods because they satisfy human wants.

5
 Ch.9 Production & Specialisation

Different Sectors of Production

1. The following is a flow diagram of production and distribution of metallic consumer goods.
Which stage(s) belong(s) to tertiary production? (1982)

Metallic
Iron
(1) (2)Bars & (3) (4)
consumer Shops Consumers
Sheets goods

A. (1) and (2) only

B. (2) and (3) only
C. (3) and (4) only
D. (4) only

Study the following information and answer questions 2-4. (1983)

Percentage share of employment by industry (HK)

Industry 1971 1981
A. Manufacturing 47.0 41.0
B. Financing, insurance, real estate and business services 2.7 4.7
C. Wholesale and retail trades, restaurants and hotels 16.2 19.2
D. Transport, storage & communications 7.4 7.4
E. Construction 5.4 7.9
F. Agriculture, forestry, hunting and fishing 3.2 2.0
G. Mining and quarrying 0.3 0.1
H. Community, social & personal services 15.0 15.4

2. The above data show that, in terms of employment, the relative importance of ________
declined over the period.
(1) primary production
(2) secondary production
(3) tertiary production
A. (1) only B. (1) and (2) only
C. (1) and (3) only D. (2) and (3) only

3. The above data show that

A. the number of people employed in manufacturing industries decreased.
B. the output of the primary sector declined.
C. the tertiary sector had the fastest expansion.

6
 Ch.9 Production & Specialisation

D. the tertiary sector was the most capital intensive.

4. Which classes of industries (A to H) belong to tertiary production?
A. B, C and D only
B. B, C, D and H only
C. C and H only
D. H only

5. Which of the following are secondary production? (1986)

(1) oil refining
(2) drug manufacturing
(3) garment manufacturing
(4) coal mining
A. (1) and (3) only
B. (2) and (3) only
C. (1), (2) and (3) only
D. (1), (2) and (4) only

6. Mr. Lee runs a small coffee stall. He prepares snacks and serves customers. What stage(s)
of production is he involved in? (1987)
(1) primary production
(2) secondary production
(3) tertiary production
A. (3) only
B. (1) and (2) only
C. (1) and (3) only
D. (2) and (3) only

7. Which of the following are tertiary producers? (1988)

(1) a fisherman
(2) a bus driver
(3) a carpenter
(4) a life-guard
A. (1) and (2) only
B. (1) and (3) only
C. (2) and (4) only
D. (3) and (4) only

7
 Ch.9 Production & Specialisation

8. Mr. Chan is a construction worker. He is also a part-time singer in a lounge. Which stage(s)
of production is he involved in? (1989)
(1) primary production
(2) secondary production
(3) tertiary production
A. (3) only
B. (1) and (2) only
C. (1) and (3) only
D. (2) and (3) only

9. The following shows the production stages of furniture manufacturing. Which firms belong
to the tertiary production? (1990)

Firm A Firm B Firm C Firm D

Lumbering Transporting Wood Furniture
Refining Manufacturing

Firm E Firm F Households

Wholesaling Retailing

A. Firms A, B and C
B. Firms A, C and D
C. Firms B, E and F
D. Firms D, E and F

10. Mr. Wong, who is a fireman, also works as a part-timer taxi-driver. Which stage(s) of
production is he engaged in? (1991)
A. secondary production only
B. tertiary production only
C. primary and tertiary production only
D. secondary and tertiary production only

11.
Primary production

Y
Secondary production

X Tertiary production

8
 Ch.9 Production & Specialisation

The above diagram shows the interdependence among the three stages of production. The
flows ‘X’ and ‘Y’ should be labeled respectively as (1991)
A. natural resources and consumer goods.
B. natural resources and capital goods.
C. services and consumer goods.
D. services and capital goods.

12. Which of the following are examples of tertiary producers? (1993)

(1) a pop singer
(2) a baker
(3) a bank teller
(4) a truck driver
(5) a film-developing operator
A. (1), (2) and (5) only
B. (1), (3) and (4) only
C. (1), (3) and (5) only
D. (2), (3) and (4) only

13. Mary is a sewing worker in a garment factory in the daytime. In the evening, she works as a
waitress in a restaurant. Mary is a ________ producer. (1995)
A. secondary
B. tertiary
C. primary and secondary
D. secondary and tertiary

14. Mrs. Lee is a hawker. She sells fresh flowers in Mongkok. Which of the following is
INCORRECT? (1997)
A. She is a secondary producer.
B. She is a tertiary producer.
C. She provides entrepreneurial skills.
D. She provides labour service.

15. From the above table, we can conclude that (2004-19)

A. most people in country B enjoy a higher living standard than most people in country
A.
B. most people in each of the countries engage in tertiary production.
C. more people engage in tertiary production in country B than in country A.
D. All of the above are correct.

9
 Ch.9 Production & Specialisation

16. The following graph shows the relationship not the three stages of production. What does P
and Q stand for respectively? Primary Production (2005-14)

Secondary Production Tertiary Production

Q
A. services; consumer goods
B. produce goods; consumer goods
C. raw materials; services
D. natural resources; producer goods

17. Some resort hotels in Japan provide natural hot springs for their customers. These resort
hotels are engaged in ______ and these hot springs are classified as _____. (2009-14)
A. primary production…producer goods
B. tertiary production…producer goods
C. secondary production…consumer goods
D. tertiary production…consumer goods

18. The following diagram shows the interrelationship of the three stages of production. What
do X and Y stand for respectively? (2011-14)

A. producer goods; services

B. producer goods; consumer goods
C. raw materials; services
D. natural resources; producer goods

19. Which of the following descriptions about the relationship between the three types of
production is correct? (DSE-Practice Paper I-4)
A. Primary production provides raw materials for the other types of production.
B. Secondary production does not rely on tertiary production to produce finished goods.
C. Tertiary production relies only on primary production.
D. The three types of production are independent, and tertiary production is the most

10
 Ch.9 Production & Specialisation

important.
20. The following graph shows the relationship of the three stages of production. What do E
and F stand for respectively? (DSE-2014-10)

A. consumer goods; raw materials

B. producer goods; services
C. raw material; services
D. producer goods; raw materials

Industry in Hong Kong

1.
Industrial Distribution of Working Population
Industry Year 1 Year 2
Manufacturing 44% 36%
Construction 6% 6%
Wholesale and retail, restaurants and hotels 20% 23%
Transport, storage and communication 8% 8%
Financing, insurance, real estate and business services 3% 6%
Services 15% 18%
Others 4% 3%

Total 100% 100%

Total number of workers 2 million 3 million

Between Year 1 and Year 2, (1988)

A. the number of workers in he secondary sector decreased.
B. in terms of employment, the tertiary sector expanded.
C. the unemployment rate remained unchanged.
D. the output from the manufacturing industry decreased.

2. Primary production in Hong Kong is insignificant because (1989)

A. Hong Kong’s free trade policy does not favour its development.
B. the government’s tax policy does not favour its development.

11
 Ch.9 Production & Specialisation

C. the local demand for primary products is low.

D. land prices in the New Territories are low.
3. Study the following data about Hong Kong’s manufacturing sector: (1992)
Year 1989 1990 1991
Number of firms 49 832 49 654 49 124
Average number of employees per film 16.3 15.4 14.2
The above trend can be explained by the following:
A. More local labour-intensive production processes have been moved to Shenzhen.
B. Hong Kong entrepreneurs in the manufacturing sector have been earning less profit
than before.
C. Less machinery has been used in local factories.
D. The productivity of Hong Kong workers has been falling.

4. Employment in primary, secondary and tertiary industries in 1981 and 1991

Primary 2% Primary 2%

Tertiary Secondary Tertiary Secondary

48% 50% 67% 31%

1981 1991
Based on the above information, (1993)
A. the primary sector employed the same number of workers in 1981 and 1991.
B. the total value of secondary products was lower in 1991.
C. Tertiary production is becoming more important in terms of its contribution to
employment.
D. Real income earned in the tertiary sector was higher in 1991.

12
 Ch.9 Production & Specialisation

5. Which of the following is a possible reason for the phenomenon shown on the above
graph? (1993)

During this period of time,

A. there has been more retirement in Hong Kong due to its aging population.
B. there has been an economic recession in the major markets of Hong Kong exports.
C. the real wages of the manufacturing workers in Hong Kong have decreased.
D. many local factories in the manufacturing sector have been moved to China.

6. The following diagram shows the percentage increase in the nominal wages of workers in
the manufacturing and the service sectors of an economy: (1994-20)

13
 Ch.9 Production & Specialisation

The above diagram shows that in the period 1986-92,

A. manufacturing workers received higher total earnings than workers in the service
sector.
B. manufacturing workers had lower average labour productivity than workers in the
service sector.
C. if the inflation rates were below 10%, then real wages of workers in both sectors
increased.
D. there was a shortage of workers in the service sector.

7.
% share in total employment
1982 1992
Manufacturing sector 45% 19%
Services sector 50% 78%
Others 5% 3%
Total 100% 100%

From the above table, we conclude that (1995-15)

A. the manufacturing sector has a big fall in employment in 1992 as compared to 1982.
B. The services sector had a great increase in employment in 1992 as compared to 1982.
C. The services sector employed the largest number of working people in 1992.
D. The services sector accounted for a greater proportion of gross domestic product
(GDP) than the manufacturing sector in 1992.

8. The following table shows the employment distribution of Hong Kong. (2007-13)

Year 1985 1997 2005

Sector
Primary 2.2% 0.5% 0.4%
Secondary 43.5% 20.4% 13.7%
Tertiary 54.3% 79.1% 86.0%
(Total) 100% 100% 100%

From the above table, we can conclude that from 1985 to 2005,

A. the number of people engaged in the primary and secondary sectors decreased while

14
 Ch.9 Production & Specialisation

that in the tertiary sector increased.

B. the overall unemployment rate remained constant.
C. the contribution to gross domestic product (GDP) of the tertiary sector increased.
D. the relative importance of the secondary sector in terms of employment decreased.
9 (2008-13)

10. Study the following information about an economy:

% of total employment
In 1999 In 2009
Primary production 39 5
Secondary production 21 30
Tertiary production 40 65
(Total) 100 100

From the above table, we can conclude that

A. the primary sector’s relative importance in total employment has decreased in 2009
because its average labour productivity has increases.
B. most people have a higher living standard in 2009 than in 1999.
C. the number of workers engaged in the secondary sector in 2009 may be larger or

15
 Ch.9 Production & Specialisation

smaller than that in 1999.

D. the tertiary sector contributes the largest share to the gross demestic product (GDP) for
2009.

Division of Labour
1. Mr. Chan, a cook, leaves the cooking to his wife at home and instead helps with jobs which
are too heavy for her. This arrangement illustrates (1987)

(1) division of labour.

(2) diminishing marginal returns.
(3) economies of scale.
(4) comparative advantage.

A. (1) and (3) only

B. (1) and (4) only
C. (2) and (3) only
D. (2) and (4) only

2. In a secondary school, some teachers teach Geography, some teach English and some teach
Economics. This illustrates (1989)
A. long run production.
B. the law of diminishing returns
C. external economies of scale.
D. division of labour.

3. The Ha family and the Wong family are living next to each other and their children go to
the same kindergarten. The children are take to school by Mr. Ha and brought home by
Mrs. Wong. This is an example of (1992)
A. division of labour.
B. diseconomies of scale.
C. diminishing returns.
D. absolute advantage.

4. Specialization is beneficial to an economy because (1993)

A. more resources are used in producing capital goods.
B. the threat of protectionism can be avoided.
C. the risk of unemployment is lowered.
D. the productivity of the factors of production is raised.

16
 Ch.9 Production & Specialisation

5. Which of the following is NOT an advantage of division of labour? (1994)

A. high work incentive
B. higher labour productivity
C. a smaller amount of tools required
D. the right person doing the right job
6. Which of the following is NOT an advantage of division of labour? (1999)
A. greater economies of scale
B. economy in the use of capital
C. higher labour productivity
D. improved skill through more practice

7. When division of labour is practiced, (2000)

A. workers have greater job satisfaction.
B. machines are used more intensively.
C. producers produce a greater variety of goods to suit different consumers tastes.
D. the occupational mobility of workers increases.

8. Which of the following is an advantage of division of labour? (2001)

A. A wider choice of goods and services can be provided.
B. Workers have a greater incentive to work.
C. Workers have higher occupational mobility.
D. Less time is required to train workers.

9. In a secondary school, different teachers are responsible for teaching different subjects.
Which of the following are reasons for the above arrangement? (2003-17)
(1) It can reduce the cost of training.
(2) Practice makes perfect.
(3) Different teachers are good at teaching different subjects.
A. (1) and (2) only
B. (1) and (3) only
C. (2) and (3) only
D. (1), (2) and (3)

10. When division of labour is practiced, (2004-17)

A. firms will enjoy greater economies of scale.
B. workers will have a higher occupational mobility.
C. workers will have a higher income.
D. output per man-hour will increase.

11. Division of labour can raise labour productivity. One reason is that (2007-14)

17
 Ch.9 Production & Specialisation

A. fewer tools are needed.

B. geographical mobility is increased.
C. time is saved from not moving task to task.
D. the relative importance of the secondary sector in terms of employment decreased.

12. Which of the following is a possible reason for the increase in average labour productivity
resulting from practicing division of labour? (2009-17)
A. Fewer capital goods are required.
B. The occupational mobility of workers is higher.
C. The total wage income of workers is higher.
D. Time is saved from moving workers between different tasks.

13. A large supermarket chain store is composed of different sections: marketing, sales,
delivery, accounts and management. An advantage of the above arrangement is: (2010-16)
A. The staff will have a higher working incentive.
B. A greater variety of services can be provided to customers.
C. The supermarket chain store can enjoy economies of scale.
D. The supermarket chain store can save on the cost of training its staff.

14. Which of the following is an advantage of division of labour? (2011-15)

A. Capital goods can be more fully utilized.
B. The risk of unemployment is lowered.
C. Different stages of production become more independent.
D. A wider choice of goods and services can be provided.

15. A professor has decided to change the way of marking the exam papers of his subject.
Instead of asking his teaching assistants to mark the whole paper for their own classes, he
assigns each teaching assistant to mark one question of the paper for the entire candidature.
Which of the following situations would likely occur? (2018-11)

(1) The marking will be more accurate since practice makes perfect.
(2) Training time will be reduced as each assistant only needs to know part of the marking
schemes.
(3) The tools required for marking will be reduced such as fewer red pens are needed.

A. (1) and (2) only

B. (1) and (3) only
C. (2) and (3) only
D. (1), (2) and (3)

18
 Ch.9 Production & Specialisation

Answers:

Meaning of production
1 D 2 C 3 B 4 D 5 B 6 D

Consumer goods vs. Capital goods

1 D 2 B 3 B 4 D 5 D 6 C 7 C
8 C 9

Different Sectors of Production

1 C 2 B 3 C 4 B 5 C 6 D 7 C
8 D 9 C 10 B 11 D 12 B 13 D 14 A
15 B 16 C 17 B 18 A 19 A 20 D

Industry in Hong Kong

1 B 2 A 3 A 4 C 5 D 6 C 7 C
8 D 9 C 10 C

Division of Labour
1 B 2 D 3 A 4 D 5 A 6 A 7 B
8 D 9 D 10 D 11 C 12 D 13 D 14 A

19
 Ch.9 Production & Specialisation

1995-2
Division of labour/ specialization 1

- jobs assigned according to talents and skills

- more skilful at jobs due to continuous practice
- time saved from moving from one job to another job
- time saved from learning all the jobs
- encouraged the use of capital/ more advanced capital 2@, max: 4
[Mark the FIRST TWO reasons only.]

1996-2
Secondary production - food materials are cooked in the shop and turned into cooked food. 2
Tertiary production – when having meals, customers are served by waiters in the shop. 2

1997-10-c
Average labour productivity is output per unit of labour input, e.g. output per man-hour. 2

- getting talented or skillful people to do the job

- continuous practice makes workers even more skillful
- saves time no need to shift from one task to another task
- any other relevant point
[Mark the FIRST TWO points only.] 2@, max: 4

2001-1
- stimulus to mechanization
- practice makes perfect
- saves time in learning the job
- saves time in moving around jobs
- choose the best person to do the job
- any other relevant point
[Mark the FIRST THREE points only.] 1@, max: 3

2004-9-d
Tertiary production. 1

20
 Ch.9 Production & Specialisation

They provide services. 1

2005-10-b-iii
(I) The workers and managers in such industries would become more efficient in performing
their jobs, because specialization permits them to acquire more technical skills and
‘know-how’ (i.e., learning by doing). 2

(II) Specialization would lead to large scale productions and bring forth economies of scale.
(Therefore the average cost decreases.) 2

DSE-Practice Paper II-11-a

Division of labour/ Specialisation
Reasons:
 practice makes perfect
 choose the most suitable persons for the job
 save time in training
 save time in job rotation
 Any other relevant point
[Mark the FIRST THREE points only.]

DSE-2013-10-a
Division of labour
- choosing the most suitable person for the job
- practice makes perfect
- saving time in training
- stimulus to mechanization
- Any other relevant point
[Mark the FIRST THREE points only.]

DSE-2015-2-a
Tertiary production as it provides retail services.

DSE-2016-13-a
Division of labour/specialization
Reasons:
– practice makes prefect

21
 Ch.9 Production & Specialisation

– choosing the most suitable person for the job

– save time in training
– more efficient use of the capital goods

DSE-2017-13-a-i
Tertiary production.
DSE-2019-5-a
Division of labour/ (Principle of) comparative advantage

Benefits:
- Finding the most suitable person for the job: the parents in both families can use their
expertise in teaching their children so the children can learn both languages better.
- Specialisation and exchange: Mr Wong can specialise in the production (teaching English) in
which the opportunities cost is lower and exchange for his children learning Japanese. The
children can learn both languages better with a lower cost.
- any other relevant point

DSE-2021-1-b
Capital goods when the riders use them to help further production, i.e. delivery service in this
case.
OR
Consumer goods when the riders use them for self-consumption, e.g. playing games.

22