中六 試卷 (F6 Economics Past Paper)
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Form 6 A, B, C, D, E
Time allowed: 1 hour.
Instructions
1. You should mark all your answers on the Answer Sheet. You are advised to use an HB pencil to mark
all your answers on the Answer Sheet, so that wrong marks can be completely erased with a clean
HEEP YUNN SCHOOL
Mid-term Assessment (2016 - 2017)
Form 6 Economics Paper 1
2. Note that you may only mark ONE answer to each question. If you mark more than one answer, you
will receive NO MARKS for that question.
3. All questions carry equal marks. No marks will be deducted for wrong answers.
There are 40 questions in this paper. Choose the BEST answer for each question.
1. Which of the following statements about interest is correct? (12/3)
A. Interest exists only when there are lending and borrowing activities in the market.
B. Interest is the cost that a lender pays in order to defer his present consumption.
Interest does not exist when there is no inflation.
D. Interest exists in a one-man economy.
October, 2016
2. Peter can choose to buy an iPhone 7 or a Samsung Note 7. Assume that the price and the time spent
on buying the phones are the same. Which of the following will increase the cost for him to buy an
iPhone 7? (15/2)
A. Note 7 is reported to have the danger of explosion due to overheated batteries.
B. The second hand price of iPhone 7 is higher than the original price.
C. The iPhone 7 is so popular that the online shopping takes longer than he expects.
D. The second hand price of iPhone 7 is not as high as he expects.
Interest exists even when there are no lending and borrowing.
It is the compensation received by a lender who defers his present consumption.
Interest still exists when there is no inflation.
It decreases the value of the Note 7 and the cost of buying iPhone 7.
The resale price higher than the original price does not increase the time and money cost of
buying the iPhone 7.
It increases the time cost.
The resale value lower than expected decreases the value of buying iPhone, not the cost.
1617 F6-Mid-term-Assessment-Paper 1-1
(1) acting as the lender of last resort
(2) buying and selling US dollars to the general public
(3) acting as the banker of the government
clearing cheques
A. (1) only
C. (2) and (4) only
31. Which of the following events will lead to a change in money supply M2? |!|EM46013|!|
A. Thomas withdraws a certain amount from his saving deposit and keeps it as cash.
B. Joanne sells her negotiable certificate of deposits and remits the amount overseas.
C. Milly deposits a cheque into her saving deposit.
D. Donald transfers an amount from his saving deposit to a time deposit with a restricted licensed
(2) HKMA only buys and sells US dollars to note issuing banks.
(3) HSBC acts as a government's bank in Hong Kong.
(4) Cheques are cleared by Hong Kong Interbank Clearing Limited.
32. Refer to the balance sheet of a banking system:
M2 = M1 + Savings deposits and time deposits with licensed banks + Negotiable certificates
of deposit issued by licensed banks held outside the banking sector
M2 decreases by the drop in saving deposit and the increase in cash holding will keep M2
NCDs is not included in M2 and the amount remitted is no longer in the money supply.
A decrease in demand deposit is offset by an increase in saving deposit, M2 remains
A drop in saving deposit decreases M2.
Assets ($m)
(1) and (3) only
(1), (2) and (4) only
1617 F6-Mid-term-Assessment-Paper 1-12
Suppose the banks decide to loan out the all the excess reserves $100 million.
A. The actual reserves held by the banks become $400 million.
B. The maximum banking multiplier will increase.
C. The maximum amount of deposits will increase by $500 million.
D. The monetary base of the economy will decrease.
Liabilities ($m)
The actual reserves will remain unchanged.
The maximum banking multiplier will still be 2000 / (500 – 100) = 5
33. If people expect bond prices to decrease,
|!|EM46050|!|
Max increase in D = 100 x 5 = $500 million
MB = Cp + R
As there is no change in both Cp and R, MB remains unchanged.
34. The quantity theory of money states that
asset demand for money increase
transaction demand for money increase
asset demand for money decrease
transaction demand for money ... decrease
A. (1) and (2) only
C. (1) and (4) only
People hold less bonds (to avoid suffering from a loss) and hold more money.
(1) in the short run, the increase in price level can be less than the increase in money supply.
(2) in the short run, output is constant.
(3) in the long run, an increase in price level leads to an increase in money supply.
(4) money is neutral in the long run.
If the nominal interest rate on bonds is 10%, the expected inflation rate is 3% and the realized
inflation rate is 2%. The real return of holding cash and the opportunity cost of holding cash are
respectively.
(2) is wrong. Output is constant only in long run.
(3) is wrong, an increase in money supply leads to an increase in price level.
A. (1) only
(2) and (3) only
B. (2) and (3) only
C. (3) and (4) only
Real return of holding cash = - realized inflation rate = -2%
Opportunity cost of holding cash = nominal interest rate = 10%
Which of the following phenomena can be observed in an economy that is in recovery?
(1) Unemployment rate is decreasing.
(2) The total expenditure on consumption increases.
(3) The real GDP is higher than the nominal GDP.
(1) and (2) only
D. (1), (2) and (3)
1617 F6-Mid-term-Assessment-Paper 1-13
B. - 2%... 8%
- 3% ... 8%
(3) Real GDP > Nominal GDP implies price level decreases. It should be in recession.
|!|EM52007!
37. Which of the following diagrams illustrate a proportional tax?
Tax payment
Tax payment
Average tax
(2) and (3) only
Average tax
(1) The ratio of tax payment to income is constant.
(3) Average tax rate is constant when income increases.
Good X (units)
(1) and (3) only
(2) and (4) only
Answer Questions 38 and 39 using information from the table below which shows the maximum
output that Countries A and B can produce with one unit of resources respectively. Assume that
Countries A and B consume only two goods X and Y.
38. Which of the following statements are correct?
1617 F6-Mid-term-Assessment-Paper 1-14
Good Y (units)
(1) Country A possess absolute advantages in production of both Good X and Good Y.
(2) Country A should not export anything.
(3) Country B possess a comparative advantage in producing Good Y.
(4) Country B should import Good X.
(1) and (2) only
C. (2) and (4) only
(1) As resources endowment of the two countries are not given, the absolute advantages
cannot be determined.
(2) and (4)
The unit cost of producing Good X and Good Y are as follows:
Good X (units)
Good Y (units)
As Country B can produce Good Y at a lower cost, Country B possesses the comparative
advantage in producing Good Y. Country B should export Good Y and import Good X.
(3) Country A should export Good X.
(3) The mutually beneficial range of ToT : 2Y < 1X < 3Y
The ToT: 1X = 2Y is not mutually beneficial.
(4) Country B should import Good X.
The per unit gain from importing Good X
= 2.5Y - 2Y = 0.5Y
39. Which of the following is a possible terms of trade for a mutually beneficial trade?
A. 1X = 2.5Y
A. √ The mutually beneficial range of ToT : 2Y < 1X < 3Y
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40. The diagram below shows the market of good X in a small open economy. The domestic price
1617 F6-Mid-term-Assessment-Paper 1-15
(1) and (3) only
(3) and (4) only
180 Quantity
before trade and the world price of good X are Po and P₁ respectively. The supply curve of good
X with free trade is
and the quantity of domestic production is
abcd ... 30 units
abcd ... 150 units
C. abef... 30 units
abef... 150 units
1617 F6-Mid-term-Assessment-Paper 1-16
END OF PAPER 1
a waiter who is paid by tips
8. The following table shows the daily production of a firm with two inputs only.
The worker tends to sacrifice quality for quantity.
Labour (units)
If the law of diminishing marginal returns applies, the value of X
A. cannot be 40.
C. cannot be 50.
Output (units)
Marginal cost ($)
Machines (units)
9. The table below shows the marginal cost of a perfectly competition firm.
increase ... may increase or decrease
1617 F6-Mid-term-Assessment-Paper 1-3
Average product (units)
Suppose the fixed cost increases by $80 while the marginal cost for each output increases by $2, the
profit maximizing output of the firm will
B. increase ... increase
B. decrease ... decrease
D. decrease ...
The increase in MC decreases the output level. Given that price is unchanged, TR decreases.
TC increases as TFC increases.
Profit = TR - TC
Profit will decrease.
may increase or decrease
10. Suppose a firm can better control the cost of production and ensure the supply of raw material
after integrating with another firm. This type of integration is
A. horizontal integration
B. vertical forward integration
C. vertical backward integration
11. Which of the following is NOT implied by the law of demand?
(1) a decrease in price of good X resulting in an increase in quantity demanded for good Y
(2) For a necessity, a 10% increase in price will cause a 5% decrease in quantity demanded.
(3) With the construction fee of the third runway imposed, the number of travelers to Europe
D. lateral integration
Vertical forward integration allows the firm to have stable supply of raw materials and
control the cost of production.
(4) An increase in the first registration fee will increase the average quality of new cars.
(1) and (3) only
(1) and (4) only
(1), (2) and (3) only
(2), (3) and (4) only
(1) a decrease in price of good X increases the Qd for X. the increase in demand for Y is
caused by a factor other than price, which is not implied by the law of demand.
(2) the % changes for P and Qd are not implied by the law.
(3) with a construction fee imposed, the relative price of long distance trip decreases. It
increases the proportion of travelers taking longer trips, not the number of travelers.
Which of the following can be regarded as an example of competitive supply?
A. residential flats and commercial flats
B. doctors and medical services
C. chicken wings and chicken legs
textbooks published by Longman and Aristo
Residential flats and commercial flats require the same factors of production.
Demand for doctors is derived from demand for medical services.
They are in joint supply.
They are in competitive demand.
13. The following diagram describes the market for European luxury handbags in Hong Kong.
Which of the following would lead to the above changes?
1617 F6-Mid-term-Assessment-Paper 1-4
3. Which of the following does NOT exist in a one-man economy?
A. Private property rights
4. In a planned economy,
A. resources are allocated mainly by government decisions.
B. the use of money is not necessary.
C. Gini coefficient tends to be smaller.
D. private property rights are not defined.
B. Opportunity cost
D. Interest
There is no need to define private property in a one-man economy.
Interest exists whenever present and future choices are available.
5. From a firm's perspective, the advantage of issuing shares over bonds to raise capital is
A. a greater amount of capital can be raised.
B. the dividend of shares is lower than the interest to the holders.
C. the shareholders have voting rights in the annual general meeting.
D. there is no maturity for the firm to return the capital to shareholders.
The amount raised can be smaller than bonds.
The dividend can be higher if the profit is high.
It is not an advantage to the firm.
6. When division of labour is practiced, (04/17)
A. workers will have a higher income.
workers will have a lower occupational mobility.
C. the products become more unique.
workers will learn different production skills in different departments.
Income will be the same if they are paid by time rate.
As their skills are more specialized, they have a lower occupational mobility.
Products become more standardized.
Their skills are more specialized.
7. Whose employer would have the highest cost in monitoring quality of the products or services? A
A. a factory worker who is paid by piece rate
B. a salesperson who is paid by basic salary and commission
C. an author who receives 10% of the sales volume as royalty
1617 F6-Mid-term-Assessment-Paper 1-2
A. An appreciation in Renminbi and an increase in rental of shop premises
B. A decrease in number of tourists from Mainland and an appreciation in Euro
C. An economic recession in China and a relaxation in the regulation of the labour importation
D. A depreciation in Renminbi and an advancement in the production technology
Demand increases and supply decreases.
Demand decreases and supply decreases.
Demand decreases and supply increases.
Demand decreases and supply increases.
14. Suppose the supply curve is upward sloping. Refer to the following table for the market of Good
Total revenue ($)
Within the above price range, the demand for Good X is
A. elastic.
C. perfectly inelastic.
B. The supply is elastic.
C. The demand inelastic and the supply is elastic.
The demand is more inelastic than supply.
As the quantity transacted remains unchanged, the demand is perfectly inelastic.
Total revenue ($)
Quantity transacted (units)
1617 F6-Mid-term-Assessment-Paper 1-5
unitarily elastic.
15. Suppose the government imposes a per-unit tax of $4 on the production of plastic utensils, the
price of the products increases by $3. Which of the following statements is correct? |!|EM31049|!|
The demand is inelastic.
16. The following table shows the demand and supply schedules of a good.
Unit price ($)
Quantity demanded (units)
As the consumer burden ($3) is greater than the producer burden ($1), we can conclude that
demand is more inelastic than supply. However, we still can't tell the value of Ed and Es.
Quantity supplied (units)
Suppose the market is initially in equilibrium.
A. The imposition of a quota at 40 units will decrease total revenue by $100.
B. The imposition of a price ceiling at $20 will reduce quantity transacted by 20 units.
C. The imposition of a price ceiling at $10 will increase the total revenue $500.
D. The imposition of a price floor at $25 will reduce quantity transacted by 40 units.
The original price is $15, Qt is 60 units. Original TR = $900
Unit price ($)
Quantity demanded (units)
Quantity supplied (units)
New price is $20, new Qt = 40 units, new TR = $800
As ceiling at $20 is ineffective, it does not affect Qt.
If price ceiling is at $10, Qt = 40, TR = $400.
A price floor at $25 will reduce Qt to 20 units.
17. Which of the following about a perfectly competitive market is INCORRECT?
A. The marginal revenue of an individual firm is also the average revenue firm.
B. An individual firm cannot influence the market price by its own power.
Firms may use non-price competitions to attract consumers.
D. The marginal cost curve of an individual firm is also its supply curve.
It can be resolved by private contracting.
It can be a divergence between private and social cost.
It depends on the private property rights.
19. The following table shows the Gini coefficient of Country A:
Pre-tax Gini Coefficient
1617 F6-Mid-term-Assessment-Paper 1-6
18. A street performer performing on the street without receiving any compensation
A. should be compensated by the government.
B. is definitely a divergence between private and social benefit.
must receive a payment from the audience if private contracting is possible.
may result in a negative externality.
Post- tax Gini Coefficient
From 2000 to 2010,
A. income distributed more evenly.
B. the government spent more on social welfare.
C. the Lorenz curve of the country became closer to the line of equality.
D. the tax system was most probably progressive.
20. Refer to the following diagram:
Increase in gini coefficient implies a more uneven income distribution.
The post social transfer gini coefficient was not given.
It became farther away from the line of equality.
As the gini coefficient became smaller after tax, the income gap became narrower.
A. increase... a decrease in producer surplus
B. decrease... an increase in producer surplus
C. increase... a decrease in consumer surplus
D. decrease ... an increase in consumer surplus
If the government increases the price ceiling from Pa to Pb, the total social surplus will
Area A represents
B. √ The deadweight loss will decrease. So total social surplus will increase.
21. Which of the following are included in the calculation of gross domestic product of Hong Kong?
(1) the rental income a Japanese earns from renting her flat out in Hong Kong
(2) the wage income earned by a Hong Kong resident working in the Bank of China in the
(3) the expenditure a Hong Kong resident pays on the hotel accommodation during his visit in the
1617 F6-Mid-term-Assessment-Paper 1-7
(4) stamp duties an investor pays for the transactions of shares
(1) and (2) only
C. (2) and (3) only
22. The following diagram shows the production chain of canned food. The manufacturer imports
raw materials of $1000.
|!|EM41045|!|
The deadweight loss will decrease. So total social surplus will increase.
Canned Food
Manufacturer
A. increases ... increases
C. increases ... decreases
The contribution of the canned food manufacturer to the country's GDP at market price is
(1) and (4) only
(3) and (4) only
$8000 ($500
subsidy included)
The contribution of the canned food manufacturer to GDP at market price
(3000 + 8000) - 1000
23. Over a period of time, the nominal GDP of an economy decreases by 10%, the production
volume decreases by 8% and the per-capita production volume increases by 2%. We can conclude
that the general price level
while the population size
Overseas Consumers
Local Consumers
decreases ... increases
decreases ... decreeases
%▲Nominal = % AReal GDP + %▲price level
-10% = -8% + % AP
As real GDP falls, given that the per capita real GDP increases, the population must
Assume that all other factors affecting the labour market remain unchanged. Which of the
following will definitely lead to a decrease in the unemployment rate?
A. More low-income middle-aged women prefer leave the labour market and more job vacancies are
available due to economic recovery.
B. More workers are imported from overseas causing some of the local workers being unemployed.
C. The government rises the retirement age from 60 to 65 and all of those remain in the market are
D. The government restricts the maximum working hour to 44 hours per week.
1617 F6-Mid-term-Assessment-Paper 1-8
Unemployment rate = unemployed population / labour supply
Unemployed population falls when more jobs are available.
Labour supply decreases when labour leaving the market.
As the % changes of the two are not given, the change in unemployment rate in uncertain.
The labour supply increases.
Unemployed population increases.
As the % changes of the two are not given, the change in unemployment rate in uncertain.
It increases the labour supply. With no change in the unemployed population, the
unemployment rate will decrease.
It decreases the labour supply. With no change in the unemployed population, the
unemployment rate will increase.
Quantity of output
Which of the following will cause the change in the above aggregate demand (AD) curve?
A. a decrease in the general price level
an economic recession of major trading partner
an increase in personal tax allowance
an expansionary monetary policy
Price level
It should be represented by a movement along the AD curve.
It decreases X and shifts AD leftwards.
Yd increases and C will increase, shifting the AD rightwards.
It lowers interest rate and increases I, shifting AD rightwards.
|!|EM43033|!|
26. Which of the following concerning aggregate supply (AS) is correct in the short run?
A. Firms will update their menus frequently when there is an increase in production cost.
B. Product price and factor price may not be adjusted simultaneously.
C. The production capacity can increase when production technology is improved.
All producers are aware of changes in the market, e.g., change in market price and demand.
1617 F6-Mid-term-Assessment-Paper 1-9
As there is a high menu cost, product price may not be adjusted immediately after a change
Technology is assumed to be constant in SR.
Information is not perfect.
1617 F6-Mid-term-Assessment-Paper 1-10
27. Refer to the following diagram. ||EM44023|!|
Price level
long-run equilibrium is attained at
A. deflationary E3
deflationary ... Ei
(1) and (2) only
C. (2) and (3) only
1617 F6-Mid-term-Assessment-Paper 1-11
Suppose the economy is initially operating at a short-run equilibrium (E4). The economy is experience
output gap. If the market is adjusted back to the long-run equilibrium automatically, the
Quantity of output
As there is a shortage in labour market, SRAS will fall. LR equilibrium is attained at E₂.
28. In order to relief the budget deficit, the government increases the profits tax rate. Which of the
following stabilize the effect of on price level of such a policy?
(1) increasing the discount rate
(2) imposing an import tariff
(3) imposing a general sales tax
B. inflationary Eo
D. inflationary E₂
B. (1) and (3) only
(1), (2) and (3)
If the profits tax rate increases, I and AD fall. PL will decrease.
(1) MS decreases when discount rate increases. It increases the interest rate and lowers the I.
AD shifts leftwards, PL falls.
(2) Price of imports will increase and M will fall. AD increases and PL will increase.
(3) It increases the cost of production and SRAS decreases. PL will increase.
29. A school principal agrees to pay a teacher a book after he teaches for a month The book performs
the function of money as |!|EM45009|!|
a unit of account.
a medium of exchange.
Future payment is expressed in terms of book.
30. Which of the following functions of a central bank are performed by the Hong Kong Monetary
Authority? |!|EM45041|!|
a store of value.
a standard of deferred payment.