Sacred Heart Canossian College

ECON TEST 1
TIME ALLOWED: 40 minutes
FULL MARK: 27

Name: Class: ( )

SYLLABUS: BASIC CONCEPTS, DEMAND& SUPPLY

1 2 3 4 5 6 7 8 9 10

PART A) MULTIPLE CHOICES (10 marks)

1. Mr. Chan owns a flat. Previously he received $40 000 per month by renting it out. However, he
rather uses the premises for his own use now. As a result, he needs to pay the management
fee and rates back by him cost $3 000 per month. He also employs one driver at a total of $6
000 per month.
What is Mr. Chan‘s opportunity cost of using the flat by himself?
(A) 49000
(B) 46000
(C) 43000
(D) 40000

2. Chris could spend three hours at a cinema or tutoring student at $80 per 30mins. He could use
the time on painting instead and earn some money. If the price of the cinema ticket is $100,
what is the opportunity cost of his choice of going to the cinema?
(A) 340
(B) 580
(C) 680
(D) 180

3. The problem of scarcity

(A) Applies to all goods
(B) Can be eliminated by technology advancement
(C) Exists in both market and planned economics
(D) Exists in poor countries only
4. Hong Kong is considered to be a market economy because
(A) it’s income distribution will be more even
(B) the degree of freedom of the people in Hong Kong is higher
(C) The majority of the resources are privately-owned
(D) Price control is implemented by the government

5. Which of the following situations will lead to an increase in the demand for private housing in
Hong Kong
(A) The government raising the stamp duties for the purchase of flats
(B) Bank raising the interest rates on mortgage loans
(C) The government suspending the Home Ownership Scheme
(D) Reduce the interest rates on home mortgages

6. According to a medical research, one of the ingredients in wine has proved to be good for the
healthy development of bone. This will lead to an increase in
(1) the quantity supplied of wine
(2) the quantity demand of wine
(3) the demand of wine
(4) the supply of wine
(A) (1) and (2)ONLY
(B) (1) and (3)ONLY
(C) (2) and (4)ONLY
(D) (3) and (4)ONLY

7. A reduction in price of CD will lead to an increase in demand for CD player. This is an example
of
(A) Competitive demand
(B) Joint demand
(C) Derived demand
(D) Excess demand

8. Which of the following statements is correct?

(A) The price of free good is zero
(B) All useful goods are economics goods
(C) Free goods is demanded by nobody
(D) Free goods can command a market price
9. To Society, useful parts of a broken car are because .
(A) Economics goods…. They are useful
(B) Free goods … they are plenty of them
(C) Economics goods … they are produced from scarce resources
(D) Free goods … nobody wants them

10 Scanners used in office can be classified as

(1) Capital goods
(2) Consumer goods
(3) Scare goods
(A) (1) and (2)
(B) (1) and (3)
(C) (2) and (3)
(D) (1) ,(2),(3)

PART B) SHORT QUESTIONS (17 MARKS)

1. John has 2 options to spend an afternoon: he can either go to play tennis or stay at home
watching television.
(a) Define opportunity cost. (2 marks)
(b) Explain whether John’s opportunity cost of playing tennis would change if the television
programme that afternoon was very boring (3 marks)

2. Suppose the government decided to give a certain amount of money to LPG taxi operators
each month for the maintenance of their taxis. At the same time, more promotion
campaigns were adopted to encourage the public to ride on LPG taxis. Explain, with the aid
of a diagram, why the equilibrium price of LPG taxi service might rise. (Assuming the price
of LPG taxi service is not regulated.) (8marks)

3. Peter runs a computer store in a computer shopping centre and employs three salesmen
responsible for the selling service. However, facing severe competition from other stores in
the same centre, Peter finds the total revenue from the shop decreases a lot. In view of the
declining sales revenue, two of the salesmen consider quitting their jobs. Do they have the
same opportunity cost in doing so if their monthly salaries are the same? Explain your
answer. (4 marks)

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