HKDSE Economics in Life – Microeconomics 1

Chapter 1 Basic Economic Concepts

Exam Kit
Extra practice questions (Suggested answers)

Exam Kit
Chapter 1
Extra practice questions (Suggested answers)

Paper 1 Multiple-choice questions

1. C
2. B
3. C
4. A
5. C
6. C
7. D
8. D
9. C
10. A
11. C
12. B
13. A
14. A
15. D
16. C
17. D
18. B

Paper 2 Short questions and structured/essay-type questions

1.
(a) Mable’s opportunity cost of being a bank teller is the value of the option of being
a personal assistant that earns $9,000 per month. (2)
(b) Mable’s opportunity cost of being a bank teller would not be affected. The
opportunity cost would change only when the value of the highest-valued option
forgone changed. Since the highest-valued option forgone (the option of being a
personal assistant) does not change, the opportunity cost would not change. (2)

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HKDSE Economics in Life – Microeconomics 1
Chapter 1 Basic Economic Concepts
Exam Kit
Extra practice questions (Suggested answers)

2.
The cost of people joining tours to travel abroad includes tours prices and people’s
time costs. During long holidays, tours prices are higher while people’s time costs are
lower (as people usually do not have to work and have more free time during long
holidays). More people choosing to join tours to travel abroad during long holidays
implies that their full cost of travelling abroad during long holidays is lower than that
on other days. (5)

3.
(a) Yes. (1)
Their costs of buying the concert tickets are the same because their monetary
costs of buying the concert tickets ($380) and their time costs ($0) are the same.
(1)
(b) No. (1)
As they may have different alternative uses of the time spent watching the
concert (3 hours), their time costs may not be the same. (2)

4.
No. (1)
The set of comic book could be regarded as interest to Victor’s father because it was
the premium/compensation he received for deferring the consumption of $20,000. (2)

5.
Yes. (1)
Interest is the cost or price of earlier availability of resources. When people are
willing to pay for the earlier availability of resources, it implies that the resources
available are not enough to satisfy all people’s want, so there is scarcity. (2)

6.
No. (1)
More of the employment service is preferred. / The free employment service is
provided using scarce resources which have alternative uses. (2)

7.
(a) No. (1)
The unexpectedly low profit affects the value of running the boutique, but not
the opportunity cost of running the boutique. (2)

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HKDSE Economics in Life – Microeconomics 1
Chapter 1 Basic Economic Concepts
Exam Kit
Extra practice questions (Suggested answers)

(b) No. (1)

More of the free item is preferred. / The free item is produced using scarce
resources which have alternative uses. (2)

8.
(a) No. (1)
The poor property management of the estate will only affect the value of buying
the flat, but not the opportunity cost of buying the flat, which is buying shares.
(2)
(b) Mr. Lai’s cost of living in the flat is the return from leasing out or reselling the
flat. If the rental income or the value of the flat increases, for example, Mr. Lai’s
cost of living in the flat will increase. (3)
(c) (i) Yes. (1)
A time cost is involved because Mr. Lai may have alternative uses of the
time spent queuing up for booking the leisure facilities. Therefore,
opportunity cost is involved. (1)
(ii) Economic goods. (1)
More of the free leisure facilities are preferred. / The free leisure facilities
are produced using scarce resources which have alternative uses. (2)
(d) Normative statement. (1)
It describes what ought to be (the word “should”) with value judgement on what
is desirable or the best. (1)

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