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ECONOMICS Paper II Kevin Ko
Kevin Ko -
英皇教育首席經濟科名師
於香港大學修讀經濟科時，已自資開辦補習社教授 CE 及 AL Economics，可見其經驗之豐富。 不單揉合了電腦技術於經濟學之中，更將抽象的經濟 學概念漫畫化，深受同學們歡迎。 其編製的《漫畫經濟一日通》初版(微觀經濟篇)及(宏 觀經濟篇)獲重慶大學出版社購入版權作全國發行。 香港公共圖書館於04年購入多套《漫畫經濟一日通》 並放置於全港各公共圖書館中以供借閱。 近年應多個媒體邀請作經濟科之主講嘉賓(有線電視 YMC台、新城997等)；亦曾為多個大型講座擔任經 濟科之主講嘉賓，例如03至05年學友社會考分析講 座，與及99至05年英皇教育會考及高考分析講座。 05年會考經濟科超過150名Ko Sir學生考獲A級成 績，再次創下驕人紀錄！ 05年高考經濟科有超過300名Ko Sir學生考獲A、B 或 C級成績，近60名更考獲A級，過百名考獲B級；重 考而獲升級的學生更是多不勝數(由D/C跳升至A，或 D/E跳升至B級，甚至由U變為合格。 早在02年已於www.CaptureA.com推出全港首創的網 上「Live Chat」(視像教室)。 Prepared by Kevin Ko
2006-CE ECON PAPER II
KING’S GLORY EDUCATIONAL CENTRE CE MOCK EXAMINATION 2006
ECONOMICS PAPER II (One hour) K E V I N
K O
INSTRUCTIONS 1.
All questions carry equal marks.
2.
ANSWER ALL QUESTIONS. Sheet.
3.
You should mark only ONE answer for each question. If you mark more than one answer, you will receive NO MARKS for that question.
4.
No marks will be deducted for wrong answers.
You should mark all your answers on the Answer
Prepared by Kevin Ko King’s Glory Educational Centre All Rights Reserved 2006 2006-CE-ECON II-1 (非賣品，免費派發予 Kevin Ko Economics Team 之學生。)
There are 50 questions in this paper.
1.
The problem of scarcity A. B. C. D.
2.
Choose the BEST answer for each question.
applies to all goods. can be eliminated by technology advancement. exists in both market and planned economies. exists in poor countries only, but not in rich countries.
Kevin Ko received a Mark Six prize of $30 000 000 in cash. In planning how to spend the sum, he had the following choices in ascending order: Preference 1: Buy a flat worth $30 000 000 in Happy Valley. Preference 2: Buy a flat worth $20 000 000 in Tai Po and put $10 000 000 in the bank. Preference 3: Buy a yacht worth $ 30 000 000. He chose to buy a flat in Happy Valley. His opportunity cost in doing so was the forgoing of A. B. C. D.
preference 2. preference 3. preference 2 and 3. insufficient information.
© by Kevin Ko Economics Team
2006-CE-ECON II-2
3.
4.
Which of the following statements about land and capital are CORRECT? (1) (2) (3) (4)
The cost of using capital must be positive. The cost of producing land must be zero. The cost of using land must be zero if land has no other uses. The cost of using capital must be zero if capital has other uses.
A. B. C. D.
(1) and (3) only (1) and (4) only (2) and (3) only (2) and (4) only
A shopping mall has a promotion on the 50-inch Plasma televisions but there was still unsold stock. One of these televisions is showing the advertisement of the price reduction in the mall. These televisions are (1) free goods because the quantity demanded is smaller than the quantity supplied. (2) consumer goods because they are sold at a shopping mall. (3) capital goods because they are man-made resources that can be used to produce further wealth. (4) economic goods because people have to pay a price for them. A. B. C. D.
(1) and (3) only (1) and (4) only (2) and (3) only (3) and (4) only
© by Kevin Ko Economics Team
2006-CE-ECON II-3
5.
Hong Kong is considered to be a market economy because A. B. C. D.
6.
its income distribution will be more even. price is used as a means to allocate resources in Hong Kong. price control is implemented on the market. all of its resources are privately owned.
Computers used in offices can be classified as (1) capital goods. (2) consumer goods. (3) scarce goods. A. B. C. D.
7.
(1) and (2) only (1) and (3) only (2) and (3) only (1), (2) and (3)
Which of the followings is classified as 'land' in economics? A. B. C. D.
tobacco plantations minerals under the ground reservoirs reclaimed land
© by Kevin Ko Economics Team
2006-CE-ECON II-4
8. No. of machines
No. of labour
Average product (units)
10
21
300
10
22
320
10
23
350
10
24
400
Refer to the above table. Which of the followings is a possible reason for the changes in average product? A. B. C. D.
9.
absolute advantage diminishing marginal returns division of labour economies of scale
Which of the followings will decrease the supply of labour of an economy? (1) an increase in the number of people migrating to other countries (2) a decrease in the number of people migrating to other countries (3) the number of people migrating to other countries this year is the same to that of last year A. B. C. D.
(1) and (3) only (2) and (3) only all of the above none of the above
© by Kevin Ko Economics Team
2006-CE-ECON II-5
10. Which of the followings will decrease the labour productivity of an economy? (1) (2) (3) (4)
an increase in the retirement age a decrease in the retirement age compulsory retirement of civil servants by the government re-employment of retired civil servants by the government
A. B. C. D.
(1) and (3) only (1) and (4) only (2) and (3) only (2) and (4) only
11. Which of the followings has the least occupational mobility? A. B. C. D.
a doctor a taxi driver a receptionist a construction worker
12. Piece rate will be used as a method of wage payment if (1) (2) (3)
the quantities of inputs produced by workers are easy to measure. the monitoring cost of labours' work is high. the quality of the product is easy to control.
A. B. C. D.
(1) and (2) only (1) and (3) only (2) and (3) only (1), (2) and (3)
© by Kevin Ko Economics Team
2006-CE-ECON II-6
13. Which of the following statements about profit is CORRECT? A. B. C. D.
It must be positive. It is the only return that is subject to tax. It must be determined after sales have been made. It is more certain than the returns to other factors of production.
14. Which of the following statements about an ordinary partnership is CORRECT? A. B. C. D.
Ordinary partnership has at least one limited partner. Ordinary partnership is a legal entity. The business will be dissolved once any one partner died. A contract signed on behalf of a partner himself is legally binding on all other partners.
15. What is the advantage of changing from a sole proprietorship into a private limited company? A. B. C. D.
A firm has more capital. A firm has longer continuity. A firm becomes a legal entity. A firm's shares can be quoted on the stock exchange.
© by Kevin Ko Economics Team
2006-CE-ECON II-7
16. Which of the following statements about the difference between a public limited company and a private limited company is true? A. B. C. D.
A public limited company has less capital than that of a private limited company. A public limited company pays profits tax at a rate lower than that of a private limited company. A public limited company is being less likely to be taken over by another company than a private limited company. The maximum number of shareholders in a public limited company is more than that of a private limited company.
17. Suppose the law of diminishing marginal returns applies to the firm, and output is as follows: No. of workers
1
2
3
4
5
Marginal product (units)
10
12
14
13
10
After what level of workers does average product start to diminish? A. B. C. D.
2 workers 3 workers 4 workers 5 workers
© by Kevin Ko Economics Team
2006-CE-ECON II-8
18. Which of the followings about economies of scale is true? A. B. C. D.
It applies to short-run production only. It applies to long-run production only. It applies to both short-run and long-run production. None of the above.
19. Wilson Liu is a famous tutor and goods at teaching Mathematics. Recently he has started tutoring Additional Mathematics classes. This is a type of __________ integration. A. B. C. D.
conglomerate backward forward lateral
20. Recently more and more new firms enter the market of cable TV services. Which of the followings would occur? A. B. C. D.
There would be an increase in the price of cable TV services. There would be an increase in the market share occupied by existing firms. The market structure of cable TV services is imperfect competition. The market of cable TV services would become a perfect competition.
© by Kevin Ko Economics Team
2006-CE-ECON II-9
21. Refer to the following diagram: MTR fares ($)
B A D No. of passengers rides
0
Cross Habour MTR Services
Which of the followings would lead to the above movement along the demand curve from A to B? A. B. C. D.
a fall in the toll fee for cross harbour Mass Transit Railway services a fall in the frequency of cross harbour Mass Transit Railway services a fall in the maintenance fee for cross harbour Mass Transit Railway services a fall in the ticket price for cross harbour bus services
22. Suppose there is an increase in the supply of iron and steel which is used in the production of ships. Which of the followings are CORRECT? (1) (2) (3) (4)
an increase in the demand for ships an increase in the supply of ships an increase in the quantity demanded of iron and steel an increase in the quantity demanded of ships
A. B. C. D.
(1), (2) and (3) (1), (2) and (4) (1), (3) and (4) (2), (3) and (4)
© by Kevin Ko Economics Team
2006-CE-ECON II-10
For Questions No. 23 and 24, consider the following supply and demand schedule of DVD in Country X. The DVD market is initially in equilibrium. Price ($)
Quantity demanded (units)
Quantity supplied (units)
30
90
60
32
80
65
34
70
70
36
60
75
38
50
80
40
40
85
23. If the government imposes a tax of $6 for each unit of DVD sold, then _______ will be the new equilibrium price. A. B. C. D.
$52 $56 $58 $60
24. If the government imposes a tax of $6 for each unit of DVD sold, then ______ will be the government revenue. A. B. C. D.
$2 400. $2 800. $3 600. $4 200.
© by Kevin Ko Economics Team
2006-CE-ECON II-11
25. Below is the diagram showing the market of tours for Hong Kong people to Europe. The initial equilibrium is at E0. Because of economic recovery, more Hong Kong people spend their holiday in Europe. Moreover, the Euro currency depreciates against the Hong Kong dollar.
HK$
S2 S0 Ea Eb
E0
S1 Ec
Ed
0
D1 D2
D0 Number of visits to Europe by Hong Kong People
The new equilibrium point in the market will be at A. B. C. D.
Ea. Eb. Ec. Ed.
26. Suppose the production of a normal good has a technological advance. In which of the following situations must the market price of the good decrease? A. B. C. D.
The earnings of consumers decrease. The earnings of consumers increase. The supply of the good is perfectly elastic. The demand for the good is perfectly elastic.
© by Kevin Ko Economics Team
2006-CE-ECON II-12
27. Under which of the followings will the buyers bear all the tax burden if the government imposes a per unit tax on Good Y? (1) Good Y is a necessity. (2) Lots of goods can substitute Good Y. (3) Compare to buyers' income, Good Y contains a small proportion. A. B. C. D.
(1) and (2) only (1) and (3) only All of the above None of the above
28. Suppose the demand of wheat is elastic. Due to a bad harvest, the equilibrium quantity changes by 30%. The equilibrium price would ____________ by ______. A. B. C. D.
increase ... 20% decrease ... 20% increase ... 40% decrease ... 40%
29. 9999 Gold is preferred to diamond as a medium of exchange because the former is more A. B. C. D.
homogenous. generally acceptable. scarce. durable.
© by Kevin Ko Economics Team
2006-CE-ECON II-13
30. The money supply in Hong Kong will increase if (1) (2) (3) (4)
more borrowers repay bank loans. the best lending rate in Hong Kong is decreased. the capital inflows of Hong Kong are increased. the demand for bank loans decreases due to economic recession.
A. B. C. D.
(1) and (2) only (1) and (3) only (2) and (3) only (3) and (4) only
31. Suppose the legal reserve ratio is 20%. If the banking system has excess reserves of $10 000, it can at most increase its loans by A. B. C. D.
$30 000. $40 000. $50 000. $60 000.
© by Kevin Ko Economics Team
2006-CE-ECON II-14
32. Which of the followings is/are included in M2? (1) (2) (3) (4) (5)
currency in circulation (C) demand deposits (DD) savings deposits with licensed banks (SDLB) time deposits with licensed banks (TDLB) negotiable certificates of deposits issued by licensed banks (CDLB)
A. B. C. D.
(1) only (2) only (1) & (2) only All of the above
33. Private consumption expenditure Government consumption expenditure Gross domestic fixed capital formation Change in stocks Total exports of goods Domestic exports Re-exports Imports of goods Exports of services Imports of services Inflow of capital Outflow of capital
$ million 60 28 19 6 90 71 19 48 32 18 88 90
The GNP of the economy in that year is A. B. C. D.
$161 million. $165 million. $167 million. $169 million.
© by Kevin Ko Economics Team
2006-CE-ECON II-15
34. If GNP increases while GDP decreases, A. B. C. D.
the net external factor income flow is increasing. the net external factor income flow is decreasing. the net external factor income flow is negative. the net external factor income flow is positive.
35. Which of the following items SHOULD be included in the calculation of Hong Kong's GDP? A. B. C. D.
money gained from betting in a football match money won from the Jockey Club of $10 000 compensation to employees from the Jockey Club of $20 000 money earned by selling used books
36. If the GDP at current market price is increasing at a rate equal to that of the GDP at constant market price, then the price index will A. B. C. D.
remain constant. increase. decrease. be uncertain.
© by Kevin Ko Economics Team
2006-CE-ECON II-16
37. A country's Gross National Product (GNP) at current market price may understate the living standard of its people because (1) the household production not transacted in the market is not included. (2) undesirable effects of the environment caused by the pollution of production are not included. (3) the effect of a rise in the population size is not considered. (4) the improvement in the quality of the goods and services produced in the country is not considered. A. B. C. D.
(1) and (2) only (1) and (4) only (2) and (3) only (3) and (4) only
38. Suppose the deflation rate of an economy decreases from 3% to 2% in a certain year. This means that A. B. C. D.
price level starts to rise. price level rises at a decreasing rate. price level decreases at a faster rate. price level decreases.
© by Kevin Ko Economics Team
2006-CE-ECON II-17
39. Study the following information about Country X: Year
Real National Income ($mn)
Price Index
1998 1999
8 000 10 000
140 168
Comparing the year 1998 with 1999, we can conclude that A. B. C. D.
the cost of living is lower in 1999. the living standard in 1999 is higher. the GNP growth rate in 1999 is greater than 25%. the price of all goods and services increased by 20% in 1998.
40. Who would lose in times of unexpected deflation? A. B. C. D.
a driver who pays a fixed driving license fee an investor who engages in gold buying a landlord who receives a fixed rental income a consumer who holds cash coupons of a department store
41. If some Hong Kong residents who emigrated return to Hong Kong to fill up some posts which have been vacant for a long time, then the number of unemployed in Hong Kong would A. B. C. D.
increase. decrease. remain unchanged. be uncertain.
© by Kevin Ko Economics Team
2006-CE-ECON II-18
42. If there is a recession in Hong Kong, then the proportion of indirect tax to the government tax revenue will A. B. C. D.
increase. decrease. remain unchanged. be uncertain.
43. Which one of the following curves shows a progressive tax?
A. Tax rate
0
B. Tax rate
Taxable income
C. Tax
0
0
Taxable income
D. Tax
Taxable income
0
Taxable income
44. Which of the following government policies will have an expansionary effect on the economy? A. B. C. D.
increasing the public assistance by using its fiscal reserves spending less money on imports increasing the salaries tax increasing the interest rate
© by Kevin Ko Economics Team
2006-CE-ECON II-19
45. The following table shows the total output of two countries: Clothing (units)
Toys (units)
Country X
16
or
8
Country Y
12
or
4
Which of the following statements is true? A. B. C. D.
Country X has an absolute advantage in producing clothing. Country X should specialize in producing clothing. The total output of clothing in country X is larger than that of country Y. The opportunity cost of producing one unit of clothing in country Y is 3 units of toys.
46. Suppose a country has an absolute disadvantage in good X. following is incorrect? A. B. C. D.
Which of the
It is possible that the country has a higher opportunity cost of producing good X than another good. It is possible that the country can produce the same amount of good X as another country with the less amount of resources. The country may also have a comparative advantage in good X. The country will have an absolute advantage in another good.
© by Kevin Ko Economics Team
2006-CE-ECON II-20
47. The following table shows the input requirement of two countries for each unit of output: Toys (units)
Clothing (units)
Country X
2
or
6
Country Y
4
or
8
(1) The opportunity cost of producing clothing in Country Y is lower than that of Country X. (2) Country Y enjoys absolute advantage in the production of both goods. (3) If trading opportunities were opened up, Country Y would export toys and import clothing. A. B. C. D.
(1) only (3) only (1) and (2) only (2) and (3) only
48. Japan Airlines Ltd. is a company registered in Japan. Which of the following would affect Hong Kong's balance of payments favourably? A. B. C. D.
Japan Airlines buying an American-made 747 Jumbo Jet a Japan Airlines plane refuelling in Hong Kong dividends being paid to the shareholders of Japan Airlines in England a Japanese singer flying on Japan Airlines to Hong Kong
© by Kevin Ko Economics Team
2006-CE-ECON II-21
49. Suppose an effective quota on imported cars is initially imposed. Later the government raises the quota and the quota is still effective. Then the market price of those cars will ___________, the quantity transacted will ____________ and the total revenue will __________ . A.
increase ... decrease ... be uncertain, depending on the price elasticity of demand for those imported cars B. increase ... decrease ... decrease C. decrease ... increase ... be uncertain, depending on the price elasticity of demand for those imported cars D. decrease ... increase ... decrease
50. An appreciation of the Hong Kong dollar will A. B. C. D.
decrease our export value in terms of the Hong Kong dollar. decrease our export value in terms of foreign currency. increase Hong Kong's gross domestic product. improve the balance of payments.
END OF PAPER
© by Kevin Ko Economics Team
2006-CE-ECON II-22
Kevin Ko -
英皇教育首席經濟科名師
於香港大學修讀經濟科時，已自資開辦補習社教授 CE 及 AL Economics，可見其經驗之豐富。 不單揉合了電腦技術於經濟學之中，更將抽象的經濟 學概念漫畫化，深受同學們歡迎。 其編製的《漫畫經濟一日通》初版(微觀經濟篇)及(宏 觀經濟篇)獲重慶大學出版社購入版權作全國發行。 香港公共圖書館於04年購入多套《漫畫經濟一日通》 並放置於全港各公共圖書館中以供借閱。 近年應多個媒體邀請作經濟科之主講嘉賓(有線電視 YMC台、新城997等)；亦曾為多個大型講座擔任經 濟科之主講嘉賓，例如03至05年學友社會考分析講 座，與及99至05年英皇教育會考及高考分析講座。 05年會考經濟科超過150名Ko Sir學生考獲A級成 績，再次創下驕人紀錄！ 05年高考經濟科有超過300名Ko Sir學生考獲A、B 或 C級成績，近60名更考獲A級，過百名考獲B級；重 考而獲升級的學生更是多不勝數(由D/C跳升至A，或 D/E跳升至B級，甚至由U變為合格。 早在02年已於www.CaptureA.com推出全港首創的網 上「Live Chat」(視像教室)。 Prepared by Kevin Ko
2006-CE ECON PAPER II
KING’S GLORY EDUCATIONAL CENTRE CE MOCK EXAMINATION 2006
ECONOMICS PAPER II (One hour) K E V I N
K O
INSTRUCTIONS 1.
All questions carry equal marks.
2.
ANSWER ALL QUESTIONS. Sheet.
3.
You should mark only ONE answer for each question. If you mark more than one answer, you will receive NO MARKS for that question.
4.
No marks will be deducted for wrong answers.
You should mark all your answers on the Answer
Prepared by Kevin Ko King’s Glory Educational Centre All Rights Reserved 2006 2006-CE-ECON II-1 (非賣品，免費派發予 Kevin Ko Economics Team 之學生。)
There are 50 questions in this paper.
1.
The problem of scarcity A. B. C. D.
2.
Choose the BEST answer for each question.
applies to all goods. can be eliminated by technology advancement. exists in both market and planned economies. exists in poor countries only, but not in rich countries.
Kevin Ko received a Mark Six prize of $30 000 000 in cash. In planning how to spend the sum, he had the following choices in ascending order: Preference 1: Buy a flat worth $30 000 000 in Happy Valley. Preference 2: Buy a flat worth $20 000 000 in Tai Po and put $10 000 000 in the bank. Preference 3: Buy a yacht worth $ 30 000 000. He chose to buy a flat in Happy Valley. His opportunity cost in doing so was the forgoing of A. B. C. D.
preference 2. preference 3. preference 2 and 3. insufficient information.
© by Kevin Ko Economics Team
2006-CE-ECON II-2
3.
4.
Which of the following statements about land and capital are CORRECT? (1) (2) (3) (4)
The cost of using capital must be positive. The cost of producing land must be zero. The cost of using land must be zero if land has no other uses. The cost of using capital must be zero if capital has other uses.
A. B. C. D.
(1) and (3) only (1) and (4) only (2) and (3) only (2) and (4) only
A shopping mall has a promotion on the 50-inch Plasma televisions but there was still unsold stock. One of these televisions is showing the advertisement of the price reduction in the mall. These televisions are (1) free goods because the quantity demanded is smaller than the quantity supplied. (2) consumer goods because they are sold at a shopping mall. (3) capital goods because they are man-made resources that can be used to produce further wealth. (4) economic goods because people have to pay a price for them. A. B. C. D.
(1) and (3) only (1) and (4) only (2) and (3) only (3) and (4) only
© by Kevin Ko Economics Team
2006-CE-ECON II-3
5.
Hong Kong is considered to be a market economy because A. B. C. D.
6.
its income distribution will be more even. price is used as a means to allocate resources in Hong Kong. price control is implemented on the market. all of its resources are privately owned.
Computers used in offices can be classified as (1) capital goods. (2) consumer goods. (3) scarce goods. A. B. C. D.
7.
(1) and (2) only (1) and (3) only (2) and (3) only (1), (2) and (3)
Which of the followings is classified as 'land' in economics? A. B. C. D.
tobacco plantations minerals under the ground reservoirs reclaimed land
© by Kevin Ko Economics Team
2006-CE-ECON II-4
8. No. of machines
No. of labour
Average product (units)
10
21
300
10
22
320
10
23
350
10
24
400
Refer to the above table. Which of the followings is a possible reason for the changes in average product? A. B. C. D.
9.
absolute advantage diminishing marginal returns division of labour economies of scale
Which of the followings will decrease the supply of labour of an economy? (1) an increase in the number of people migrating to other countries (2) a decrease in the number of people migrating to other countries (3) the number of people migrating to other countries this year is the same to that of last year A. B. C. D.
(1) and (3) only (2) and (3) only all of the above none of the above
© by Kevin Ko Economics Team
2006-CE-ECON II-5
10. Which of the followings will decrease the labour productivity of an economy? (1) (2) (3) (4)
an increase in the retirement age a decrease in the retirement age compulsory retirement of civil servants by the government re-employment of retired civil servants by the government
A. B. C. D.
(1) and (3) only (1) and (4) only (2) and (3) only (2) and (4) only
11. Which of the followings has the least occupational mobility? A. B. C. D.
a doctor a taxi driver a receptionist a construction worker
12. Piece rate will be used as a method of wage payment if (1) (2) (3)
the quantities of inputs produced by workers are easy to measure. the monitoring cost of labours' work is high. the quality of the product is easy to control.
A. B. C. D.
(1) and (2) only (1) and (3) only (2) and (3) only (1), (2) and (3)
© by Kevin Ko Economics Team
2006-CE-ECON II-6
13. Which of the following statements about profit is CORRECT? A. B. C. D.
It must be positive. It is the only return that is subject to tax. It must be determined after sales have been made. It is more certain than the returns to other factors of production.
14. Which of the following statements about an ordinary partnership is CORRECT? A. B. C. D.
Ordinary partnership has at least one limited partner. Ordinary partnership is a legal entity. The business will be dissolved once any one partner died. A contract signed on behalf of a partner himself is legally binding on all other partners.
15. What is the advantage of changing from a sole proprietorship into a private limited company? A. B. C. D.
A firm has more capital. A firm has longer continuity. A firm becomes a legal entity. A firm's shares can be quoted on the stock exchange.
© by Kevin Ko Economics Team
2006-CE-ECON II-7
16. Which of the following statements about the difference between a public limited company and a private limited company is true? A. B. C. D.
A public limited company has less capital than that of a private limited company. A public limited company pays profits tax at a rate lower than that of a private limited company. A public limited company is being less likely to be taken over by another company than a private limited company. The maximum number of shareholders in a public limited company is more than that of a private limited company.
17. Suppose the law of diminishing marginal returns applies to the firm, and output is as follows: No. of workers
1
2
3
4
5
Marginal product (units)
10
12
14
13
10
After what level of workers does average product start to diminish? A. B. C. D.
2 workers 3 workers 4 workers 5 workers
© by Kevin Ko Economics Team
2006-CE-ECON II-8
18. Which of the followings about economies of scale is true? A. B. C. D.
It applies to short-run production only. It applies to long-run production only. It applies to both short-run and long-run production. None of the above.
19. Wilson Liu is a famous tutor and goods at teaching Mathematics. Recently he has started tutoring Additional Mathematics classes. This is a type of __________ integration. A. B. C. D.
conglomerate backward forward lateral
20. Recently more and more new firms enter the market of cable TV services. Which of the followings would occur? A. B. C. D.
There would be an increase in the price of cable TV services. There would be an increase in the market share occupied by existing firms. The market structure of cable TV services is imperfect competition. The market of cable TV services would become a perfect competition.
© by Kevin Ko Economics Team
2006-CE-ECON II-9
21. Refer to the following diagram: MTR fares ($)
B A D No. of passengers rides
0
Cross Habour MTR Services
Which of the followings would lead to the above movement along the demand curve from A to B? A. B. C. D.
a fall in the toll fee for cross harbour Mass Transit Railway services a fall in the frequency of cross harbour Mass Transit Railway services a fall in the maintenance fee for cross harbour Mass Transit Railway services a fall in the ticket price for cross harbour bus services
22. Suppose there is an increase in the supply of iron and steel which is used in the production of ships. Which of the followings are CORRECT? (1) (2) (3) (4)
an increase in the demand for ships an increase in the supply of ships an increase in the quantity demanded of iron and steel an increase in the quantity demanded of ships
A. B. C. D.
(1), (2) and (3) (1), (2) and (4) (1), (3) and (4) (2), (3) and (4)
© by Kevin Ko Economics Team
2006-CE-ECON II-10
For Questions No. 23 and 24, consider the following supply and demand schedule of DVD in Country X. The DVD market is initially in equilibrium. Price ($)
Quantity demanded (units)
Quantity supplied (units)
30
90
60
32
80
65
34
70
70
36
60
75
38
50
80
40
40
85
23. If the government imposes a tax of $6 for each unit of DVD sold, then _______ will be the new equilibrium price. A. B. C. D.
$52 $56 $58 $60
24. If the government imposes a tax of $6 for each unit of DVD sold, then ______ will be the government revenue. A. B. C. D.
$2 400. $2 800. $3 600. $4 200.
© by Kevin Ko Economics Team
2006-CE-ECON II-11
25. Below is the diagram showing the market of tours for Hong Kong people to Europe. The initial equilibrium is at E0. Because of economic recovery, more Hong Kong people spend their holiday in Europe. Moreover, the Euro currency depreciates against the Hong Kong dollar.
HK$
S2 S0 Ea Eb
E0
S1 Ec
Ed
0
D1 D2
D0 Number of visits to Europe by Hong Kong People
The new equilibrium point in the market will be at A. B. C. D.
Ea. Eb. Ec. Ed.
26. Suppose the production of a normal good has a technological advance. In which of the following situations must the market price of the good decrease? A. B. C. D.
The earnings of consumers decrease. The earnings of consumers increase. The supply of the good is perfectly elastic. The demand for the good is perfectly elastic.
© by Kevin Ko Economics Team
2006-CE-ECON II-12
27. Under which of the followings will the buyers bear all the tax burden if the government imposes a per unit tax on Good Y? (1) Good Y is a necessity. (2) Lots of goods can substitute Good Y. (3) Compare to buyers' income, Good Y contains a small proportion. A. B. C. D.
(1) and (2) only (1) and (3) only All of the above None of the above
28. Suppose the demand of wheat is elastic. Due to a bad harvest, the equilibrium quantity changes by 30%. The equilibrium price would ____________ by ______. A. B. C. D.
increase ... 20% decrease ... 20% increase ... 40% decrease ... 40%
29. 9999 Gold is preferred to diamond as a medium of exchange because the former is more A. B. C. D.
homogenous. generally acceptable. scarce. durable.
© by Kevin Ko Economics Team
2006-CE-ECON II-13
30. The money supply in Hong Kong will increase if (1) (2) (3) (4)
more borrowers repay bank loans. the best lending rate in Hong Kong is decreased. the capital inflows of Hong Kong are increased. the demand for bank loans decreases due to economic recession.
A. B. C. D.
(1) and (2) only (1) and (3) only (2) and (3) only (3) and (4) only
31. Suppose the legal reserve ratio is 20%. If the banking system has excess reserves of $10 000, it can at most increase its loans by A. B. C. D.
$30 000. $40 000. $50 000. $60 000.
© by Kevin Ko Economics Team
2006-CE-ECON II-14
32. Which of the followings is/are included in M2? (1) (2) (3) (4) (5)
currency in circulation (C) demand deposits (DD) savings deposits with licensed banks (SDLB) time deposits with licensed banks (TDLB) negotiable certificates of deposits issued by licensed banks (CDLB)
A. B. C. D.
(1) only (2) only (1) & (2) only All of the above
33. Private consumption expenditure Government consumption expenditure Gross domestic fixed capital formation Change in stocks Total exports of goods Domestic exports Re-exports Imports of goods Exports of services Imports of services Inflow of capital Outflow of capital
$ million 60 28 19 6 90 71 19 48 32 18 88 90
The GNP of the economy in that year is A. B. C. D.
$161 million. $165 million. $167 million. $169 million.
© by Kevin Ko Economics Team
2006-CE-ECON II-15
34. If GNP increases while GDP decreases, A. B. C. D.
the net external factor income flow is increasing. the net external factor income flow is decreasing. the net external factor income flow is negative. the net external factor income flow is positive.
35. Which of the following items SHOULD be included in the calculation of Hong Kong's GDP? A. B. C. D.
money gained from betting in a football match money won from the Jockey Club of $10 000 compensation to employees from the Jockey Club of $20 000 money earned by selling used books
36. If the GDP at current market price is increasing at a rate equal to that of the GDP at constant market price, then the price index will A. B. C. D.
remain constant. increase. decrease. be uncertain.
© by Kevin Ko Economics Team
2006-CE-ECON II-16
37. A country's Gross National Product (GNP) at current market price may understate the living standard of its people because (1) the household production not transacted in the market is not included. (2) undesirable effects of the environment caused by the pollution of production are not included. (3) the effect of a rise in the population size is not considered. (4) the improvement in the quality of the goods and services produced in the country is not considered. A. B. C. D.
(1) and (2) only (1) and (4) only (2) and (3) only (3) and (4) only
38. Suppose the deflation rate of an economy decreases from 3% to 2% in a certain year. This means that A. B. C. D.
price level starts to rise. price level rises at a decreasing rate. price level decreases at a faster rate. price level decreases.
© by Kevin Ko Economics Team
2006-CE-ECON II-17
39. Study the following information about Country X: Year
Real National Income ($mn)
Price Index
1998 1999
8 000 10 000
140 168
Comparing the year 1998 with 1999, we can conclude that A. B. C. D.
the cost of living is lower in 1999. the living standard in 1999 is higher. the GNP growth rate in 1999 is greater than 25%. the price of all goods and services increased by 20% in 1998.
40. Who would lose in times of unexpected deflation? A. B. C. D.
a driver who pays a fixed driving license fee an investor who engages in gold buying a landlord who receives a fixed rental income a consumer who holds cash coupons of a department store
41. If some Hong Kong residents who emigrated return to Hong Kong to fill up some posts which have been vacant for a long time, then the number of unemployed in Hong Kong would A. B. C. D.
increase. decrease. remain unchanged. be uncertain.
© by Kevin Ko Economics Team
2006-CE-ECON II-18
42. If there is a recession in Hong Kong, then the proportion of indirect tax to the government tax revenue will A. B. C. D.
increase. decrease. remain unchanged. be uncertain.
43. Which one of the following curves shows a progressive tax?
A. Tax rate
0
B. Tax rate
Taxable income
C. Tax
0
0
Taxable income
D. Tax
Taxable income
0
Taxable income
44. Which of the following government policies will have an expansionary effect on the economy? A. B. C. D.
increasing the public assistance by using its fiscal reserves spending less money on imports increasing the salaries tax increasing the interest rate
© by Kevin Ko Economics Team
2006-CE-ECON II-19
45. The following table shows the total output of two countries: Clothing (units)
Toys (units)
Country X
16
or
8
Country Y
12
or
4
Which of the following statements is true? A. B. C. D.
Country X has an absolute advantage in producing clothing. Country X should specialize in producing clothing. The total output of clothing in country X is larger than that of country Y. The opportunity cost of producing one unit of clothing in country Y is 3 units of toys.
46. Suppose a country has an absolute disadvantage in good X. following is incorrect? A. B. C. D.
Which of the
It is possible that the country has a higher opportunity cost of producing good X than another good. It is possible that the country can produce the same amount of good X as another country with the less amount of resources. The country may also have a comparative advantage in good X. The country will have an absolute advantage in another good.
© by Kevin Ko Economics Team
2006-CE-ECON II-20
47. The following table shows the input requirement of two countries for each unit of output: Toys (units)
Clothing (units)
Country X
2
or
6
Country Y
4
or
8
(1) The opportunity cost of producing clothing in Country Y is lower than that of Country X. (2) Country Y enjoys absolute advantage in the production of both goods. (3) If trading opportunities were opened up, Country Y would export toys and import clothing. A. B. C. D.
(1) only (3) only (1) and (2) only (2) and (3) only
48. Japan Airlines Ltd. is a company registered in Japan. Which of the following would affect Hong Kong's balance of payments favourably? A. B. C. D.
Japan Airlines buying an American-made 747 Jumbo Jet a Japan Airlines plane refuelling in Hong Kong dividends being paid to the shareholders of Japan Airlines in England a Japanese singer flying on Japan Airlines to Hong Kong
© by Kevin Ko Economics Team
2006-CE-ECON II-21
49. Suppose an effective quota on imported cars is initially imposed. Later the government raises the quota and the quota is still effective. Then the market price of those cars will ___________, the quantity transacted will ____________ and the total revenue will __________ . A.
increase ... decrease ... be uncertain, depending on the price elasticity of demand for those imported cars B. increase ... decrease ... decrease C. decrease ... increase ... be uncertain, depending on the price elasticity of demand for those imported cars D. decrease ... increase ... decrease
50. An appreciation of the Hong Kong dollar will A. B. C. D.
decrease our export value in terms of the Hong Kong dollar. decrease our export value in terms of foreign currency. increase Hong Kong's gross domestic product. improve the balance of payments.
END OF PAPER
© by Kevin Ko Economics Team
2006-CE-ECON II-22
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