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2022-Nov Mock Ans Eng-1
2022-Nov Mock Ans Eng-1
2022-Nov Mock Ans Eng-1
Paper 1
Answers (45 marks)
1. C 6. A 11. D 16. A 21. A 26. C 31. A 36. B 41. D
2. B 7. B 12. B 17. C 22. D 27. B 32. A 37. A 42. D
3. B 8. A 13. B 18. D 23. D 28. B 33. C 38. B 43. C
4. B 9. A 14. D 19. C 24. C 29. D 34. D 39. D 44. D
5. A 10. D 15. C 20. B 25. B 30. C 35. D 40. A 45. B
Paper 2
Section A
1. a. Opportunity cost remains unchanged, because (1 mark)
this only reduces the value of buying shares. The value of the highest-valued option
forgone (depositing in a bank) is not affected. (1 mark)
b. Opportunity cost increases, because (1 mark)
it increases the value of the highest-valued option forgone (depositing in a bank).
(1 mark)
3. a. i. Advantage:
When the group suffers a loss, it does not have to pay dividends to
shareholders, it has to pay to debenture holders.
When the group liquidates, there is no need for the group to repay
shareholders the amount of capital invested / there is no share redemption
obligation, but principal has to be repaid to the debenture holders.
(Any ONE of the above or other reasonable answer. 1 mark)
4. a. The law states that when more units of a variable factor are continuously added to a
given quantity of fixed factors, the marginal product of the variable factor will
eventually decrease, ceteris paribus (including technology). (3 marks)
b. Yes, because (1 mark)
when labour increases from 3 units to 4 units, the marginal product decreases from
13 units to 11 units. (2 marks)
Additional information:
Capital (units) 30 30 30 30
Labour (units) 1 2 3 4
Average output of labour (units) 8 10 11 11
Total output (units) 8 20 33 44
Marginal output (units) 8 12 13 11
P2
P1
AD2
AD1
Output
0 YF
Verbal elaboration:
When import desire decreases, the economy’s import value will decrease and net exports
will increase. Aggregate demand will increase. (1 mark)
In the long run, the price level will increase and output level will remain unchanged.
(1 mark)
Additional information:
After the process of deposit contraction:
Reserves = $10,000 million
Total deposits = $10,000 million ÷ 40% = $25,000 million.
Amount of bank loans = $(25,000 – 10,000) million = $15,000 million
+
D2
D1
Quantity
0 Q1 Q2
Verbal elaboration:
When the US dollar appreciates against the Euro, the Hong Kong dollar (HKD) also
appreciates against the Euro under the linked exchange rate system. (1 mark)
As the price of French leather products (in HKD) decreases, Hong Kong people will buy
more French leather products. (1 mark)
Hong Kong’s demand for French leather products will increase. (1 mark)
As the price (in Euros) does not change and the quantity transacted increases, the total
export value (in Euros) will increase. (1 mark)
S2
P1
P2
D2
D1
Quantity
0 Q2 Q1
Verbal elaboration:
When the prices of traditional automobiles increase, the demand for electric vehicles
will increase as they are substitutes. (2 marks)
Breakthroughs in production technology for electric vehicles increase their supply.
(1 mark)
If the increase in demand is smaller than the increase in supply, the price falls.
(1 mark)
c. i. Indirect tax because the tax burden can be shifted to others. (2 marks)
ii. Regressive tax because tax payment takes a smaller proportion of income when
income increases. | (3 marks)
S
Deadweight loss
Pb
Pe
Pa
D
0 Quantity
Q1 Qe
Verbal elaboration:
The initial price floor at Pa is ineffective since it is lower than the equilibrium price Pe.
The market price remains at Pe. (1 mark)
When the price floor is raised to Pb, the market price rises from Pe to Pb and the
quantity transacted decreases from Qe to Q1. (1 mark)
As deadweight loss appears / total social surplus decreases / marginal benefit is higher
than marginal costs, economic efficiency worsen. (1 mark)
b. No, because (1 mark)
the cash coupon is not a generally accepted medium of exchange since the coupon
is not accepted by other merchants.
the cash coupon is not a store of value since the purchasing power stored in the
coupon cannot be used for general future use / the coupon cannot be used after the
expiry date.
the cash coupon is not a standard of deferred payment, since future payment is not
expressed in the number of cash coupons.
(Any ONE of the above or other reasonable answer. 2 marks)
c. Reasons:
Some of the factor inputs used in the construction of the infrastructure are not
produced in Country A but imported.
Some of the locally produced factor inputs used in the construction of the
infrastructure were not produced in 2022.
(Or other reasonable answer. 2 marks × 2 = 4 marks)
11. a. Reason:
Heterogeneous output: The property sizes / location sold by the two developers
are different.
Different prices: In perfect competition, the building should have only one price
per square foot, but the prices per square foot of the properties sold by the two
developers are different.
Imperfect information: The two developers provide property information through
advertisements, implying the cost of obtaining market information is not zero.
Non-price competition exists: The provision of advertisements is a form of non-
price competition.
(Any ONE of the above or other reasonable answer. 2 marks)
b. Indicate on the diagram:
Demand curve shifts leftward. (1 mark)
Price falls. (1 mark)
Quantity decreases. (1 mark)
Unit price ($)
P1
P2
D1
D2
Quantity
0 Q2 Q1
c. i. If the average labour productivity of imported workers is higher (lower) than that
of existing construction workers in Hong Kong, average labor productivity will
increase (decrease). (3 marks)
The maximum marks for content are 12 marks. Answers may include the following:
Objective 3: to increase aggregate output (in the short run and/or in the long run)
Policy A: Carrying out reclamation projects will greatly increase government
investment expenditure and aggregate demand. This increases aggregate output in
the short run. When the reclamation project is completed, capital accumulation
will increase long run aggregate supply. Aggregate output increases in the long
run.