1. Mrs.

Wong is a lawyer and is also good at doing housework, but she employs a Filipino maid to
do her housework. In terms of opportunity cost, explain why Mrs. Wong employs a Filipino maid
instead of being a full-time housewife.

2. Mr. Chan owns a flat in MongKok. The following is his order of preferences of ways to use his
flat:

First choice : live in his flat

Second choice : rent it to a tenant
Third choice : leave it vacant

In terms of opportunity cost, explain whether the costs of the second and third choices are the
same for Mr. Chan. (4 marks)

3. A large number of departing passengers were delayed at the airport in Hong Kong during a
typhoon. Suppose they were delayed 24 hours on average.

(i) Explain whether their opportunity cost of that visit to Hong Kong would have changed as a
result of the delay. (2 marks)

(ii) During that 24 hours, passengers were either waiting in the airport or had free hotel
accommodation arranged for them. Explain whether your answer in (c)(i) depends on which
situation they were in. (2 marks)

4. Mr Chan and Mr Lee are secondary school teachers. They earn the same salary of $30 000 a
month
(a) Define opportunity cost. (2 marks)
(b) Explain whether Mr Chan's and Mr Lee's opportunity cost of being a teacher would definitely
be the same. (2 marks)
(c) Explain whether the opportunity cost of quitting their jobs as teachers would definitely be
the same. (3 marks)

5. 2004/I/1 Hong Kong citizens could use public swimming pools free of charge on Sundays in July
of 2003. Explain whether the above service was a free good to society. (3 marks)

6. Country A is a planned economy and Country B is a market economy. Explain TWO differences
between these two types of economic systems. (4 marks)
Chapter 3 + 4

1. Study the following news report : Last year people was afraid of eating poisonous seafood. Though
the import volume of seafood decreased, its selling price remained the same. Explain the phenomenon
mentioned in the news report with the aid of a supply-demand diagram. (6 marks)

2. Bank A raises capital by issuing shares to the public. The quantity and subscription price (認購價) of
these shares are fixed and not all people who apply for these shares are successful in their application.
Explain the economic phenomenon described above with the aid of a diagram. Also indicate in the
diagram the amount of capital raised. (7 marks)

CH.4

1. Suppose the Organization of Petroleum Exporting Countries cuts its oil production. At the same
time, the demand for automobiles decreases. With the aid of a diagram, explain under what
condition the price of gasoline would increase. (7 marks)

CH.5

2. There are student places not yet filled in Miss Wong’s tutorial school. The school decides to
launch an advertising campaign to recruit more students and to keep the tuition fee unchanged.
With the aid of a diagram, explain how a successful advertising campaign would fill all the places
and increase the total revenue of the school. (7 marks)
CH.6

1.

2. 1997/I/10b If a country imposes an effective quota on the quantity of its import, explain and
indicate clearly on a supply-demand diagram how the market price and the volume of the
import would change. (8 marks)

CH.7

1. 2004/I/9c A first registration tax is imposed on cars and the tax is collected from car sellers.
Suppose the total tax burden of car sellers is greater than that of the buyers. (i) State the
condition that leads to this sharing of the tax burden. Illustrate the situation with a diagram. (ii)
Using the same diagram, show car sellers’ total sales revenue net of the tax. (8 marks)

2. Good X is subject to a per-unit sales tax. (i) With the aid of a diagram, explain under what
condition consumers’ total spending on Good X will decrease as a result of the introduction of
the tax. (7 marks) (ii) Indicate in the diagram in (c)(i) the change in sellers’ revenue (net of tax).
(2 marks)