St.

Louis School
Post-Mock Examination (2022-2023)

Subject / Paper: Economics (Paper 1)

Secondary Six
Time allowed : 1 hour

Date: 11th March, 2023

Setter: \

Name: _______________________________

Class: ______________ Class No. _________

INSTRUCTIONS

1. Read carefully the instructions on this Book and on the Answer Sheet. After the announcement of the start of
the examination, you should first write your name, class and class no. in the spaces provided on Page 1 of
this Book as well as on the Answer Sheet.

2. 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.

3. All questions carry equal marks.

4. 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.

5. You should mark only ONE answer for each question. If you mark more than one answer, you will receive
NO MARKS for that question.

6. No marks will be deducted for wrong answers.

7. No extra time will be given to students for writing name, class and class no., and question number after the
‘Time is up’ announcement.

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

1. Wendy plants a tree in her garden. She can sell the tree now for $10,000. Alternatively, she can sell the tree a
year after for $20,000. The extra $10,000

A. is an interest only if Wendy sells the tress now.

B. is an interest only if Wendy sells the tree one year later.
C. is an interest no matter Wendy sells the tree now or not.
D. is not an interest because no borrowing or lending is involved.

2. As the Hong Kong government removed the mandatory mask wearing requirement, students can now take
off their face masks while attending lessons at school.

Which of the following would be the LEAST important factor for students to choose between taking off
their masks and continuing wearing their masks while attending lessons at school?

A. The risk of contracting COVID-19 for students is lower when they wear a face mask.
B. Students cannot use their facial expression to express themselves when they wear a face mask to
communicate with their schoolmates.
C. Students have already spent a lot of money on purchasing masks.
D. The quality of students’ skin may be worsened when they wear a face mask for a prolonged time.

Answer Questions 3 and 4 by referring to the following information:

To deal with the rising labour costs, cashierless grocery stores are becoming more popular around the world.
Compared to the traditional stores, no staff is being hired to work in these cashierless stores and customers can
purchase their products using a self-checkout station.

3. Compared to the traditional grocery stores, cashierless grocery store is an example of using __________ to
solve the problem of __________.

A. customs and traditions ... ‘what to produce’

B. customs and traditions ... ‘how to produce’
C. market mechanism ... ‘what to produce’
D. market mechanism ... ‘how to produce’

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4. It is observed that the same bottle of distilled water is sold at a lower price in a cashierless grocery store than
that in a traditional grocery store. Which of the following statements about this situation is correct?

A. The cashierless grocery store is not maximizing its profit.

B. The demand for distilled water in a cashierless grocery store is higher than that in a traditional
grocery store.
C. The lower price of distilled water in a cashierless grocery store could be explained by a lower
cost of production incurred in running the store.
D. There would be a shortage of distilled water in the cashierless grocery store.

5. Which of the following statements regarding a public good is correct?

A. Concurrent consumption is possible for a public good.

B. A private good will become a public good if the owner does not charge a price on the use of the
good.
C. The production of a public good does not incur opportunity cost.
D. A public good must be free-of-charge.

6. In order to promote the development of the Guangdong-Hong Kong-Macao Greater Bay Area, the Chinese
government relaxes the restrictions on the purchase of real estates by Hong Kong people in the area. Which
of the following statements is correct?

A. It will increase the occupational mobility of Hong Kong people because those moving to the
mainland China will necessarily change their jobs.
B. It will increase the geographical mobility of Hong Kong people because the cost of travelling
around the Greater Bay Area is lower.
C. It will reduce the occupational mobility of Hong Kong people because it is easier for Hong Kong
people to engage in a new occupation.
D. It will not affect labour mobility because those who buy real estates in mainland China are retired
persons.

7. As the government start to relax the anti-epidemic measures, many restaurants in Hong Kong extend their
business hours and open more tables in order to serve more customers. Which of the following are variable
costs involved in the adjustment of restaurants?

(1) table clothes

(2) wages of the waiters and chefs
(3) rental payment for the restaurant premises
(4) customers’ expenses in the restaurants
(5) electricity fees

A. (1) and (4) only

B. (2) and (5) only
C. (1), (2) and (5) only
D. (1), (2), (3) and (4) only

8. In 2022, Amazon, a technology company mainly focusing on e-commerce, launches “Amazon Clinic”,
which provides message-based virtual health services and aims to treat common conditions like allergies and
skin conditions. Which of the following is the LEAST likely motive behind the expansion?

A. to extend its brand name to other markets

B. to reduce business risk by diversifying sources of income
C. to ensure a market outlet of its technologies developed
D. to lower the average cost of production

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9. The following table shows the production plan of Firm A which employs two factors only, namely labour
and machine.

Labour (units) Machine (units) Total product of labour (units) Total cost of production ($)
2 2 50 2,400
3 2 70 2,600
4 2 X 2,800
5 2 120 3,000

Suppose the law of diminishing marginal returns applies to Firm A. Which of the following statements is
correct?

A. The value of X may be equal to 90.

B. The value of X must be larger than 100.
C. If Firm A is enjoying economies of scale, the value of X can be equal to 90.
D. The average product at 4 units of labour can be 30 units of output.

10. Suppose the government cancels the first registration tax concession for electric vehicles. At the same time,
there is a technological breakthrough in the production of gasoline. Which of the following diagrams can
best depict the above situation?

A. Gasoline B. Gasoline
Price S1 Price S1
S2 S2

D2
D1 D
Quantity Quantity

C. Gasoline-propelled cars D. Gasoline-propelled cars

Price S1 Price S1
S2 S2

D1
D D2
Quantity Quantity

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11. The following table shows the quantities of coffee beans consumed before and after an increase in the unit
sales tax imposed on coffee beans.

Quantity of high-quality Quantity of low-quality

coffee beans consumed coffee beans consumed
Before the increase in unit sales tax 100 500
After the increase in unit sales tax Q1 Q2

Which of the following pair(s) of figures is/are consistent with the law of demand?

(1) Q1 = 80; Q2 = 300

(2) Q1 = 60; Q2 = 350
(3) Q1 = 120; Q2 = 490

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

12. A fall in the demand for __________ will lead to a drop in the price of __________.

(1) commercial offices ...... residential flats

(2) desktop computers ...... computer hardware
(3) digital cameras ...... film cameras
(4) beef ...... beef entrails (牛內臟)

A. (1) and (2) only

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

13. The following table shows the sales information of a toy company.

Year-on-year growth rate Year-on-year growth rate

Year
of price of toys of sales volume of toys
2019 -5.0% +10%
2020 -6.2% +17.3%
2021 -7.4% +15.7%

According to the above information, which of the following statements are correct?

(1) The demand for toys is elastic.

(2) The above changes in price and sales volume may be caused by an increase in supply of the input of
toys.
(3) The above situation violates the law of demand.
(4) The elasticity of demand for toys is greater than the elasticity of supply of toys.

A. (1) and (2) only

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

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14. The diagram below shows the supply and demand curves of imported Thailand rice in Hong Kong. Point E is
the original equilibrium point.

Price
D1 S1
D S
E1
D2
S2

E
E2 E4

E3
0 Quantity

Suppose there is a bad harvest of rice in Thailand and the import price of rice from the mainland China
increases. The new equilibrium point will most likely be at _____.

A. E1
B. E2
C. E3
D. E4

15. Suppose there is an effective price ceiling imposed on Good Y. The price ceiling may become ineffective
when

(1) the price of the complement of Good Y increases.

(2) the input price of Good Y decreases.
(3) the government raises the price ceiling.

A. (1) and (2) only

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

16. Refer to the following market supply of Good X.

Unit price ($) 45 50 55 60 65 70

Quantity supplied ($) 100 110 120 130 140 150

After the government levies a per-unit sales tax on Good X, the quantity transacted falls from 120 units to
110 units while the total expenditure of consumers rises by $1,100.

Based on the above information, which of the following statements is correct?

A. The tax is equal to $15 per unit of Good X sold.

B. The new market price is $50.
C. The demand for Good X is less elastic than the supply of Good X.
D. Within the range of the original and new market prices, the elasticity of demand for Good X is
larger than one.

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17. Which of the following statements about a perfectly competitive market are correct?

(1) As all firms are price-takers, there is no price competition in the market.
(2) The supply schedule of a perfectly competitive firm is the same as its marginal cost schedule.
(3) A perfectly competitive firm can maximize its profit by producing at the output level where its marginal
cost equals the market price.

A. (1) and (2) only

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

18. When the supply of coffee beans decreases, the total sales value of Espresso coffee will __________ while
the consumer surplus of Espresso coffee will __________.

A. increase ...... decrease

B. increase ...... change uncertainly
C. change uncertainly ...... decrease
D. change uncertainly ...... change uncertainly

19. The following table shows some data about a good at a given market price.

Quantity 5 units 6 units

Total cost $100 $120
Producer surplus $50 ?

Given that the total fixed cost is $20. If the market price of the good remains the same, the producer surplus
at 6 units will be equal to _______.

A. $50
B. $56
C. $60
D. $64

20. Firm Café is a coffee shop located in Kwun Tong. After being recommended by OpenRice, a popular food
and restaurant guide in Hong Kong, Firm Café kept the price of its food and coffee unchanged and it is
observed that there were fewer empty seats in the shop.

Which of the following statements about the catering services offered by Firm Café are correct?

(1) Consumer surplus increases.

(2) Producer surplus increases.
(3) Total revenue increases.

A. (1) and (2) only

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

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21. It is known that the production of Good X emits pollutants and causes health damage to the nearby residents.
Suppose the industry of Good X now sees a larger output due to an increase in demand. Which of the
following is/are the possible reason(s) that the divergence between private and social costs will increase as a
result of the increase in output of Good X?

(1) There are more pollutants emitted by each unit of Good X produced.
(2) The sales revenue of companies producing the substitute of Good X drops.
(3) The workers in the industry of Good X benefit from an increase in wage rates.

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

22. In a country, suppose both the average income of the middle-income group and the proportion of households
in the middle-income group decrease. It follows that

A. the income of the high-income group will increase.

B. the income of the low-income group will decrease.
C. the income inequality of the country will be worsened.
D. the Gini coefficient of the country may decrease.

23. In the 2022-23 budget, the Financial Secretary announced a tax deduction for domestic rental expenses,
subject to a deduction ceiling of $100,000. This measure would NECESSARILY __________.

A. widen the income gap between the rich and the poor
B. reduce the government revenue
C. increase the aggregate demand of Hong Kong people
D. result in a trade deficit in Hong Kong

24. Which of the following items is NOT included in the calculation of Hong Kong’s GDP?

A. profit earned by a car agent from reselling second-hand cars

B. stamp duty levied on the shares bought and sold in the Hong Kong stock market
C. insurance premium for a car paid to a local insurance company
D. interest to a loan paid by a firm in Hong Kong to a bank in Japan

25. Country X imports workers from other countries but does not export any workers to other countries. Suppose
the gross domestic product (GDP) of Country X is $280 billion. If the imported workers earn $80 billion and
they remit $60 billion of their income to their home countries, the gross national income (GNI) of Country X
is $________ billion.

A. 140
B. 200
C. 220
D. 260

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26. Study the following diagram.

Year-on-year
percentage change (%)

Nominal GDP

Real GDP

0 Year
2020 2021 2022

According to the above diagram, which of the following conclusions CANNOT be drawn?

(1) The GDP deflator in 2020 was lower than 100.

(2) Compared with 2020, the price level in 2021 remains the same.
(3) In 2020, nominal GDP was larger than real GDP.

A. (1) and (2) only

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

27. The diagram below shows the aggregate demand (AD) curves, short run aggregate supply (SRAS) curves
and long run aggregate supply (LRAS) curve of an economy.

Price level LRAS

SRAS0

SRAS1

E1
E0
E2
AD0

AD1
0 Aggregate output
Y1

Suppose the economy initially operates at E0 and the potential output level is at Y1. The long run equilibrium
will be at _____ because there will be an __________ in the factor market creating __________ on the factor
prices.

A. E1 ...... excess supply ...... an upward pressure

B. E1 ...... excess demand ...... an upward pressure
C. E2 ...... excess supply ...... a downward pressure
D. E2 ...... excess demand ...... a downward pressure

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28. The following graph shows the percentage change in price level of an economy.

According to the above graph, which of the following persons will gain in July?

A. a flat owner repaying floating mortgage loans

B. a holder of government bonds of which the interest rate of return is linked to the inflation, subject
to a minimum return of 3%
C. an employer who signs a fixed nominal wage contract with his workers
D. a creditor who has loaned out a sum of money at a floating interest rate

29. The following is an extract of the “My Blog” from the Financial Secretary in 2020:

Hong Kong’s economy is in deep water and figures are showing that the situation is getting worse. The
unemployment rate increased by 0.3% to 3.7%. The decrease in retail sales value ranged from 18% to
24% over the last 6 months. According to the Census and Statistics Department, GDP grew at a negative
annual rate of 2.9% in the fourth quarter of last year.

According to the above extract, Hong Kong was in the __________ phase of a business cycle in 2020.

A. recovery
B. peak
C. recession
D. depression

30. The following table shows the population data of an economy:

Population aged 15 or above 7,800,000

Employed persons 4,750,000
Underemployed persons 122,500
Unemployment rate 5%

Based on the above data, the underemployment rate of the economy is ________.

A. 1.57%
B. 1.70%
C. 2.45%
D. 2.51%

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31. Inflationary (output) gap

A. implies that the economy is experiencing inflation.

B. will exist if aggregate demand exceeds short run aggregate supply.
C. must be eliminated in the long run.
D. will result in a downward pressure of the wages of labour.

32. Mary plans to deposit $450,000 in a financial institution in Hong Kong in the form of a time deposit for one
month. Which of the following institutions can accept her deposit?

(1) a licensed bank

(2) a restricted licence bank
(3) a deposit-taking company

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

33. Refer to the following data about the money supply of Country A:

Components $ billion
Total issue of legal tender 40
Legal tender held by authorised institutions 12
Demand deposits 8
All types of deposits with licensed banks and negotiable certificates of deposit
27
issued by licensed banks (except those held by authorised institutions)
All types of deposits with restricted licence banks and deposit-taking companies 32
Neogtiable certificates of deposit issued by restricted licence banks and
10
deposit-taking companies (except those held by authorised institutions)

The money supply M2 and M3 are $________ billion and $________ billion respectively.

A. 55 ... 97
B. 55 ... 105
C. 63 ... 97
D. 63 ... 105

34. Study the following balance sheet of a banking system, which holds an excess reserve of $80 million.

Assets ($ million) Liabilities ($ million)

Reserves 800 Deposits 3,600
Loans 2,800

If the central bank issues newly printed banknotes worth $150 million, the cash held by the non-bank public
will increase by $100 million and the total amount of excess reserve will increase by $20 million. The money
supply of the economy will then increase by $________ million.

A. 50
B. 250
C. 550
D. 650

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35. Suppose the central bank raises the legal reserve ratio. Which of the following CANNOT offset the effect of
the above situation on the nominal interest rate?

(1) The nominal income of households increases.

(2) Investors feel pessimistic about the future investment environment of financial markets.
(3) The central bank buys government bonds in the open market.

A. (1) and (2) only

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

36. Refer to the following diagram.

Growth rate (%)

Money supply

0 Year

According to the quantity theory of money, which of the following statements is correct?

A. The price level may be decreasing.

B. The price level is increasing at a constant rate.
C. The nominal output remains constant.
D. If the money supply grows at a slower rate than the nominal output, the velocity of circulation of
money will be increasing.

37. Which of the following government policies will raise the general price level and unemployment level of an
economy at the same time?

A. providing cash subsidies to all citizens

B. cancelling the production subsidies provided to firms
C. abolishing the general sales tax
D. revaluating the domestic currency

38. Which of the following is a contractionary fiscal policy?

A. carrying out an open market sale of government bonds

B. financing the government expenditure by collecting tax from households, where the amount of
expenditure is larger than the amount of tax collected
C. widening the tax band of the salaries tax
D. increasing the marginal tax rates of the salaries tax

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39. The diagram below shows some fiscal data about the government of an economy between 2018 and 2021.

During the above period, we can conclude that

A. the economy was in a recovery.

B. there has been a fiscal deficit since 2020.
C. the government had to use its fiscal reserves to finance the budget deficits after 2019.
D. the government revenue in 2021 was lower than that in 2020.

40. Which of the following taxation systems will cause the Lorenz curve to move closer to the line of perfect
equality?

A. Tax rate B. Tax rate

0 0
Taxable income Taxable income

C. Tax payment D. Tax payment

0 0
Taxable income Taxable income

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41. Country X evenly allocates its resources to produce 30 units of rice and 60 units of corn respectively. Given
that the international market price for 1 unit of rice is equal to 0.8 units of corn and the rice-importing
country has to pay a transportation cost of 0.1 units of corn per unit of rice imported.

Which of the following statements is correct?

A. Country X has an absolute advantage in producing rice.

B. The opportunity cost of Country X in producing 1 unit of rice is 0.5 unit of corn.
C. Country X will gain 1.1 units of corn per unit of imports.
D. Country X will gain 0.3 units of rice per unit of exports.

42. Suppose an effective import quota is initially imposed on soybeans in a small open economy. If the domestic
demand for soybeans increases,

A. the quantity of soybeans domestically produced will remain unchanged.

B. the quantity of soybeans domestically consumed will remain unchanged.
C. the world price of soybeans will increase.
D. the total import value of soybeans will increase.

43. The following table shows the information about the balance of payments of a country.

Item $ million
Visible trade 55
Invisible trade X
Net factor income from abroad 15
Capital inflow 18
Capital outflow 24
Increase in reserve assets 30

Which of the following statements is correct?

A. There is an invisible trade surplus of $19 million.

B. The current account deficit is $36 million.
C. There is a balance of payments surplus of $30 million.
D. The country’s gross domestic product is greater than its gross national income.

44. The table below shows the interest rate of Renminbi time deposits at HSBC on 26 September 2019.

Duration Renminbi ¥10,000 to ¥499,999 Renminbi ¥500,000 or above

12 months 0.55% 0.60%

On 26 September 2019, Mr. Cheung exchanged a total of RMB¥100,000 from Hong Kong dollar at an
exchange rate of HK$100 to RMB¥90.247 and deposited the sum to HSBC as time deposits. Suppose he
withdrew the money one year later and exchanged the full sum back to Hong Kong dollar at an exchange
rate of HK$100 to RMB¥92.258.

From the above transactions, Mr. Cheung __________.

A. gained about HK$550

B. gained about HK$2,518
C. lost about HK$1,764
D. lost about HK$1,819

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45. Under which of the following situations will the import volume of a country decrease?

(1) an increase in the tariffs on imports

(2) an increase in the effective quota of imports
(3) an appreciation of the domestic currency
(4) an embargo imposed on the imports from its major trading partners

A. (1) and (2) only

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

END OF PAPER

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