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Post-Mock Revision Set 4 - P1 - Question

(1) The document is an economics exam paper containing 45 multiple choice questions about concepts such as opportunity cost, normative vs positive statements, interest rates, supply and demand. (2) It provides instructions for students on how to complete the exam, including marking answers clearly on an answer sheet. (3) The questions cover a range of microeconomics and macroeconomics topics testing understanding of concepts like firms, markets, and government policies.

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0% found this document useful (0 votes)
193 views12 pages

Post-Mock Revision Set 4 - P1 - Question

(1) The document is an economics exam paper containing 45 multiple choice questions about concepts such as opportunity cost, normative vs positive statements, interest rates, supply and demand. (2) It provides instructions for students on how to complete the exam, including marking answers clearly on an answer sheet. (3) The questions cover a range of microeconomics and macroeconomics topics testing understanding of concepts like firms, markets, and government policies.

Uploaded by

title sub
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Post-Mock Revision Set 4

ECONOMICS PAPER 1
Name: ____________________

Class: S6 _____ ( )

Duration: 1 hour

INSTRUCTIONS

(1) When told to open this book, you should


check that all the questions are there. Look for
the words ‘END OF PAPER’ after the last
question.

(2) All questions carry equal marks.

(3) ANSWER ALL QUESTIONS. You are


advised to use an HB pencil to mark all the
answers on the Answer Sheet, so that wrong
marks can be completely erased with a clean
rubber. You must mark the answers clearly;
otherwise you will lose marks if the answers
cannot be captured.

(4) You should mark only ONE answer for each


question. If you mark more than one answer,
you will receive NO MARKS for the question.

(5) No marks will be deducted for wrong answers.

p. 1
S6 Economics

There are 45 questions in this paper. Choose the BEST answer for each question.

1. Jenny has $4,000 and wants to spend it on a new smartphone. The following shows her preferred phones
and their prices.
1st choice Zoda MK2 $3,990
2nd choice Crystal J7 $3,650
3rd choice Lance HD $3,850

Which of the following will decrease Jenny’s opportunity cost of choosing the Zoda MK2?

A. Users write very bad comments about the Zoda MK2.


B. The price of the Crystal J7 increases to $3,800.
C. The price of the Crystal J7 decreases to $3,500.
D. The Lance HD becomes more attractive than the Crystal J7 to Jenny as it now includes new
functions.

2. ‘Tackling more economic problems by government command can reduce an economy’s Gini coefficient.’
This statement is a

A. normative statement because the statement is about one’s preference.


B. normative statement because it is about fairness in income distribution.
C. positive statement because it is correct.
D. positive statement because it is refutable by facts.

3. Which of the following statements about interest is/are correct?

(1) Interest would not exist without money.


(2) Even if someone does not borrow money, interest is still the cost of his/her present consumption.
(3) The existence of interest implies scarcity.

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

4. Which of the following will decrease the labour supply in Hong Kong?

(1) The student places in tertiary education increase.


(2) Each working man is given a three-day paternity leave when his wife gives birth to a baby.
(3) A policy of maximum working hours is implemented.

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

5. If the government imposes a stricter policy on immigration and emigration,

A. average labour productivity will increase.


B. local unemployment rate will increase.
C. geographical mobility of labour will decrease.
D. occupational mobility of labour will decrease.

2
S6 Economics

6. The traffic signs on roads are ________ because ________.

A. capital goods … they help production in the economy


B. free goods … the users do not need to pay for them
C. public goods … the traffic signs are for public use
D. private goods … they are private property of the government.

7. The following table shows the data of watch manufacturers in a certain district.

Number of Average cost of Average annual profit of each


manufacturers production ($) manufacturer ($ million)
50 7.2 0.5
40 7.4 0.6
30 7.6 0.7
20 7.8 0.8

The above relationship can be explained by ________.

A. internal economies of scale


B. internal diseconomies of scale
C. external economies of scale
D. external diseconomies of scale

8. Consider a manufacturing firm in a perfectly competitive market. If the rent of the factory, which is a
fixed cost, increases by $10 000, while the marginal cost for each unit of the output decreases by $1.
The profit-maximizing output of the firm ________ and the profit of the firm ________.

A. will increase, may increase or decrease


B. may increase or decrease, may increase or decrease
C. will increase, will decrease
D. will decrease, will decrease

9. Refer to the following table.

Firm A Firm B
Number of owners 2 8
Transfer of ownership Needs the consent of other Needs the consent of other
owners owners
Legal status Not a legal entity Legal entity

Which of the following statements are correct?

(1) Firm A does not need to disclose its financial statement to the public while Firm B needs to.
(2) Firm A pays a lower profits tax rate in Hong Kong than Firm B.
(3) The owners of Firm A have unlimited liability while the owners of Firm B have limited liability.

A. (1) and (2) only


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

3
S6 Economics

10. Compared with shareholders,

(1) bondholders bear less risk.


(2) bondholders have the priority to get back their capital when the company is liquidated.
(3) bondholders have more controlling power on the company.

A. (1) and (2) only


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

11. Suppose a property management company takes over an insurance company. Which of the following is
the LEAST likely motive of the property management company?

A. enjoying economies of scale


B. diversifying investment risk
C. raising goodwill
D. having greater influence on market price

12. Which of the following about a price-taking market are correct?

(1) The market price seldom changes.


(2) There is no product differentiation among sellers.
(3) All sellers charge the same price for the same product.
(4) Entry to the market is restricted.

A. (1) and (2) only


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

13. Which of the following is INCONSISTENT with the law of demand?

A. When the quota on imported clothing increases, the consumption proportion of higher quality
clothing rises.
B. When drivers and passengers are required by law to wear seat belts, the number of traffic accidents
increases.
C. There are relatively less high quality fruit sold in rural markets than in urban markets which are
further away from the farms.
D. The unemployment rate decreases when the government cuts unemployment benefits.

14. An increase in the demand for ________ will lead to a decrease in the supply of ________.
A. oranges … apple seeds
B. fish … crabs
C. Adidas football boots … Adidas basketball shoes
D. chicken legs … chicken wings

4
S6 Economics

15. The diagram below shows the supply curve of Blu-ray discs.

Which of the follow CANNOT explain the movement from point A to point B?

A. The price of Blu-ray discs decreases.


B. The production cost of Blu-ray discs increases.
C. The price of Blu-ray disc players decreases.
D. The production cost of Blu-ray disc players decreases.

Answer questions 16 and 17 by referring to the following supply and demand schedules of a good.

Price ($) 11 12 13 14 15 16
Quantity supplied (units) 16 17 18 19 20 21
Quantity demanded (units) 22 20 18 16 14 12

16. Which of the following statements is correct about the good?

A. If a quota is set at 20 units, the price will be $15.


B. There will be a surplus of 3 units when the maximum price is set at $14.
C. If a price floor is set at $15, the total revenue will be $300.
D. If the government imposes a unit tax of $3 on the good, the total tax revenue will be $48.

17. Suppose the government provides a unit subsidy of $3 to producers of the good. Which of the following
are correct?

(1) The elasticity of demand for the good is larger than the elasticity of supply.
(2) Consumers’ total expenditure on the good will decrease.
(3) The total social surplus will decrease.

A. (1) and (2) only


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

18. Because of the fear of nuclear radiation in Japan, both the price of and the total expenditure on of air
tickets to Japan has dropped. We can conclude that the demand for air tickets to Japan ________.

A. is inelastic
B. is unitarily elastic
C. is elastic
D. may be inelastic, unitarily elastic, or elastic

5
S6 Economics

19. A decrease in the number of consumers of Good X results in a 10% and 5% change in its price and
quantity transacted respectively. Which of the following best explains the above changes?

A. Firms producing Good X have excess capacity in production.


B. The factors of production for Good X are not easily available.
C. The expenditure on Good X takes a small proportion of people’s income.
D. There are no close substitutes for Good X.

20. When an effective price floor is raised to a higher level, which of the following will increase?

(1) consumer surplus


(2) producer surplus
(3) deadweight loss

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

21. In which of the following situations is efficiency attained?

A. External cost is eliminated.


B. Total social benefit is maximized.
C. The difference between total social benefit and total social cost is zero.
D. The difference between total social benefit and total social cost is maximized.

22. If two countries have the same Gini coefficient,

A. the shapes of the Lorenz curves of the two countries are the same.
B. the living standards of the two countries are the same.
C. the household income of the two countries are the same.
D. None of the above is correct.

23. To calculate the gross national income (GNI) of Hong Kong, which of the following items should be
deducted from Hong Kong’s gross domestic product (GDP)?

A. rental income earned by a Hong Kong resident from lending his car in the mainland of China
B. dividend received by a Japanese from shares bought in Hong Kong
C. donations from a Hong Kong resident to the mainland
D. salary earned by a native English teacher employed on a two-year contract by a secondary school
in Hong Kong

6
S6 Economics

24. Refer to the following table.

Gross domestic product components $ million


Private consumption expenditure 560
Net domestic fixed capital formation 400
Changes in inventories X
Government consumption expenditure 800
Exports of goods 200
Imports of goods 300
Exports of services 150
Imports of services 120
Net factor income from abroad 80
Depreciation 60
Indirect taxes 10
Subsidies 5

Suppose the GDP at factor cost is $1,700 million. The value of X is ________.

A. -40 million
B. -45 million
C. -50 million
D. -55 million

25. Refer to the following information of an economy.

Percentage change
(relative to the previous year)
Per capita real GDP -3.5%
Real GDP -2.7%
General price level 3.2%

It can be concluded from the above data that the nominal GDP ________ and the population size
________ in the above period.

A. increased … increased
B. increased … decreased
C. decreased … increased
D. decreased … decreased

26. Suppose the underemployment rate of an economy is 2% and 60,000 people are underemployed. If the
unemployment rate is 4%, the unemployed population is ________.

A. 120,000
B. 125,000
C. 3,000,000
D. 3,125,000

7
S6 Economics

27. The following table shows the financial statement of an electrical shop in a particular year.

$ $
Sales revenue of electric appliances 480,000
Less: Rental payment 50,000
Wages 40,000
Electricity and water charges 10,000
Imported electric appliances 120,000
Profits tax 39,000 259,000
Net profit 221,000

What is the electrical shop’s contribution to the GDP of the economy?

A. $260,000
B. $261,000
C. $300,000
D. $310,000

28. Refer to the following diagram of an economy.

Which of the following economic phenomena would most likely be observed when the economy is in
point X?

A. A rising unemployment rate


B. Increasing government expenditure
C. Decreasing purchasing power of money
D. Falling business confidence

29. Which of the following is NOT a regressive tax in Hong Kong?

A. stamp duty
B. property tax
C. general rates
D. betting duty

8
S6 Economics

30. The table below shows the changes in the salaries tax system of an economy.

Marginal tax rate under Marginal tax rate under


Taxable income
the old tax system the new tax system
On the first $30,000 6% 4%
On the next $30,000 9% 7%
On the next $30,000 12% 12%
Remainder 15% 17%

Which of the following is a most likely result of the above changes in the tax system?

A. The tax revenue of the government will decrease.


B. Income inequality will be improved.
C. The tax base will be narrowed.
D. The tax revenue of the government will be more stable in different phases of the business cycle.

31. Mr Wong withdraws HK$50,000 cash from his savings account in a bank in Hong Kong. Then he remits
half of the amount to overseas and put the rest as demand deposits in the same bank. Hong Kong’s
money supply _________ will increase by HK$25,000 and _________ will decrease by HK$25,000.

A. M1 … M3
B. M2 … M1
C. M3 … M2
D. M3 … M1

32. Which of the following is correct according to the quantity theory of money?

A. An increase in real output causes an equal percentage increase in the nominal money supply in
the long run.
B. A change in the money supply causes the same percentage change in nominal national income.
C. A change in the money supply causes the same percentage change in real national income.
D. The velocity of circulation of money never changes.

33. Study the following data about an economy.

Monetary base $10 billion


Legal tender held by the public $1 billion
Required reserve ratio 0.25
Money supply $16 billion

Excess reserves in the banking system are __________.

A. $3.75 billion
B. $5.25 billion
C. $9 billion
D. $15 billion

9
S6 Economics

34. Refer to the following balance sheet of a banking system.

Assets ($) Liabilities ($)


Reserves 600 Deposits 1,500
Loans 900

Suppose the banking system has $100 excess reserves. If someone deposits $50 cash into the banking
system, the maximum increase in money supply will be ________.

A. $75
B. $125
C. $400
D. $450

35. Aaron did not expect any change in the price level. He made an investment and expected a nominal rate
of return of 10%. The nominal rate of return of the investment turned out to be 12% and the inflation
rate was 4%. Which of the following is correct?

A. Aaron lost because his wealth decreased in real terms.


B. Aaron lost because the actual real rate of return was lower than expected.
C. Aaron gained because the actual nominal rate of return was higher than expected.
D. Aaron gained because the actual real rate of return was positive.

36. Refer to the following long run aggregate supply (LRAS) curve of an economy.

When the economy moves from point A to point B, which of the following will remain unchanged?

(1) nominal output level


(2) full employment output level
(3) real output level

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

37. Which of the following events may lead to a decrease in the price level and an increase in the aggregate
output in the short run?

A. a provision of professional training for financial industries


B. a decrease in the married person’s tax allowance
C. damage to electrical generators due to a natural disaster
D. an increase in the cost of production

10
S6 Economics

38. Suppose the government increases the Low-income Working Family Allowance. The aggregate demand
will ________ because ________.

A. increase … private consumption expenditure increases


B. increase … government consumption expenditure increases
C. decrease … the government budget deficit increases
D. decrease … there are disincentive effects

39. Which of the following diagrams illustrate the adjustment to long-run equilibrium by the market forces
when the economy is in an inflationary gap.

40. Suppose the fiscal balance and trade balance in an open economy are both zero. If the construction of
infrastructure in the economy decreases sharply, the economy will have a ________ and a ________.

A. fiscal surplus … trade deficit


B. fiscal deficit … trade deficit
C. uncertain fiscal balance … trade surplus
D. fiscal surplus … trade surplus

41. Country X is a small economy. If the government abolishes the unit tariff on imported paper, which of
the following statements is INCORRECT?

A. The volume of paper exported to Country X increases.


B. The price of paper in Country X decreases.
C. The total revenue of paper producers in Country X decreases.
D. The total expenditure of paper consumers in Country X decreases.

11
S6 Economics

42. The following table shows the amount of resources required to produce one unit of clocks and donuts in
Country X and Country Y.

1 unit of clocks 1 unit of donuts


Country X 45 units of resources 60 units of resources
Country Y 50 units of resources 50 units of resources

The cost of transporting 1 unit of donuts is 0.1 units of clocks, which is paid by the importing country.
Which of the following terms of trade enables mutually beneficial trade?

A. 1 unit of donuts = 0.8 unit of clocks


B. 1 unit of donuts = 1.25 units of clocks
C. 1 unit of donuts = 1.4 units of clocks
D. None of the above

43. The following table shows the data about Country X.

Cups (units) Bowls (units)


Total output with no international trade 100 AND 120
Total output with specialization and
170 AND 0
international trade
Total consumption with international trade 120 AND 60

The opportunity cost of producing 1 unit of bowls is ________ units of cups. The terms of trade is 1 unit
of cups in exchange for ________ units of bowls.

A. 7/12 … 6/5
B. 7/12 … 5/6
C. 12/7 … 6/5
D. 12/7 … 5/6

44. In 2016, the British pound depreciated sharply against the US dollar. Which of the following is a possible
effect of the depreciation of the British pound on Hong Kong under the linked exchange rate system?

A. The value of British’s assets held by Hong Kong people (in terms of the Hong Kong dollar)
increases.
B. The cost of travelling in Hong Kong (in terms of the British pound) for British citizens decreases.
C. The value of goods exported from Britain to Hong Kong (in terms of the British pound) increases.
D. The number of Hong Kong students studying in Britain decreases.

45. Which of the following transactions would NOT affect the current account of Hong Kong?

A. The Hong Kong Monetary Authority sold the US dollar to the market.
B. The Hong Kong government donated money to the mainland.
C. A Hong Kong resident received dividend from a listed company in the US.
D. A Hong Kong travel agency bought tickets from a Japanese airline.

END OF PAPER

12

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