ECON 2001 RBRSKBHESEY FOR TEACHERS’ USE ONLY Alternative answers are acceptable so long as they are well reasoned. Section A 1. = stimulus to mechanization ~ practice makes perfect + saves time in learning the job = saves time in moving around jobs = choose the best person todo the job - = any other relevant point [Mark the FIRST THREE points only. 2 Unit Price with subsites Dy with no subsites @ a @ Grant (a) Indicate in the graph demand curve shits othe let fixed postage charge, ie, =Py Ly decrease in fotal revenue © L, = new loss in total revenue G= new gain in total revenue 2OOL-CEAICON 3 ARMMEH FOR TEACHERS’ USE ONLY Marks 1@, max:3’ ARAMEH FOR TEACHERS’ USE ONLY Alternative answers are acceptable so long as they are well reasoned. 3. (The data show that) machinery is a fixed factor and ‘when the variable factor, labour, is added successively to machinery, [Labour (unitsy | Machinery (units) MP (units) 10 3 e i 5 50 2 5 100 3 5 150 4 5 130 the marginal product eventually diminishes. the data illustrate the law of diminishing marginal returns. 4. = price competition = different products: diferent services, e.g, some shops sell cans of Coca-Cola 24 hours a day ~ different costs: diferent rents paid by different shops; discounted cost due to bulk purchase atthe wholesale level, ete. imperfect information : imperfect information about the prices ofthe product sold in other shops; imperfect information about the availability of other nearby shops selling the product, etc {Mark the FIRST TWO points only.] 22001-CE-ECON LF 4 ARASH FOR TEACHERS’ USE ONLY 2@, max :4ARAME FOR TEACHERS’ USE ONLY Alternative answers are acceptable so long as they are well reasoned. Marks 5. = (ondivisibitity) Banknotes can be divided into different denominations without a change in value. Diamond if divided into smaller units will have a fall in total value, = (on homogeneity) Banknotes with the same face value issued by the same bank share uniform physical characteristics => homogeneous in value Diamonds do not have uniform physical characteristics => heterogeneous in value 2@" max:4 = (on homogeneity) The value of @ banknote is more easily recognized (because of uniform physical characteristics) ‘The value of a diamond is not easily recognized (because physical characteristics). jonds do not have uniform + any other relevant point ‘no comparison : zero marks 2OOL-CE CON TUS ARAMEM FOR TEACHERS’ USE ONLY-= RRAMEH FOR TEACHERS’ USE ONLY E Alternative answers are acceptable so long as they are well reasoned. Marks 6. (@)( The answer is included’ or ‘excluded” depending on whether the firm he works for isa resident producing unit of HK or not . 1 Explanation of why the firm is or is not a resident producer of HK, 1 eg. Excluded : ‘The foreign airline operates its business in foreign countries. Itis not a resident producer of HK. 2g.2 Included: A branch of the foreign airline operates in HK and he works for this branch. ‘This branch is a resident producer of HK / he is working for a resident producer of HK, (b) ( The answer is ‘included’ or ‘excluded’ depending on whether the rental income of a resident producer of HK is earned in HK or not, U Explanation of why the rental income is or is not earned in HK. 1 eg Included ‘The HK company operates is business in HK and the premises is located in BK. ‘The rental income is eamed by a resident producer of HK and is earned in HK. 2.2 Excluded . ‘The HK company operates its business in HK and the premises is located ina foreign ‘The rental income is earned by a resident producer of HK but itis a net income from abroad. IWHCECON 1 16 ARASH FOR TEACHERS’ USE ONLYRRAME FOR TEACHERS’ USE ONLY Alternative answers are acceptable so long as they are well reasoned. Marks 7, (a) Indirect tax because the tax burden canbe shied onto others (the buyers), : 2 (©) The poor consumes a larger proportion oftheir income. : oR \ same amount of tax forthe same good paid by people with different incomes a higher proportion of income of the low-income group is taxed 1 “. The general sales tax increases the income inequality 1 [Remark : Mere mentioning ofthe conelusion without elaboration : zero marks} 8 (a) () - Goods 1 © Services 1 {Mark the FIRST TWO points only] (i) Eg, interest (ther egs are : dividend, rental income, wages) earned from / paid to foreign counties 2 () The capital and financial account. . Effective communication for Section A max :2 Total 3O1-CE-CON 1.47 ARMM FOR TEACHERS’ USE ONLY: pra eh ee FOR TEACHERS’ USE ONLY a Alternative answers are acceptable so long as they are well reasoned. Section B 9. (@) (Hong Kong : opportunity cost of 1G = 0.5C USA : opportunity cost of 1G = 1.25C Hong Kong has a lower opportunity cost in producing garment / comparative advantage in {garment production. . Hong Kong will export garment. Gi) The range of T.0.7. with transportation cost is: IC < 1G < 1.25C “2 ‘Unit Price , & L=Loss P G=Gain P, o Le Quantity = correct supply curve to show the original quota is effective +S, shifis leftward to S, loss > gain ‘erbal explanation - st Q Later reduction of quota quantity, equilibrium price P condition : elastic demand % change in Q > % change in P 2AN1-CP-ECON 118 | ARAMEeH FOR TEACHERS’ USE ONLY. ARAMEH FOR TEACHERS’ USE ONLY E Alternative answers are acceptable so long as they are well reasoned. Marks 9. (©) Advantage + his workers would have a higher working incentive ; . + lower cost of supervision 1@, max: 1 + any other relevant point [Mark the FIRST point only.) ~ higher cost of monitoring the quality ofthe products = more costly to calculate the wage payment 1@, max: 1 = any other relevant [Mark the FIRST point only.] @ Most foodstuffs, daily necessities and industrial raw materials are imported. 1 introduction of the tax would lead to arise in the general price level. 1 If the introduction of the tax only results in an once-and-for-all rise inthe general price level, then it would not bring forth an inflation, a [Remark : Only put down the definition of inflation as ‘a persistent or continuous rise if the ‘general price level’ without other elaboration — max : 2 marks] Effective commiunication max:2 Total :25 2WOLCEACON 1-19 ARAMEA FOR TEACHERS’ USE ONLY: ARAMA FOR TEACHERS’ USE ONLY Alternative answers are acceptable so long as they are well reasoned. 10. (a) to channel people's savings to investments 2 ©) @ actual reserve ratio = 250. T000 - 1 = 028 (0r +) 1 excess reserve = (0.25 - 0.2) x $1 000 mn 1 = $50 mn i i) ‘The withdrawal reduces the amount of reserves by $40 mn to $210 mn, ' This new amount of reserves can back up $210 mn x : = 51.050 mn of deposits. 1 o@ Unit Price aod [eat 0 ° de Quantity @ F vB isthe amount of capital raised Indicate in the graph = avertical supply curve = the price is set below the equilibrium price ~ excess demand

Q, / excess demand ARMAS FOR TEACHERS’ USE ONLY. = ARAB FOR TEACHERS’ USE ONLY E Alternative answers are acceptable so long as they are well reasoned. Marks 10. () (ii) = no interest burden 1 = no redemption obligation 1 {Mark the FIRST TWO points only) (6) The oppor cost of gold coin purchase i the valu of savings in banks, eg. the interest return on savings in banks. 2 ‘A tax on interest reduces / changes the value of savings in banks 1 Which means the opportunity cost of gold coin purchase is lowered / has changed. 1 Effective communication max :2 Total :25, 20UCF-ECON 1-21 ORME FOR TEACHERS’ USE ONLY: RARAMER FOR TEACHERS’ USE ONLY “ ‘Alternative answers are acceptable so long as they are well reasoned, LL. (@) @_ $((@0-20)+(20-2-0.5)+0.5] m = $88. (ii) ~ market value of currently constructed property decreases | {otal value of middlemen services (of those property agencies, law firms, ete) decreases effect on expenditure components, e.g. consumption 4, investment + = effect on factor income e.g. wages 4, profits L : +. GDP decreases. [Remark : Mere mentioning of the conclusion without elaboration : zero marks] (©) demand side cost of transaction { = incentive to buy property 7 and number of transaction T supply side: volume value of business ofthe construction industry 1 => expansion in the production ofthe construction industry and the derived demand for construction workers f (investment t i) employment opportunities * [Remark : Mere mentioning of the conclusion without elaboration : zero marks) (©) ~ wider source of capital because capital can be raised from the public shares are freely transferable, approval of the Board of Directors is not required wider scope of specialization because ownership and management are separated 7 Jasting continuity / not affected by any individual shareholder's withdrawal, death, ete (Mark the FIRST TWO points only] 2WO1-CERCON 1 22 FREES el FOR TEACHERS’ USE ONLYARAMEH FOR TEACHERS’ USE ONLY Alternative answers are acceptable so long as they are well reasoned. 1 @ UnitPrice s Quantity a & fixed price P is set above the equilibrium price demand curve shifts to the right “reins private housing is a substitute ‘demand for private housing increases (given constant P,) QT =>TRT effective communication 20O1-CEHCON 1 2 ARS FOR TEACHERS’ USE ONLY Marks max :2 Total 25