HKDSE PAPER II (Sorted)

A. Basic Economic Concept

1. Peter borrowed a book from Mary and he promised to return the book with a
bookmark to her a month later at her request. Explain why the bookmark could
be regarded as “interest” to both Peter and Mary. (4 marks)
[HKDSE-2012-ECON-PP-II-A1]

Answer:
To Peter: The bookmark was the price/cost he paid for the earlier availability of
the book. (2)
To Mary: The bookmark was the premium/compensation she received for
deferring consumption. (2)

2. A good which is free-of-charge is a free good. Do you agree? Explain. (3 marks)

[HKDSE-2012-ECON-II-A1]

Answer
No, because (1)
the good may be produced form scarce resource which have alternative uses./
more of the good may still be preferred. (1)

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HKDSE PAPER II (Sorted)

3. The Hong Kong government plans to introduce the “Hong Kong Property for
Hong Kong Residents” policy. The flats built under the policy can only be sold
to Hong Kong permanent residents within 30 years.
(a) What are private property rights? Explain why the private property rights
over the flats may be weakened under this policy. (4 marks)
(b) Compared with similar flats in the same district without the reselling
restriction, would the price of the flats under this policy be higher or lower?
Explain. (3 marks)
[HKDSE-2013-ECON-II-A2]

Answer
(a) Private property rights refer to the exclusive right to use, the exclusive right
to receive income from, and the right to transfer a property owned by an
individual. (2)
The private property rights over the flats under the scheme are weakened as
the flat-owners’ right of selling (or transferring) their flats to non-residents
is confined. (2)
(b) Price will be lower (1)
because the number of potential buyers will drop resulting in a lower
demand for these flats. (2)

4. (a) Under the “Ride 10 Get 1 Free” scheme, with 10 fare-paying journeys on
the MTR from Monday to Friday in the same week, passengers could get a
single journey ticket for free. Is the free journey a free good? Explain.
(2 marks)
(b) It was observed that there were queues of passengers redeeming the free
tickets at customer service counters in MTR stations. Suppose the waiting
time is the same for these passengers, is the cost of redeeming the free
tickets necessarily the same to these passengers? Explain. (3 marks)
[HKDSE-2013-ECON-II-B9bc]

Answer
(a) No, (1)
as the provision of MTR service involves the use of scarce resources having
alternative uses. (1)
(b) No, (1)
as people have different alternative uses of time, their time costs will not be
the same. (2)

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HKDSE PAPER II (Sorted)

5. Serine is a university graduate who is seeking a job. She has several options and
her order of preference is shown below:

First preference: to work for the government as an administrative officer

Second preference: to work in an accounting firm as a trainee
Third preference: to continue to seek a job without accepting any offers

Analyse whether Serine’s opportunity cost of choosing to work as an

administrative officer will necessarily remain unchanged if
(a) the government reduces the starting salary of administrative officers.
(2 marks)
(b) the government provides unemployment benefits for all graduates seeking
jobs. (3 marks)
[HKDSE-2014-ECON-II-A1]

Answer:
(a) Yes. (1)
It is because the drop in salary of the administrative officer only decreases
the value of the chosen option, but it does not affect the highest valued
option forgone. (1)
(b) No. (1)
As the value of the third preference increases as a result of more income
granted by the government, (1)
it is possible that the value of the third option is higher than that of the
second option. So the cost of choosing to work as an administrative
officer may change from ‘to work in an accounting firm as a
trainee’ to ‘continue seeking a job without taking up any job and enjoy the
unemployment benefit’. (1)

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HKDSE PAPER II (Sorted)

6. More and more famous universities offer “massive open online courses” (MOOC)
to students from various backgrounds for systematic learning.

(a) Most of the teaching materials in MOOC can be accessed online by anyone
free of charge. Explain whether these materials are free goods;
(2 marks)

(b) Some people prefer to take free MOOC while others prefer to take paid
courses conducted on the university campus. If the courses are with the
same contents and number of teaching hours, will the cost for a person to
take a free MOOC be necessarily lower than the cost for another person to
take a paid on-campus course? Explain. (3 marks)

[HKDSE-2015-ECON-II-A1(a)(i) & (b)]

Answer
(a) No, (1)
because it has positive marginal cost of production; or (1)
because it is produced from scarce resources, which have alternative uses.

(b) No (1)
because the time cost of a person taking MOOC may be higher than the time
cost of another person taking on campus course plus the course fee; (2)
or the former person (MOOC student) may have to spend extra time to access /
download the course materials and to communicate with the course instructor or
teaching assistant.
Or the former person may also have to pay for internet connection in order to
access the course materials.

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HKDSE PAPER II (Sorted)

7. Apple Inc. launches a new model of smartphone. In order to buy the new model,
some people spend hours in trying to login the website of Apple Inc. If the resale
value of the new model falls, the opportunity cost of buying the new model
through the website of Apple Inc. will decrease. Do you agree? Explain your
answer. (3 marks)

[HKDSE-2016-ECON-II-A1]

Answer:

The full cost of buying the new model includes the price of new model
(monetary cost) plus the time spent logging in the website. (1)
The resale value of the new model is not a forgone option (1)
so the cost of buying the new model does not change. (1)

or

The drop in resale value will reduce the (speculators’) demand for the new
model (1)
and therefore reduce the excess demand, (1)
lowering the time spent logging in the website and reduce the time cost of buying
the new model. (1)

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HKDSE PAPER II (Sorted)

8. Serine is working in the Hong Kong branch of a multinational firm. She is

considering the next step in her career. She has several options and her order of
preference is as follows:

First option: to work in a firm located in South Korea

Second option: to switch to a local firm without overtime work
Third option: to stay in the current firm

Explain whether the opportunity cost of switching to the local firm without
overtime work will necessarily remain unchanged

(a) if the military threat from North Korea to South Korea becomes more
intense. (2 marks)
(b) is she wants to enjoy more leisure time. (3 marks)
[HKDSE-2017-ECON-II-A1]

Answer:
(a) No. The value of highest value option forgone (i.e. First option) drops. (2)

(b) The cost of switching to local firm is to work in a firm located in South Korea.
(1)
No. Working time in South Korea may be very long so that the first option
becomes less preferrable. (2)
OR
No + The value of 1st option / All options drops (2)
OR
No + The 1st option becomes less preferable (2)
OR
No + not working becomes her highest valued option forgone (2)

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HKDSE PAPER II (Sorted)

9. Although air ticket fares and hotel rates are usually higher during holiday periods,
many people still travel abroad. Explain, in terms of opportunity cost, why it is
not necessarily more expensive for travellers to travel abroad during holiday
periods than non-holiday periods. (3 marks)
[HKDSE-2018-ECON-II-A1]

Answer:
- Full cost = monetary cost + time cost (1)

- During holidays, the time cost of travelling abroad (e.g. value of other leisure
activities) may be a lot lower than that in non-holiday periods (e.g. income
sacrificed) such that the difference may be larger than the difference in the
air ticket fares and hotel expenses (monetary costs). (2)

- When the full cost is considered, travelling abroad during holiday periods
may be less expensive.

10. A country considers acquiring more land by reclamation for building residential
flats. Explain whether the opportunity cost of land reclamation will change if
(a) the maximum height of the buildings on the reclaimed land is limited to two
storeys due to technical reasons. (2 marks)
(b) there is a shortage of the materials for land reclamation. (3 marks)
[HKDSE-2019-ECON-II-A1]

Answer:
(a) The opportunity cost will remain unchanged. (1)
It is because the height limitation only reduces the value of reclaimed land
but does not affect the highest valued option forgone. (1)

(b) The full cost increases (1)

The government need extra money / resources to compete for the raw
materials in the case of shortage. (1)
The monetary / non-monetary cost increases. (1)

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HKDSE PAPER II (Sorted)

11. Li Ka Shing Foundation offered an unconditional cash gift of $5,000 to each

2018 HKDSE candidate living in Yuen Long, Tuen Mun and Islands districts
under the project “Decide Well, Spend Wisely.”

Statement A: The project can improve the public examination results of

candidates in those districts.
Statement B: The project can improve equity in Hong Kong.

Explain whether Statement A is a positive statement. (2 marks)

[HKDSE-2019-ECON-II-A2(a)]

Answer:
Statement A is a positive statement. (1)
It is because the statement can be refutable by facts. (1)

12. A free good must be free of charge. Do you agree? Explain your answer.
(3 marks)
[HKDSE-2020-ECON-II-A1]

Answer:
Yes (1)
More of free god is not preferred. (1)
No one is wiling to pay a price/ give up resources for getting more free good. (1)

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HKDSE PAPER II (Sorted)

13. Masks have become a daily necessity as it is compulsory for people to wear
masks in many public areas.

The government distributed ‘CuMask’ to citizens in Hong Kong for free.

Explain whether the ‘CuMask’ is a free good. (2 marks)

[HKDSE-2021-ECON-II-B10(b)(i)]

Answer:
Not a free good as (1)
- it is produced from scarce resources
- more is preferred to less / willing to incur a cost (pay a price)
- the quantity of face mask is not sufficient to satisfy all people’s want
- the resources used to produce the masks have alternative use
- opportunity cost (cost / production cost) is involved in producing the face
masks
(either 1, 1 mark)