Belilios Public School

Yearly Examination 2020 - 2021

Economics

Secondary 4 Time Allowed: 2 hours

Maximum Marks: 100

Section A – Multiple Choice Questions – Answer ALL Questions

Instructions
1. Write down your name and class number in the appropriate boxes on the multiple choice answer sheet
provided. Then use an HB PENCIL to shade the appropriate boxes showing your class number.
2. There are 30 questions in this section. Choose the BEST option among the alternatives given and
shade the appropriate box WITH AN HB PENCIL on the answer sheet provided.
3. All the answers should be marked on the Answer Sheet.
4. Note that you may only mark ONE answer to each question. Two or more answers will score NO
MARKS.
5. All questions carry equal marks. No marks will be deducted for wrong answers.

Section B – Short Questions & Section C – Long Questions

Instructions
1. Write your name and class number in the spaces provided on the cover of the answer book.
2. There are SIX questions in Section B and TWO questions in Section C. Answer ALL questions. Keep
your answers SHORT.
3. Answer each question in the space provided.
If you have used any supplementary answer sheets, you should write your name, class number and
question number on every supplementary answer sheet and place them inside the answer book.

1
2021-YE-S4-ECONOMICS
Section A (30 marks)

1. Due to the outbreak of the coronavirus, the Hong Kong government banned bars from operating.
Which of the following events would raise the cost of operating bars illegally?
(1) The government steps up enforcement so that the risk of being caught increases.
(2) The government raises the penalty for the illegal operation of bars.
(3) There are significantly fewer customers than before the outbreak of the coronavirus.
A. (1) and (2) only
B. (1) and (3) only
C. (2) and (3) only
D. (1), (2) and (3)

2. The government planned to expand the $2 transport fare concession scheme by lowering the eligible
age from the current 65 to 60. The above proposal is related to the ________ question.
A. ‘how to produce’
B. ‘for whom to produce’
C. ‘for whom to produce’ and ‘how to produce’
D. ‘what to produce’ and ‘how to produce’

3. Which of the following is correct?

A. Relative price will not exist when there is only one good in the world.
B. If the nominal price of Good A increases by $5, the relative price of Good B (in terms of Good
A) will decrease by $5.
C. Nominal price can still exist when money does not exist.
D. If the nominal prices of all goods increase by 100%, the relative prices of all goods will also
increase by 100%.

4. Suppose Good X and Good Y are substitutes. Which of the following can best illustrate this
relationship?
A. When the price of Good X increases, the demand for Good Y decreases.
B. When the supply curve of Good X shifts rightwards, the demand curve of Good Y shifts leftwards.
C. When the demand for Good X increases, the demand for Good Y also increases.
D. When the supply of Good X increases, the supply of Good Y decreases.

2
2021-YE-S4-ECONOMICS
5. The following shows the supply-demand diagram of delivery services. The initial equilibrium point is
E0.

Price ($)
S1
E2 S0
S2
E1 E0
E3

E4 D2
D0
D1
0 Quantity

Due to the COVID-19 epidemic, more people are shopping online. In addition, more people are
working as couriers. The new equilibrium point will most likely be ______.
A. E1
B. E2
C. E3
D. E4

6. The following diagram shows Country A’s imported cheese market.

Price ($)

S1 S2
S0
E1
E3
E0
E4
E2
D
0 Quantity

Suppose the original market equilibrium is at E0. If the government imposes an effective quota on
imported cheese, at which of the following points will the new market equilibrium most likely be?
A. E1
B. E2
C. E3
D. E4

3
2021-YE-S4-ECONOMICS
The following table shows the original supply-demand schedules of cigarettes. Suppose the number of
cigarette factories increases. For every price, the quantity supplied of cigarettes increases by 2 units.
Answer Questions 7 and 8.

Price ($) Quantity demanded (units) Quantity supplied (units)

51 9 5
52 8 6
53 7 7
54 6 8
55 5 9

7. If the government wants to keep the quantity transacted at its original level, which of the following
measures may be adopted?
(1) Imposing a unit tax of $2
(2) Providing a unit subsidy of $2
(3) Setting a price ceiling of $53
(4) Setting a price floor of $53
A. (1) and (3) only
B. (1) and (4) only
C. (2) and (3) only
D. (2) and (4) only

8. Based on the above table, which of the following statements are correct?
(1) Due to the increase in the number of cigarette factories, the total revenue increases.
(2) Within the range of the original and the new equilibrium prices, the demand for cigarettes is
elastic.
(3) Within the range of the original and the new equilibrium prices, the supply of cigarettes is elastic.
A. (1) and (2) only
B. (1) and (3) only
C. (2) and (3) only
D. (1), (2) and (3)

4
2021-YE-S4-ECONOMICS
9. Refer to the following table about the supply-demand schedule of a good.

Price ($) 10 11 12 13 14 15
Quantity supplied (units) 27 29 31 33 35 37
Quantity demanded (units) 42 39 36 33 30 27

If the government imposes a $5 unit tax on the good, the producers’ tax burden will be
A. $54.
B. $81.
C. $99.
D. $135.

10. Read the following passage:

ABC Group employed approximately 14,000 employees … Employees are entitled to

participate in the growth of the Group through a unique Share Option Scheme, under which
they can buy the shares of the Group at a 30% discount and sell them in the market.

According to the above information, ABC Group can be classified as a _______________ because
_______________.
A. private limited company ... employees share profits
B. public limited company ... the shareholders can sell the shares in the market
C. public limited company ... of the large number of employees
D. partnership ... the owners have a strong incentive to improve efficiency

11. A firm chooses to issue shares instead of bonds to raise capital. This is because
A. shareholders potentially have a higher return if the firm earns huge profits.
B. there is no redemption obligation.
C. bondholders get back their money before shareholders when the firm winds up.
D. the voting power of existing shareholders will not be diluted.

12. Which of the following is an advantage of division of labour?

A. Reducing workers’ risk of unemployment
B. Reducing the influence of one production stage on another
C. Increasing workers’ productivity
D. Allocating more resources for producing capital goods

5
2021-YE-S4-ECONOMICS
13. The following table shows the city Winterfall’s employment distribution in different years.

Year 1814 1824 1834

Primary production 50% 45% 38%
Secondary production 40% 45% 50%
Tertiary production 10% 10% 12%
From the table, we can conclude that from 1814 to 1834,
A. the overall unemployment rate remained unchanged.
B. the total value of tertiary production increased.
C. the number of people engaged in tertiary production decreased.
D. the relative importance of primary production in terms of employment decreased.

14. Henry is a farmer and he makes a scarecrow to discourage birds from eating the plants. Henry
engages in _______ production and the scarecrow provides the service of _______.
A. secondary ... labour
B. tertiary ... entrepreneurship
C. primary ... capital
D. secondary ... land

15. The following diagram shows the relationship of the three types of production. What do H and J stand
for, respectively?

Primary
production

J
Secondary Tertiary
production production

A. raw materials; producer goods

B. raw materials; consumer goods
C. services; economic goods
D. producer goods; consumer goods

6
2021-YE-S4-ECONOMICS
16. A painter specialising in drawing pictures while a singer specialising in singing are examples of
________ division of labour.
A. simple
B. complex
C. regional
D. international

17. Which of the following will increase the labour supply in Hong Kong?
A. An increase in the number of migrants to the mainland from Hong Kong.
B. The Hong Kong government reduces the number of public holidays.
C. The Hong Kong government promotes the development of high-tech industry.
D. Firms invest more in machinery, which leads to an increase in labour productivity.

18. Which of the following measures can raise the productivity of bank employees?
(1) Reducing their retirement age
(2) Improving their working incentives (e.g. providing bonus)
(3) Providing evening training courses
(4) Increasing the number of vacancies
A. (1) and (2) only
B. (1) and (3) only
C. (2) and (3) only
D. (3) and (4) only

19. The following table shows Alex’s wage between May and August.

May June July August

Alex’s output (units) 10 15 0 8
Alex’s wage ($) 60 80 20 52

According to the above table, which method(s) is/are most likely used in calculating Alex’s wage?

A. Time rate
B. Piece rate
C. Basic salary plus time rate
D. Basic salary plus piece rate

7
2021-YE-S4-ECONOMICS
20. Study the following table.

Factory X Factory Y
Number of workers 150 200
Average working hours per worker per week 45 40
Total output per week (units) A 9,200

If the average labour productivity of Factory X is higher than Factory Y, the possible value of A would
be _______.
(1) 8,750
(2) 8,000
(3) 6,750
(4) 6,200
A. (1) only
B. (4) only
C. (1) and (2) only
D. (3) and (4) only

21. The cost-output relationship of a firm is as follows:

Total output (units) 0 10 20 30 40

Total cost ($) 50 100 220 360 520

Based on the table, we can conclude that within the above production range,
A. the law of diminishing marginal returns applies.
B. the firm suffers from diseconomies of scale.
C. the average variable cost is $13 when the output level is 40 units.
D. the total variable cost is $170 when the output level is 20 units.

22. Which of the following statements regarding long run is correct?

A. Scale of production will increase if a firm employs more resources which are fixed in the short
run.
B. Diminishing marginal returns sets in when marginal product starts decreasing due to excessive
variable factors or inadequate fixed factors.
C. When a firm enjoys economies of scale, its average cost will continue to fall with an increase in
output.
D. Diseconomies of scale mean that an increase in the amount of inputs will lead to a decrease in
output.

8
2021-YE-S4-ECONOMICS
23. The following table shows the input-output relationship of a firm:

Number of workers Number of machines Output per worker (units)

1 8 50
2 8 51
3 8 52
4 8 51
5 8 50

The marginal product of labour will start to diminish when the _______ worker is employed.
A. second
B. third
C. fourth
D. fifth

24. An airline company has expanded its business as follows:

Flight catering X Y
Airline company Hotel
company

To the airline company, X and Y belong to _______ expansion and _______ expansion, respectively.
A. vertical ... conglomerate
B. vertical ... vertical
C. lateral ... lateral
D. lateral ... conglomerate

25. A firm can increase its influence on the market price of its products through _______ integration. This
type of integration would also enable the firm to _______.
A. horizontal ... reduce duplication of resources
B. horizontal ... spread its risk through product diversification
C. vertical forward ... extend its brand name to other products
D. vertical forward ... benefit from economies of scale

9
2021-YE-S4-ECONOMICS
26. In a perfectly competitive market, an individual seller would NOT lower the price of his products to
attract sales because
A. this would trigger a price war among all sellers in the market.
B. he would lose all his customers.
C. he cannot control the price of his products.
D. he can sell whatever amount of output at the market price.

27. In a/an _______ market, prices tend to be rigid despite changes in market demand and supply because
_______.
A. perfectly competitive … sellers try to maintain their market share
B. monopolistically competitive … market information is imperfect
C. oligopolistic … sellers are interdependent in their pricing strategies
D. monopolistic … the seller can charge whatever price it wants

28. Study the following table.

Units of output Total cost ($)

1 1
2 5
3 10
4 16

When the price increases from ______ to ________, the price-taking firm will increase its
production from 2 units to 4 units.
A. $4 ... $6
B. $5 ... $6
C. $4 ... $16
D. $5 ... $16

29. Which of the following statements about a perfectly competitive market is correct?
A. Market supply and market demand jointly determine the market price of the product.
B. The marginal cost schedules of all individual sellers are the same.
C. The average cost schedule of a firm is the same as its supply schedule.
D. The profit-maximising output of all individual sellers is the same.

10
2021-YE-S4-ECONOMICS
30. The cost schedule of a price taker is shown as follows:

Output (units) 2 3 4 5 6 7
Marginal cost ($) 4 7 10 13 16 19
Fixed cost ($) 5 5 5 5 5 5
Average variable cost ($) 2.5 4 5.5 7 8.5 10

Which of the following is correct?

A. If the market price is $10, the profit-maximising output is 7 units.
B. If the market price is $16, the total cost is $51.
C. If the market price is $10, the maximum profit is $18.
D. If the market price is $16, the maximum profit is $40.

Section B (35 marks)

1. Sunny is deciding how to spend his Easter holiday. He has several options and his order of preference
is as follows:

First option To prepare for the public examination

Second option To take part in a basketball training camp
Third option To have a part-time job

Explain how the following independent events will affect Sunny’s opportunity cost of preparing for
the public examination.

(a) The basketball training camp has been cancelled due to the COVID-19 epidemic. (2 marks)
(b) His father has lost his job and Sunny is more eager to earn more money to support his family.
(3 marks)

2. Mr Wong runs a small restaurant. He employs three workers, John, Paul and Catherine. Suppose each
is responsible for part of the work at the restaurant: Mr Wong works as a cashier; John and Paul work
in the kitchen and Catherine works as a waitress.
(a) In which type of production is Mr Wong involved? (1 mark)
(b) Identify and explain the type of division of labour involved. (3 marks)
(c) Explain ONE disadvantage of division of labour. (2 marks)

11
2021-YE-S4-ECONOMICS
3. Cheese is a major ingredient of pizza. Suppose the price of cheese increases significantly. Under what
condition will consumers’ total expenditure on pizza decrease? Explain your answer with the aid of a
diagram. (8 marks)

4. The table below shows the input-output relationship of a firm which only employs workers and
machines as factors of production.

Number of Number of Average working hours Daily output

machines workers per worker per day (units)
1 5 7 300
2 5 7.5 340
3 5 8 390
4 5 8.5 420

State the law of diminishing marginal returns and explain whether the above data illustrate the law.
(4 marks)

5. Firm A operates in a price-taking market. The table below shows its production information.

Output (units) Total revenue ($) Total cost ($)

0 0 0
1 5 1
2 10 3
3 15 6
4 20 10
5 25 15
6 30 21
7 35 28

(a) What is the market price for each unit of output? (1 mark)
(b) Find the profit-maximising output by using the following approach, briefly explain.
(i) the total revenue and total cost approach; (3 marks)
(ii) the marginal revenue and marginal cost approach. (4 marks)

6. Mr Tung is deciding whether to buy shares or bonds issued by a listed company. Advise him on what
to buy if:
(a) he wants the returns to be more stable. (2 marks)
(b) he wants to affect the policy made by the board of directors through voting. (2 marks)
12
2021-YE-S4-ECONOMICS
Section C (35 marks)
7.
New hospital seeks medical staff

Gleneagles Hong Kong Hospital (GHK) (港怡醫院) in Wong Chuk Hang will open in early
2017. To prepare for operations, GHK has begun recruiting its medical team, thus providing
alternative employment for Hong Kong nurses and doctors.

It has been reported that GHK is offering a 50% salary rise to experienced nurses from other
hospitals on Hong Kong Island. GHK is also actively inviting private clinic doctors to work as
visiting doctors. However, some of the invited doctors do not find GHK’s offer attractive in
terms of the hospital’s geographical location and financial rewards.

10 June, 2016

(a) Suppose doctors can choose to be visiting doctors at Queen Mary Hospital or GHK. If GHK
offers the same remuneration for every doctor, will their cost of being a visiting doctor at GHK
necessarily be the same? Explain. (3 marks)

(b) With reference to the news, GHK is offering a 50% salary rise to experienced nurses.
(i) Explain the above phenomenon using the concept of elasticity. (3 marks)

(ii) It has been observed that there is a waiting time for public hospital services. What would the
effect of GHK’s recruitment be on waiting times for public hospital services? Briefly explain.
(4 marks)

(c) GHK Hospital Limited is owned by Parkway Pantai Limited and NWS Holdings Limited (Hong
Kong stock code: 659). The maximum number of owners of GHK Hospital Limited cannot
exceed 50.
(i) Explain the difference between GHK Hospital Limited and NWS Holdings Limited in terms
of public subscription for shares and information disclosure. (4 marks)

(ii) NWS Holdings Limited’s main businesses are infrastructure, facilities management,
construction, and bus and ferry services. NWS Holdings Limited has expanded its business
lines to GHK. To what type of expansion does this belong? Explain. Also state ONE
advantage of such an expansion. (4 marks)

13
2021-YE-S4-ECONOMICS
8. Country A would like to lower the volume of imports from Country B. After the imposition of a $10
per-unit tariff on Country B’s imports, the volume of imports did not fall although the price of imports
has increased.
(a) Explain the above phenomenon with the aid of a diagram. Indicate the consumers’ tax burden after
the per-unit tariff is imposed. (7 marks)
(b) Suppose Country A can import similar goods from Country C instead of Country B. Explain how
the situation mentioned in (a) can be improved. (2 marks)
(c) An economist suggests that the government could adopt price ceiling to reduce the volume of
imports. With the aid of a diagram, discuss the effect of price ceiling on price, quantity, total
revenue and what economic phenomena would you observe. (8 marks)

End of Paper

14
2021-YE-S4-ECONOMICS