中四 試卷 (F4 Economics Past Paper)
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Section A: Multiple choice questions (30 marks)
Scarcity refers to a situation where resources are not enough to satisfy human wants;
while a shortage refers to a situation where Qd > Qs when price is below equilibrium.
Shortage implies the existence of scarcity; scarcity does not necessarily imply the
existence of shortage.
Shortage can be eliminated when price reaches equilibrium but not scarcity.
People need to make choices because scarcity exists.
Scarcity exists in both a society and a one-man economy.
Heep Yunn School
Final Examination (2013-2014)
F.4 Economics Suggested Answers
Public goods are non-rival and non-excludable in consumption. Public goods
can be privately owned.
Since the quantities of economic goods are insufficient to satisfy human wants,
the use of an economic good involves an opportunity cost.
Free goods are goods whose quantity are sufficient to satisfy human wants.
Natural resources are not certainly free goods.
Producer goods are for further production, not direct consumption.
The opportunity cost for Joanne to watch the movie
= Price of the ticket + the highest-valued alternative use of the 2 hours
$100+ $45 x 2 = $190
Income is not necessarily unevenly distributed in a market economy.
Resources are mostly privately owned in a market economy; resources are mostly
government owned in a planned economy.
The level of interest rate depends on the availability of loanable fund in the market. It
does not mean the interest rate is higher in a market economy.
Unemployment rate is the ratio of unemployed population to labour force. It does not
mean that the unemployment rate of a market economy must be higher than that in a
planned economy.
13-14-F.4 Final Exam- Economics -Ans P.1
Flow X is a real flow from firms to households, so it refers to goods and services.
Flow Y is a money flow from firms to households, so it refers to households' factor
According to the law of demand, the quantity demanded decreases when the price
increases, ceteris paribus. As the amount of pocket money, which affects demand, has
increased, it is no longer a constant factor and we cannot conclude that the law of
demand is violated.
Two goods are in joint demand if they have to be used together.
When the prices of flats are below the equilibrium level, the quantity
demanded is greater than the quantity supplied. There will be a shortage of
As long as the market price is adjusted to equilibrium, where Qd = Qs, there is
no shortage.
They are in joint supply.
They are in competitive supply.
They are in competitive demand.
(1) Electric cars and gasoline cars are substitutes. The demand for gasoline cars
(2) The battery charge stations and the electric cars are complements. The demand
for the stations will increase.
(3) When the demand for gasoline cars decreases, the demand for gasoline will also
(4) Batteries and the electric cars are complements. The demand for batteries will
The demand for flowers increases on Mothers' Day. The supply of flowers increases due
to the good weather.
13-14-F.4 Final Exam- Economics -Ans P.2
More substitutes are available. Thus the price elasticity of bus service increases.
The demand for bus service increases.
The quantity demanded for bus service increases.
The quantity demanded for bus service increases.
The quantity demanded at the two prices are both 200 units. Therefore, the demand is
perfectly inelastic within that price range.
Since the local and imported shoes are substitutes, the demand for locally
produced shoes will increase. Price and quantity transacted will both increase.
Therefore, the total revenue for local shoes manufacturers will increase.
The change of total revenue of imported shoes manufacturers depends on the
elasticity of demand.
After the imposition of an effective quota on imported shoes, the price of
imported shoes will increase and the quantity demanded will decrease.
Production does not necessarily required consumers to pay for the services and
Even an activity is illegal, as long as it turns inputs into output, it is also regarded as
production.
A private good is not concurrent in nature. It is not possible for many people to
consume it simultaneously without reducing its quantity or quality.
Whether the books are private goods or not does not depend on the ownership.
A borrower who borrows a book and take it home can prevent others from reading
the same book.
A The possibility to exchange is the necessary condition for practicing division of labour.
Workers only know a particular stage in the entire production process. It makes them
more difficult to change jobs.
When the market is small, it is not suitable for practicing division of labour.
13-14-F.4 Final Exam- Economics -Ans P.3
B A doctor has to forgo a high income when he changes his occupation. Therefore, he has
a lower occupational mobility.
He is the owner of the company who bears risks in production and makes major
decisions for the company. He is classified as entrepreneurship.
A Public enterprises can also be government departments financed by trading funds.
Public enterprises also face competitions from private enterprises. E.g., Hongkong Post
faces competition from other private enterprises DHL and Fedex.
Public corporations are managed by an independent board of directors appointed by
the government.
D Some services are provided free-of-charge; some services are fare-paying.
The law of diminishing marginal returns is an empirical law which is generated from
observations.
The productivities of all inputs are assumed to be constant.
A|A sole proprietorship cannot issue shares to raise capital.
Her company is a sole proprietorship because she is the only owner of the company and
the company is not a legal entity. The liability of the sole proprietor is unlimited, which
means that the owner is personally responsible for the financial debts of the company.
C The continuity of a sole proprietorship is limited.
Since a sole proprietorship is not a legal entity, it cannot own properties in its own
The restaurant chain engages in the previous stage of production of the restaurant chain
and the expansion is a backward expansion. The expansion enables the restaurant chain
to have a reliable supply of input.
13-14-F.4 Final Exam- Economics -Ans P.4
(2) is incorrect as a market can exist without a physical location.
B Although there is only one seller in the market, the buyers and sellers do not know
everything about the market. Information is not perfect.
с The seller can search a price to charge constrained by the law of demand.
In a perfectly competitive market, profit is maximised at the output level where the
marginal cost equals the marginal revenue and the price (MC = MR = P = $20).
Therefore, the profit-maximising output level of Mr. Lee's factory is 31 units and the
price of the product is $20.
Section B (37 marks)
1. What to produce (1) the type of service to be provided is the Treasure Cove themed land. (1)
How to produce (1) the 3D immersion technology is used as production method. (1)
(a) No. (1) It increases the value of the chosen option (1). It does not affect the highest valued
option forgone, which is the chance of being a secretary in a trading firm. (1)
(b) Yes. (1) When the staff are required to work overtime, the value of working as a secretary falls.
(1) Therefore, opportunity cost of working as a teacher falls. (1)
(a) Mary is incorrect. (1) An excess demand refers to the quantity demanded being greater than
the quantity supplied. (1) However, the quantity supplied is greater than the quantity demanded at
(b) When there is an excess demand, the market price tends to rise.
When price increases, quantity demanded decreases and quantity supplied increases (1).
The price rises until the market price equals the equilibrium price (1) and the quantity
demanded equals the quantity supplied (Qo). (1) The excess demand becomes zero.
(a) Public limited company. (1)
(b) Wider source of capital: a limited company can issue shares or bonds to raise capital while a
sole proprietorship cannot.
Limited liabilities: The amount of liabilities of the owners is confined to the amount they have
invested in the firm.
13-14-F.4 Final Exam- Economics -Ans P.5
Separate legal status: The company has a separate legal status. It can initiate lawsuits or to be
Division of labour: Usually limited companies are of greater production scale. Division of labour
can be practiced. By employing specialists to carry out the production stages, productivity will
(Any TWO points, 2@)
(c) No repayment of capital is needed (1) / No interest burden in the future (1)
(a) Lateral (1) as the two firms are running similar (both involve instant messaging) but not in direct
competition. (1)
(b) To diversify risk by diversifying market and product / make good use of resources / economies
of scale+ explanations (any two, 2@)
The law of demand states that price and quantity demanded are negatively related, holding other
factors constant. (2)
When the same amount of flag-fall charge is increased on both long and short distance journeys,
the price of long-distance journeys will fall relative to the price of short-distance journeys. (2) the
quantity demanded for long-distance journeys increases. (1) the proportion of long-distance
journeys taken will increase.
(a) Martin only possesses the exclusive right to use. (1)
(b) He does not have the
exclusive right to derive income as he cannot rent out the flat (1)
the right to transfer as he cannot sell the flat (1)
Section C (40 marks)
(a) Economies of scale occur when an increase in output scale causes a drop in average cost. (1)
Economies of scale are illustrated in the above data. The following table shows the average costs
of the firm.
Average cost ($)
Total cost ($)
When total output increases from 1,000 units to 3,000 units, the average cost decreases from
$5 to $3.5.
Total output (units)
13-14-F.4 Final Exam- Economics -Ans P.6
(b) When price decreases, quantity transacted increases. (1) When demand is elastic (1), the
percentage increase in Qd is greater than the percentage decrease in price (2), 759 store will
find the total revenue increases.
Decrease in P and increase in Q (1)
Indication of (+) and (-) (1)
(c) Monopolistic competition (1)
There are many stores in the market. (2)
Unit price ($)
(a)(i) Scheme A is time rate. (1)
Scheme B is basic salary and commission. (1)
(ii) Scheme A (time rate) should be adopted. (1)
Disadvantages:
Products are heterogeneous (1) snacks sold with different tastes. (1)
Imperfect information (1) Consumers do not know the price and quality of the products (1)
Price competition used (1) Sellers try to attract consumers by lowering prices. (1)
(any two, 2@)
13-14-F.4 Final Exam- Economics -Ans P.7
Quantity (units)
Oligopoly (1)
There are a few dominating sellers in the market. (2)
Interdependent pricing strategies (1): when a seller decreases the prices of the snacks, other
sellers in the market will follow. (1)
Products are heterogeneous: (1) snacks sold with different tastes. (1)
Imperfect information (1): consumers do not know the price and quality of the products. (1)
High supervision cost: The wage earned will be the same regardless of the working
performance, firms may need to incur a high cost to prevent shirking of the staff.
Wage is inflexible. Even when there is a drop in demand for the product, the wage paid is the
(Any two, 2@)
(b)More of the free samples are preferred. / The amount of free samples is not enough to
satisfy human wants. / An opportunity cost is incurred when producing the free samples.
(Any two, 2@)
(a) The law of diminishing marginal returns is illustrated. It states that in the short run, when more
and more variable factors are added to a fixed amount of fixed factor, the marginal product of the
variable factors will eventually fall, holding production technology constant. (3)
Total Output (units)
DD shifts leftwards (1)
Price remains unchanged (1)
Indication of surplus (1)
The marginal product falls when the 14th / after the 13th unit of labour is added. (1)
Unit price ($)
(b) Accommodation in hotels and apartments in slums are substitutes. (1) Demand for hotel rooms
will decrease(1) quantity transacted and total revenue decrease (1). A surplus of rooms exists (1)
when hotels do not lower the room rates.
Marginal product
13-14-F.4 Final Exam- Economics -Ans P.8
Quantity (units)