RESTRICTED PUahsce 92. CB ECON Pal Marking Scheme Marl 1. (a) — heterogeneous service, e.g. 4-seaters and 5-seaters 3 ~ entry is not free, no. of licences is regulated by the government 3 - regulated fares 3 = drivers and customers may not have perfect knowledge of the market, e.g. while some customers are waiting for (any two) taxis, some taxi drivers are looking for customers some~ where else 3 = any other relevant point 3 (Mere listing of points without elaboration - max. 2 marks. Mark the FIRST TWO points only.) (>) Zt enjoys economies of scale Loni Gas. 1) = marketing economy : bulk purchase ofspare parts at discount 3 - financial economy : lower cost of borrowing due to goodwill/sufficient collateral 7 - less than proroctionate cf farts and cowpenerts ace kept for tsintenmnce purpose (any evo) | - less than proportionate of parking spaces are needed = any other relevant point woe (Were Listing of points withcut elaboration - max. 2 marks. Mark the PIRST TWO points only.) (c) (As-compared-with-the-case-when-the-driver—is-paid-a—fixed—wages) advantages : = part of the risks can be shifted onto the driver 3 = the omer may earn a higher income as the driver has a higher working incentive 3 | (any one) - any other relevant point 3 Max: 3 (Mere listing of points without elaboration - max. i mark. Mark the FIRST point only.) disadvantages : - under-report of the true revenue as the driver tends to cheat 3 = higher maintenance cost as the driver tends to (any one) over-utilize the taxi - any other relevant point (5. PL ON ee A a 2 Rifle cba tA aa (Mere listing of points without elaboration ~ max. 1 mark. Mark the FIRST point only.) RESTRICTED wOmaleRESTRICTED PY RBC 92. CE ECON P.2 Marking Scheme s Marks ae J nse 1. (4) (4) No, of taxilicences (ii) Pie of tai icence Ly bee J Conve bard bern teste ded foes wi do neC aadat A Compre, Gata & pls + Coss No, of taxi licences (1) price of a taxi licence will decrease 2 (iD [if demand is elastic, 2 *'x increase in Qd for taxi-Licences > = decrease in price 2 ~ increase in value due to increase in (any one) number of licences > decrease in value due to price fall i 2 gum 7 058 Max 2 2 d \ im RESTRICTED Wek wetRESTRICTED PURiscte 92 OB BOON P.3 Marking Scheme Marks 2. (a) (i) the highest-valued option or the best alternative that has to be forgone 2 ii) the opportunity cost of producing 1 unit of rice {ho Cllog c } in Country A is 0.5 units of clothing whereas that sas 2 Pepcc|! a Country B is 0.75 units of clothing -, | _ Bisa or por Country A produces rice at a lower opportunity cost than Country B 2 Country A should specialize in rice production 1 a rise. ne wrote cy he. 1 (dia) Given : 10“units of clothing are exchanged for 18 units of rice through international trade ce 1G IR 0.50. IGRI F CNEK> a ye [ within country A, 18 & 2x 9) mits of rice are excha ede. > 0 | for only 9 (= 1 x 9) units of clothing 2 4 eG = => Country A gains one additional unit of etothing & SS & 2 bef from ever 18 units of rice sold to Country B jo Coun a cieoa o the cpportnnity cost to try Ain preducing — eee 10 x 10) units cf clothing is 20 (= 2 x 10), COB imesh e | me units of rice at 2 7 7 TER. trepde- => Country », saves up resources in production because of international trade, e.g. saves up 2 units of rice we when it buye 10 units of clothing from Country B > gat 2 \ (iv) n0 change — hg inanke below a QR ¥'% the outputs of Country A are doubled but the a opportunity cost of producing rice remains the =@ — same as in (a)(ii) above (i.e. 1 unit of rice is exchanged for 0.5 units of clothing) 3 (>) (i) Hong Keng-made garments . hath Co nit price © pull wv pute ee tm Us pwaket fr iuprted So © D : po Shift clecde T Lin 5 Soe ; NN TO ne babel cheduct Im , oF s , dw t a 2 G eu dated TL Te D = [im 5 / o\ $s te Clap ) oe” peda Sim avhesle. import tax => supply-decreases ‘ 1 2 equilibrium price increases i equilibrium quantity decreases = lung die > fe nant S mo diiguun at elh du barks.” ReAw nae eR ee