DSE Efficiency, Equity & the Role of Govt P.

DSE Economics (Questions)

Topic: Efficiency, Equity Name: _______________( )

& the Role of Government Class: _______ Block: _______

(pp12Q4)
1. (a) What is “deadweight loss”? (2 marks)
(b)
A teacher said, “An effective price ceiling may increase the consumer surplus.”
His student replied, “If this is the case, the price ceiling may enhance economic
efficiency!”
(i) Do you agree with the teacher? Illustrate your answer in Figure 1. (3 marks)
(ii) Do you agree with the student? Explain your answer with the aid of Figure 2.
(5 marks)

(pp12Q11)
2. d. Under the School Textbook Assistance Scheme (STAS), needy students are granted
subsidies to cover the costs of textbooks and miscellaneous school-related expenses.
Explain how STAS can enhance equity in Hong Kong society. (4 marks)

(DSE12Q4)
3. According to a report of the United Nations in 2008, the Gini coefficients of Hong Kong
and Beijing were 0.53 and 0.22 respectively.
a. Was the income gap between the rich and the poor in Hong Kong wider or narrower
than that in Beijing? (1 mark)

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(DSE12Q5)
4. Country A has imposed an effective pricing ceiling on Good X.
(a) Suppose Country A eliminates all illegal transactions of Good X. Can this price
control ensure all lower income buyers obtain the quantity of Good X they plan to
purchase? Explain. (4 marks)
(c) Suppose the effective price ceiling is lowered. Will the change in price ceiling
improve economic efficiency? Explain your answer with the aid of a diagram.
(4 marks)
(DSE12Q10)
5. b. Do you think that the government should introduce the “scheme $6000” to improve
equity in the Hong Kong Society? Explain. (4 marks)

(DSE13Q7)
6. Table 1 shows the Gini coefficients by occupation of Hong Kong in the years 2006 and
2011.
Table 1 Gini Coefficient
2006 2011
Construction 0.362 0.385
Financing, insurance, real estate and business services 0.544 0.548

(a) According to Table 1, which occupation has a smaller income inequality among its
workers? Give TWO possible reasons that account for such a difference in income
inequality. (4 marks)

Table 2 shows the employment distribution by industry section of Hong Kong in the years
2006 and 2011.
Table 2 Employment Distribution by
Industry Section
2006 2011
Construction 8.0% 7.7%
Financing, insurance, real estate and business services 17.0% 19.2%

Table 3 shows the Gini coefficients of Hong Kong in the years 2006 and 2011.
Table 3 2006 2011
Gini Coefficient 0.533 0.537
(b) How may the data given in Tables 1 and 2 help explain the change in the income
inequality of Hong Kong as reflected in Table 3? (4 marks)

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 DSE Efficiency, Equity & the Role of Govt P.3

(13Q11)
7. The government has launched the “Work Incentive Transport Subsidy Scheme”
(b) Discuss the effects of the scheme on
(ii) income inequality (3 marks)

(14Q3)
8. Figure 1 shows the market supply and demand curves of Good X. Suppose the
government raises the price floor from Pa to Pb.
Good X
unit price
S

Pb

Figure 1
Pa

D
0 Quantity
With the aid of Figure 1, explain whether the rise in the price floor could enhance
economic efficiency. (6 marks)

(14Q9)
9. Many countries have considered imposing ‘soft drink tax’ for health reasons.
Suppose a country decides to impose a per unit tax on the sellers for every bottle of soft
drink sold in the market.
a. Under what condition will the soft drink buyers in the country bear a greater tax
burden than the sellers? Illustrate your answer with a supply-demand diagram.
(5 marks)
b. Using the same diagram in (a), indicate the change in consumer surplus after the tax
is imposed. (1 mark)

(15Q3)
10. An increase in an effective quota in the market of a good would lead to a reduction in
deadweight loss. Do you agree? Explain your answer with the aid of a diagram.(6 marks)

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 DSE Efficiency, Equity & the Role of Govt P.4

(15Q12)
11. d. Some residents complained that the large number of tourists overloaded the public
transportation system, resulting in a large increase in travel time for all passengers.
Explain, in terms of externality, why inefficiency may exist when the transportation
system is overcrowded. (4 marks)

(16Q4)
12. These years many customers like to take photos of the food they have in restaurants and
share them in social media. However, some high-end restaurants do not allow their
customers to take photos. Explain how the “photo-taking-and-sharing” behavior of the
customers may involve externality. (3 marks)

(16Q11)
13. Medical service is one of the basic human needs.
Source A: a conversation outside a public clinic in Hong Kong
Son : Dad, I feel very ill.
Father : Oh no! There is a long queue waiting.
Son : Why don’t we go to a private doctor?
Father : The fee charged by public clinics is only $45, much lower than that charged
by private doctors.
(b) With reference to Source A, explain with the aid of Figure 1 how the price set by
public clinics may lead to economic inefficiency in the provision of public
medical service. (6 marks)
(Assume the supply curve in Figure 1 fully reflects the marginal social cost of
public medical service.)

Source B: an extract from the Hospital Authority webpage

The Hospital Authority is committed to providing community-based primary care
services. Our target patients include the elderly, low-income individuals, and
patients with chronic diseases.
(c) With reference to Source B, explain how the services provided by the Hospital
Authority can enhance equity. (2 marks)
(d) Many people argue that public clinic should raise the fee to reduce the waiting
time. Evaluate this argument in terms of equity and economic efficiency. (4 marks)

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 DSE Efficiency, Equity & the Role of Govt P.5

(17Q4)
14. Pokémon GO is a popular game for which gamers need to move around different places
with their smartphones to catch the cyber-pets. Its developer has placed hotspots in different
areas where many gamers are attracted to gather. Some restaurants in remote areas found
their business sharply increased as they are located near these hotspots.
a. Based on the above information, explain, in terms of externality, how the placing of
the hotspots may result in efficiency. (3 marks)
b. How may such a problem of inefficiency be relieved by market? (2 marks)

(17Q11)
15. The government of Country X introduces a per-unit subsidy to the education services of
private universities.
b. ‘The subsidy causes inefficiency even though both students and universities benefit.’
Defend the statement by comparing the marginal cost and the marginal benefit in
Figure 3. (3 marks)
c. Explain whether subsidizing education can help improve equality. (3 marks)
Price ($) Figure 3

0
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(18Q4)
16. Apart from the difference in education level, explain TWO factors that may lead to
income inequality. (4 marks)

(18Q10)
17. Foreign domestic helpers are paid with a minimum wage at HK$4 410 per month for a
two-year contractual period in Hong Kong.
c. Suppose the minimum wage in the market of foreign domestic helpers in Hong Kong
is effective. With the aid of Figure 2, explain how it may result in economic
inefficiency. (4 marks)

 End of Paper 

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