el Final Examination, 2012-2013 83 Feonomles ‘Time allowed: 40 minutes Put all our answers on the answer sheets provided. Section A: Multiple Cholee Questions (20 marks) 1, Which ofthe folowing descriptions about scarcity is correct? [A The problem of scarcty does not exist in some cities in the mainland of China where rapid economic growth i occurring, £8, The problem of scarcity sill exists in one-man economy. . The problem of scarcity will disappear if haf of the world’s population dies cof an unknown disease. 1. Economies isthe study of how to reduce scarcity 2. Mc Wong has just obtained a driving leence and Is considering buying a ca. Which ofthe folowing will increase Mr. Wong's cost of buying the car? (2) Theres an increase inthe price ofthe new ca. (2) Theres a sharp increase n the pice of gasoline. (2) Me Wong’s wife told hi that she was pregnant and he decides to save money to meet unexpected expenses. |. (a) and (2) only 8. (1) and (3) only © (2) and (3) only D. (1), (@)and (3) 3. Which ofthe folowing about a free good fs true? ‘A. Everybody wants to have more of 8, ttisuseless tis wanted by some people. D._ ftis unlimited in supply.'A person says that consuming $100 today is preferred to consuming $100 2 yar later, Hemeans that |. eatlleravallabiity of consumption isan economic good 8. he is wllngto pay an extra amount to consume earl he needs some compensation for deferring consumption D. Allofthe above Study the followhg diagram which shows the market demand and supply ‘curves for Good X:. Which ofthe following statements are correct? (a) At $2, the quantity demanded Is greater than the quantity supplied by 25, unis. (2) At $4, there sno tendency forthe price to change. (@)AtS6, a shortage develops as there Is unsatisfied demand in the market, A. (a)and (2) only 8. (a) and (2) only © 2)and (3) only D. Allofthe abore Which of the following illustrate the ‘what to produce’ problem? (W)ARer the high-definition television system was launched In 2008, more ‘manufacturers manufactures high-definition television sos (2) Mr. Ho decides to dose down his restaurant because profits have been ectining {8) Me chan buysa Cnnamorel toy for hls daughter oa birthdsy ei. ‘A. (1) and (2) ony 8. (1) and (3) ony .(2)and (3) ony 0. (2),2) and (320. ‘The ‘how to produce’ problem is directly Involved when the age limit for receiving old age allowances is lowered ‘2 book publisher offers a 30% diecount on all af its books at a back fl ‘local bank closes some branches and expands its e-banking services the Chinese goverment increased its effort to prosecute those who sell pirated goods. theres compettion, ‘the problem o scarcity willbe solve, ‘there wil be no discrimination ithe competition sf. there will be dscrimination, whatever kinds of competition are used people will werk better. Suppose Ocean Park offers free admission to all visitors for one month to colebrato its anniversary. Which ofthe following is nota crrect conclusion? ‘A. There willbe more vistors during that month, B._Allvisitors coss of going ona ride must decrease, C.The queve for rides wll be longer. . ‘The average numberof rides each visor takes wll decrease, ‘When the market eqilbrlum s attained, “The quantities demanded by all individual consumers ace equa ‘There wll no longer be any competition among supplirs. ‘Theres no tendency forthe price torseor fll Allof the aboveSection Bilin the blanks (12 marks) Referring tothe following diagram, what 0} (e) and (a) respectively? @) > Realflow — —> Money flow Section C: Questions ($8 marks) 4. (a) The following table shows the weeky supply schedules of Bo and Jo who are the only supplies in the hot dog market, Find the weekly market supply schedule for hot dogs by filing the following table, (4 marks) [Unit price GF x [2 | 30 o's quantity suoplied (units) 0 00 | 200 Tos quantity supplied (units) 3o0_| 200 | 400 ‘Market quantity supplied (units) {by Figure 1 shews the indvidual weekly demand curves of Pete and Tom, who are the only buyers in the market for hot dogs, Derive the weekly markat demand curve for hot dogs and draw itn figure 1 on the answer sheet, (4 marks) Unit price (8) 20 w+ - ett C(t) Too 203°"300 400500 600 700 #00. 900 1000 1100 Figure 1 +{Based on the above information, what are the equilbrum price and quantity forhot dogs? (&marks) (0) State the law of emand, (6 marks) (b) "even though the price of mi inereases, John stil buys the same amount of smi” Based on this statement, can you say thatthe law of demand doesnot ‘exist the mill market? Explain, (6 marks) 3. Does scarcity implyshortage? Explain. (12 marks) 4. Which type of competition, price competition or non-price competition is more commonly foundina planned economy? Explain. (12 Marks) **°¥END OF PAPERY***er ae niet Ho te ia) "abeb-to oer ‘ (ua 3) ton Yoo an wea Fh 5 anna ingest et ite nok naps le tah et purines” tet ‘avin amet a Yr so 60 srt roo bat neo 1 ined mS Sacha i wd a, Testicle Samed Yori ytonion ce ‘rein a mancames atten Wo nabhinges ho othas a Ws ie “(eb SE nied Tyronons bind Se oor set yaad so ani *Marking scheme for S.3 Eeonomies Final Examination, 2012-2018, Seetion A: Multiple Chole Questions (20 marks) Section B Fillin the blanks (12.marks) (a) factor seevices (Le. labour, capital land and entrepreneur) (©) expenciture o sales revenue {goods and services {4) production costs or factor income Le. wage, interest, rent and profit) Section C: Questions (48 marks) 1. (a) (marks) [Unit price (6) 10 20 o's quantity supplied (units) o 100, Jo's quantity supplied (units) too | 200 | 400 | 800 [Market quantity supplied (units) | 100 | 300 | 600 | i100 (P)nie pice) (4maris) \ arbat demand carve 00 2007300400500 600 700 800 900 10 1,100 (c) The equilibrium price for hot dogs s $30 while the equilibrium quantity is 600 units. (4 marks) ++ 4 +> Quanity (nits)(a1 The law of demand states that an Increase (decrease) in price ofa good! will rosut in a decrease (Increase) In its quantity demanded, caters paribus. (6merks) (b) No, one cannot conclude that the law of demand does nat exist in the mile market, Although John’s individual action Is not consistent with the law of demand, as long as most people behave Io a way that follows the law of demand, the law stlholds, (6 marks) ‘No, scarcity does not Imply shortage. (2 marks) Whenever the quantity ‘demanded at zero price is larger than the quantity supplied, there isthe problem of scatiy for that good. (4 marks) A shortage of a good exits when the price is contrlled by the government and set below the equilibrium level. Such that the quantity supplied is smaller than the quantity demanded. (4 marks) If market price of a scarce good Is not controlled to be below equilibrium level out increases to equilibrium level, shortage wil not exist Yet scarey ofthe good wil stil preva even Ifthe market clears. (2 marks) Non-price competition Is more commonly found in a planned economy. (2 marks) In a plarned economy, most resources do nat have private property Fight but owned by the government. (4 marks) Allocaton of resources cannot be guided by price signal or achieved through market exchange. (4 marks) Then, non-price competition, such as ‘first-come, first-served’ is needed according to the command of the government, (2 marks)