F6 Econ 1 Que
F6 Econ 1 Que
2324-JCTIC
F6 ECON Jockey Club Ti-I College
Paper 1 F.6 Mock Examination Student Number
ECONOMICS PAPER 1 Class / Group
Class Number
5th February 2024
08:30 – 09:30 (1 Hour)
INSTRUCTIONS
1. Read carefully the instructions on the Answer Sheet. After the announcement of the start of the
examination, you should insert the information required in the spaces provided.
2. When told to open this book, you should check that all the questions are there. Look for the
words ‘END OF PAPER’ after the last question.
4. ANSWER ALL QUESTIONS. You are advised to use an HB pencil to mark all the answers
on the Answer Sheet, so that wrong marks can be completely erased with a clean rubber. You
must mark the answers clearly; otherwise, you will lose marks if the answers cannot be
captured.
5. You should mark only ONE answer for each question. If you mark more than one answer, you
will receive NO MARKS for that question.
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There are 45 questions in this section. Choose the BEST answer for each question.
2. Which of the following would be included as the opportunity cost by a driver who is considering
speeding (超速行駛)?
(1) the reduction in travel time
(2) the increase in fuel cost
(3) the increase in wear-and-tear on his car
(4) the fine to be paid by him for speeding last month
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4. The owner of a cake shop has changed the production method of the shop. Instead of each pastry
chef making whole cakes, the production of cakes is divided into different stages and each pastry
chef is responsible for a particular stage. Which of the following situations would likely occur?
(1) The pastry chefs will become more skillful in doing their own tasks.
(2) The pastry chefs will have less job satisfaction.
(3) The cake shop will need to purchase more tools for production.
5. The fan club of a popular singer launched a free ice cream giveaway. Ice cream trucks displaying
the portrait of the idol will distribute free ice cream to people at designated time slots and locations.
The ice cream will be distributed on a first-come-first-served basis, while stocks last.
This free ice cream is __________ because ___________.
A. a free good … the public do not need to pay for it
B. an economic good … it can be used to produce other goods and services
C. a private good … it is rival in consumption
D. a public good … it is non-excludable in consumption
6. The owner of Tesla took over Twitter, a social media company. Compared with taking over
another electric car manufacturer, which of the following are most likely the reasons for the above
takeover?
(1) Raising market share
(2) Product diversification
(3) Improving production efficiency
(4) Extension of brand name
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7. In Hong Kong, government officials are paid a monthly salary rather than by a piece rate. Which
of the following is a possible reason for such an arrangement?
A. It is difficult to standardise their work.
B. The cost of measuring output is higher with a monthly salary.
C. The cost of monitoring performance is higher with a piece rate.
D. There is a higher incentive to work with a monthly salary.
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9. The following table shows information about two firms in Hong Kong.
Firm A Firm B
Number of owners 30 30
If one of the owners goes If one of the owners goes
Continuity bankrupt, the firm bankrupt, the firm has to be
continues to exist dissolved
Disclosure of
Required to disclose to the Not required to disclose to
accounting
public the public
information
Based on the above information, which of the following statements about the above firms is
CORRECT?
A. Neither firm can issue shares or bonds to the public.
B. Both firms pay the same profits tax.
C. Firm A requires the consent of other shareholders to transfer ownership, while firm B does
not.
D. Firm A has an independent legal status while firm B does not.
10. Both the labour supply and average labour productivity of an economy decreased. Which of the
following can best explain the above change?
A. More experienced workers retired.
B. More enterprises adopted artificial intelligence to replace workers.
C. More residents moved to work in neighbouring areas.
D. The degree of division of labour decreased.
11. The table below shows the cost-output relationship of a price-taking firm.
Initially the market price is $10. If the price and total fixed cost both increase by $2, the profit of
the firm will
A. decrease by $2.
B. remain unchanged.
C. increase by $4.
D. increase by $6.
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12. Suppose the government imposes an airport maintenance tax on all airline operators, which is 5%
of the air ticket price for each passenger. Which of the following are consistent with the law of
demand?
(1) The prices of short-distance flight tickets will increase.
(2) The number of international travellers will decrease.
(3) The average length of airplane journeys will increase.
13. The following diagram shows the supply curve (S) of electric vehicles.
Unit price
S
A
0 Quantity
Which of the following reasons best explains the change in equilibrium position from A to B?
A. The production cost for electric vehicle batteries increases.
B. More traditional automakers enter the electric vehicle market.
C. Some studies suggest that electric vehicles perform poorly in cold environments.
D. The government offers tax exemptions to buyers of electric vehicles.
A. (1) only
B. (1) and (2) only
C. (2) and (3) only
D. (1), (2) and (3)
17. Which of the following statements about a perfectly competitive market is CORRECT?
A. Different sellers sell similar but distinguishable products.
B. The market price will not change.
C. Sellers have perfect market information while buyers do not have perfect market
information.
D. The marginal revenue of a firm equals to the market price.
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18. The market structure of wedding photography services in Hong Kong can be regarded as
A. oligopoly because wedding photography companies can charge their own prices.
B. oligopoly because wedding photography companies engage in non-price competition.
C. monopolistic competition because wedding photography companies are interdependent in
their pricing strategies.
D. monopolistic competition because photography companies provide different wedding
photography services.
19. The following diagram shows the supply and demand curves of good X.
Price
S1
S0
b
c
P1 a
g
D
0 Quantity
Suppose a price ceiling is set at P1. When the supply of good X decreases from S0 to S1, the
marginal benefit will be ________ the marginal cost and the deadweight loss will be _________.
A. larger than … area abc
B. larger than … area acg
C. smaller than … area abc
D. smaller than … area acg
20. Good X and Good Y are complements and the supply curves of both goods are upward sloping.
Suppose the government imposes an effective quota to the producers of Good X. Which of the
following statements is INCORRECT?
A. The total social surplus of Good X will decrease.
B. The producer surplus of Good Y will decrease.
C. The total revenue of Good Y will decrease.
D. The producer surplus of Good X will decrease.
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21. Which of the following is NOT an example of the divergence between private and social costs?
A. The police block several traffic lanes because of a traffic accident caused by a drunk driver.
B. The fruits and vegetables grown by a house owner attract birds, whose excrement dirties the
neighbour’s garden.
C. An audience member makes loud noises while watching a movie in a cinema.
D. A construction company pays a farmland owner for permission to dump construction waste
on the farmland.
2021 2022
Gini coefficients based on pre-tax post-
0.451 0.451
social transfer monthly household income
Gini coefficients based on post-tax post-
0.474 0.453
social transfer monthly household income
Which of the following best explains the change in Country A from 2021 to 2022?
A. The government has reduced the transfer payments to low-income groups.
B. The government has tightened the eligibility criteria for applying for subsidised housing.
C. The government has raised the tobacco tax.
D. The government has raised the progressivity of salaries tax.
Suppose the above production chain has included a subsidy of $50 that is given to the local
manufacturers. If the contribution of the above production chain to Country A’s GDP at factor
cost is $800, the value of X is ________.
A. $70
B. $170
C. $370
D. $420
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24. Consider the following statistical data about Country A.
2021 2022
Change in nominal GDP ‒5% ‒2%
Change in real GDP 1% 1%
Change in population size 0% ‒3%
A. (1) only
B. (1) and (3) only
C. (2) and (3) only
D. (1), (2) and (3)
25. Billy is a professor from South Korea. He was invited to teach a six-month course at a university
in Hong Kong and received a salary of $100,000. He then returned to South Korea. The income
from the course was $80,000. Organising the above course would lead to ___________ in Hong
Kong’s GDP and ___________ in Hong Kong’s net factor income from abroad.
A. an increase … an increase
B. a decrease … an increase
C. an increase … a decrease
D. a decrease … a decrease
26. Suppose many factories in an economy are closed due to a mass labour strike. Which of the
following will offset its effect on the economy’s price level in the short run?
A. The income of the economy’s trading partners increases.
B. The government raises the minimum wage rate.
C. People’s desire to save increases.
D. Producers expect the price level to increase.
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27. Refer to the following diagram.
Price level
LRAS
SRAS
A
AD
0 Y Aggregate output
The initial equilibrium point of Country A is at E. If the new long run equilibrium point is at A,
which of the following is a possible reason for the change in the equilibrium point?
A. A large number of factories are temporarily closed due to a labour strike.
B. The central bank prints more money.
C. The stock market in Country A’s largest export market declines.
D. The transportation cost for raw materials decreases.
28. Which of the following will cause an economy’s price level and aggregate output to increase in
the short run?
A. People’s desire to save increases.
B. The economy’s major trading partner experiences a recession
C. The money supply decreases.
D. Consumers expect the future price level to increase.
29. Initially an economy operates at the long run equilibrium. Which of the following will result in
an inflationary (output) gap?
A. The domestic currency depreciates.
B. The government tightens the regulations on disposal of construction waste.
C. The government increases the profits tax rate.
D. The government increases the quota for importing overseas labour.
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30. Refer to the following advertisement for a magazine.
Subscription Plan
If a customer purchases the magazine at the one-year subscription discount price, which of the
following functions does money perform in this payment?
(1) medium of exchange
(2) unit of account
(3) store of value
(4) standard of deferred payment
31. Titus withdraws HK$800,000 from his time deposits account with a deposit-taking company in
Hong Kong. He puts one-fourth of the amount into his safe deposit box in a licensed bank and
deposits $500,000 into his account with a restricted licence bank. He remits the remaining amount
overseas.
What will be the immediate effects of the above actions on the Hong Kong dollar money supply?
(1) M1 will increase by HK$200,000.
(2) M2 will decrease by HK$600,000.
(3) M3 will decrease by HK$100,000.
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32. The following table shows the monetary base and money supply of a country.
Date Monetary Base ($ billion) Money Supply ($ billion)
1 January 2022 150 800
1 January 2023 300 800
Which of the following could explain the above changes from 2022 to 2023?
A. The central bank lowered the required reserve ratio and the commercial banks held less
excess reserves.
B. The central bank sold bonds to the public and the commercial banks held more excess
reserves.
C. The central bank bought bonds from the public and the commercial banks held less excess
reserves.
D. The central bank increased the required reserve ratio and bought bonds from the public.
33. The following table shows the balance sheet of the banking system of a country. The monetary
base of the country is $700. The banks hold excess reserves of $100.
Suppose the public deposit $100 cash into the banking system. If the banks lend out all of their
excess reserves, which of the following statements is/are CORRECT?
(1) The deposits will increase by $1,000.
(2) The loans will increase by $300.
(3) The money supply will be $3,100.
A. (1) only
B. (1) and (3) only
C. (2) and (3) only
D. (1), (2) and (3)
34. Suppose the nominal interest rate of a bond is 5% and the expected inflation rate is 3%. Which of
the following statements is CORRECT?
A. If the actual inflation rate is –1%, the bond issuer will gain.
B. If the actual inflation rate is 4%, bondholders will lose.
C. The cost of holding money is 2%.
D. Expected real interest rate is higher than nominal interest rate.
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35. Which of the following statements about the quantity theory of money is CORRECT?
A. When real output is increasing, increasing the money supply will cause the price level to fall.
B. When real output grows faster than the money supply, the price level will fall.
C. When the price level increases, the money supply will increase by the same percentage.
D. When the velocity of circulation of money remains constant, a decrease in the money supply
will lead to an increase in real output.
36. Suppose the unemployment rate of an economy is 5%. Which of the following would lower the
unemployment rate?
(1) Some graduates who studied abroad return to the economy to find a job and 3% of them
fail to find one.
(2) Some workers who have been unemployed for a long time emigrate to other countries.
(3) Some retirees return to work (assume that they do not replace the job position of any
labour).
37. Which of the following statements about the classical quantity theory of money is CORRECT?
A. An increase in the price level will cause money supply to increase by the same percentage.
B. If the growth rate of money supply is constant, the inflation rate will equal 0%.
C. When money supply grows by a constant percentage each year, real output will also grow
by the same percentage each year.
D. When money supply grows by a constant percentage each year, nominal output will also
grow by the same percentage each year.
38. Anson lives and works in Hong Kong. He has the following incomes in 2022:
(1) commission earned as a salesperson
(2) rental income received from renting out a property
(3) interest earned from time deposits with licensed banks
(4) dividend received from a listed company in Hong Kong
According to the tax system of Hong Kong, which of the above incomes are subject to taxation?
A. (1) only
B. (1) and (2) only
C. (2) and (3) only
D. (1), (2) and (4) only
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39. Suppose a country has a deflationary (output) gap. Which of the following would narrow the
deflationary (output) gap and the income gap at the same time?
A. to increase transfer payments
B. to raise the discount rate
C. to raise the sales tax rate
D. to lower the profits tax rate
40. Firms in an economy generally were pessimistic about their business prospects and decreased
investment. At the same time, the central bank of the economy sold government bonds in the open
market, which resulted in changes in economy’s output level and interest rate.
Which of the following policies can stabilise the economy’s output level and interest rate at the
same time in the short run?
A. The government raises the discount rate.
B. The government raises the profits tax rate.
C. The government issues more licenses for electronic payment tools.
D. The government lowers the income tax rate.
41. The following table shows the production and consumption data in Country A, which only
produces and consumes Good X and Good Y.
Good X (units) Good Y (units)
Total production without trade 10 AND 60
Total production with specialization 60 AND 0
Total consumption with trade 20 AND 120
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42. The following diagram shows the market of Good X in a small open economy. The economy
imposes an import quota on Good X.
PW = World
Unit price
price
S0
S1
PW
Import
quota
D
0 Quantity
If the demand for Good X increases, which of the following are CORRECT?
(1) The world price of Good X will increase.
(2) The domestic production of Good X will increase.
(3) The import volume of Good X will remain unchanged.
(4) There will be an excess demand for Good X.
43. The following table shows the change in the exchange rate between the US dollar (USD) and the
Japanese yen (JPY).
Katie exchanged USD 2,000 for JPY in January. Then she sold the sum for USD in December. In
the above transactions, Katie _____________.
A. lost about USD 112
B. lost about USD 318
C. gained about USD 112
D. gained about USD 318
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44. The following diagram shows the change in the exchange rate between the British pound (GBP)
and the Hong Kong Dollar (HKD).
9.5
9.4
9.3
(GBP/HKD)
9.2
9.1
9
8.9
8.8
Oct-2022 Nov-2022 Dec-2022
During the period of October to December 2022, the change in the exchange rate between GBP
and HKD would lead to _____________.
A. a decrease in the number of British tourists visiting Hong Kong
B. a decrease in the total value of goods exported from Britain to Hong Kong (in terms of GBP)
C. a decrease in the total value of goods exported from Hong Kong to Britain (in terms of GBP)
D. a depreciation of the US dollar against the British pound
45. The following table shows some information about the balance of payments of Country A.
Item $ million
Visible trade balance 200
Invisible trade balance 250
Net factor income from abroad 25
Net current transfers ‒70
Change in reserve assets 100
End of Paper
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