ECONOMICS Paper II Kevin Ko
Kevin Ko -
CE AL Economics ()( ) 04 ( YMC997) 0305 9905 05150Ko SirA
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2006-CE ECON PAPER II
KINGS GLORY EDUCATIONAL CENTRE CE MOCK EXAMINATION 2006
ECONOMICS PAPER II(One hour) K E V I N K O
INSTRUCTIONS 1. 2. All questions carry equal marks. ANSWER ALL
QUESTIONS. Sheet. You should mark all your answers on the
Answer
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.
No marks will be deducted for wrong answers.
4.
Prepared by Kevin Ko Kings Glory Educational Centre All Rights
Reserved 2006 2006-CE-ECON II-1 ( Kevin Ko Economics Team )
There are 50 questions in this paper.
Choose the BEST answer for each question.
1.
The problem of scarcity A. B. C. D. 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.
2.
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.
Which of the following statements about land and capital are
CORRECT? (1) (2) (3) (4) A. B. C. D. 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. (1) and (3)
only (1) and (4) only (2) and (3) only (2) and (4) only
4.
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. 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.
6.
Computers used in offices can be classified as (1) capital
goods. (2) consumer goods. (3) scarce goods. A. B. C. D. (1) and
(2) only (1) and (3) only (2) and (3) only (1), (2) and (3)
7.
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 10 10 10 10 No. of labour 21 22 23 24 Average
product (units) 300 320 350 400
Refer to the above table. Which of the followings is a possible
reason for the changes in average product? A. B. C. D. absolute
advantage diminishing marginal returns division of labour economies
of scale
9.
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) A. B. C. D. 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 (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) A. B. C. D. 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. (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 Marginal product
(units) 1 10 2 12 3 14 4 13 5 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 ($)
B A D 0 No. of passengers rides Cross Habour MTR Services
Which of the followings would lead to the above movement along
the demand curve from A to B? A. B. C. D. a fall in the toll fee
for cross harbour Mass Transit Railway services a fall in the
frequency of cross harbour Mass Transit Railway services a fall in
the maintenance fee for cross harbour Mass Transit Railway services
a fall in the ticket price for cross harbour bus services
22. Suppose there is an increase in the supply of iron and steel
which is used in the production of ships. Which of the followings
are CORRECT? (1) (2) (3) (4) A. B. C. D. an increase in the demand
for ships an increase in the supply of ships an increase in the
quantity demanded of iron and steel an increase in the quantity
demanded of ships (1), (2) and (3) (1), (2) and (4) (1), (3) and
(4) (2), (3) and (4)
by Kevin Ko Economics Team
2006-CE-ECON II-10
For Questions No. 23 and 24, consider the following supply and
demand schedule of DVD in Country X. The DVD market is initially in
equilibrium. Price ($) 30 32 34 36 38 40 Quantity demanded (units)
90 80 70 60 50 40 Quantity supplied (units) 60 65 70 75 80 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. $4 200.
by Kevin Ko Economics Team
2006-CE-ECON II-11
25. Below is the diagram showing the market of tours for Hong
Kong people to Europe. The initial equilibrium is at E0. Because of
economic recovery, more Hong Kong people spend their holiday in
Europe. Moreover, the Euro currency depreciates against the Hong
Kong dollar.
HK$ Ea Eb E0 Ed
S2 S0 S1 Ec
D1 D2 D0 Number of visits to Europe by Hong Kong People
0
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) A. B. C. D. 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. (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) A. B. C. D. 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) (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 The GNP of the economy in that year is A. B. C. D. $161
million. $165 million. $167 million. $169 million.
$ million 60 28 19 6 90 71 19 48 32 18 88 90
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 $20 000 money
earned by selling used books
36. If the GDP at current market price is increasing at a rate
equal to that of the GDP at constant market price, then the price
index will A. B. C. D. remain constant. increase. decrease. be
uncertain.
by Kevin Ko Economics Team
2006-CE-ECON II-16
37. A country's Gross National Product (GNP) at current market
price may understate the living standard of its people because (1)
the household production not transacted in the market is not
included. (2) undesirable effects of the environment caused by the
pollution of production are not included. (3) the effect of a rise
in the population size is not considered. (4) the improvement in
the quality of the goods and services produced in the country is
not considered. A. B. C. D. (1) and (2) only (1) and (4) only (2)
and (3) only (3) and (4) only
38. Suppose the deflation rate of an economy decreases from 3%
to 2% in a certain year. This means that A. B. C. D. price level
starts to rise. price level rises at a decreasing rate. price level
decreases at a faster rate. price level decreases.
by Kevin Ko Economics Team
2006-CE-ECON II-17
39. Study the following information about Country X: Year 1998
1999 Real National Income ($mn) 8 000 10 000 Price Index 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
B. Tax rate
0
Taxable income
0
Taxable income
C. Tax
D. Tax
0
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) Country X Country Y 16 12 or or Toys (units) 8
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) Country X Country Y
2 4 or or Clothing (units) 6 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