2021-2022

MOCK EXAM
S6 ECON
PAPER 1

Name:
SACRED HEART CANOSSIAN COLLEGE
2021-2022 MOCK EXAMINATION Class: No.:

SECONDARY 6 Block:

ECONOMICS
Paper 1
Marks: _____________________

Time allowed: 1 hour

GENERAL INSTRUCTIONS

(1) Read carefully the instructions on the Answer Sheet.

After the announcement of the start of the examination,
you should first insert the information required in the
spaces provided. No extra time will be given to insert
the information after the ‘Time is up’ announcement.

(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.

(3) All questions carry equal marks.

(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.

(6) No marks will be deducted for wrong answers.

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2122-S6 MOCK EXAM-ECON 1
There are 45 questions in this paper. Choose the BEST answer for each question.

1. Which of the following statements about scarcity are INCORRECT?

(1) If resources are evenly distributed, scarcity does not exist.

(2) A good is not scarce if everyone owns it.
(3) A good whose quantity is limited must be scarce.

A. (1) and (2) only

B. (1) and (3) only
C. (2) and (3) only
D. (1), (2) and (3)

2. Ricardo can choose to spend his summer holidays either working in a start-up company or taking a programming course. Which
of the following will result in an increase in the opportunity cost of taking a programming course?

(1) The start-up company gives two more days of paid-leave to its workers every month.
(2) The lesson time of the programming course is lengthened by 45 minutes.
(3) The teaching mode of the programming course shifts from face-to-face to online, leading to a lower teaching quality.

A. (1) and (2) only

B. (1) and (3) only
C. (2) and (3) only
D. (1), (2) and (3)

3. Which of the following are positive statements?

(1) Levying a vacant property tax will cause the prices of residential properties to decrease.
(2) Lowering the tax rate on dividend income is unfair as it will worsen income inequality.
(3) Increasing the profits tax rate will not affect investment incentive.

A. (1) and (2) only

B. (1) and (3) only
C. (2) and (3) only
D. (1), (2) and (3)

4. Which of the following is an example of using the market mechanism to tackle the basic economic problem of ‘how to produce’?

A. A boutique chain closes its business in Hong Kong.

B. A tuck shop installs more vending machines to replace cashiers in order to cut labour cost.
C. A famous American magician holds a show in Hong Kong and sets the ticket price at $3 000.
D. A family adopts division of labour to allocate housework among family members to increase efficiency.

5. Facing a higher freight cost due to the shortage of shipping container, an online shop increases the fixed shipping fee for each
order. Which of the following statements are correct?

(1) Fewer higher-priced goods will be sold.

(2) The revenue of the online shop will decrease.
(3) The ratio of higher-priced goods sold to lower-priced goods sold will increase.

A. (1) and (2) only

B. (1) and (3) only
C. (2) and (3) only
D. (1), (2) and (3)

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6. The demand for __________ can be regarded as a derived demand for __________.

(1) rocket ... space travel

(2) smartphone cases ... smartphones
(3) television programmes ... actors

A. (1) only
B. (1) and (2) only
C. (1) and (3) only
D. (2) and (3) only

7. Suppose Good X and Good Y are in competitive supply, a decrease in the __________ Good X will result in an increase in the
__________ Good Y.

A. supply of ... demand for

B. supply of ... price of
C. demand for ... supply of
D. demand for ... quantity demanded of

8. On Thanksgiving Day, Grace Café lowered the price of its espresso from $25 to $15. As a result, more people bought the
espresso. Which of the following statements about the situation is correct?

A. The demand for Grace Café’s espresso increased on Thanksgiving Day.

B. The profit of Grace Café was not maximised on Thanksgiving Day.
C. The total revenue of Grace Café from selling espresso would increase if the demand is elastic.
D. The total expenditure of consumers on Grace Café’s espresso would increase if the supply is elastic.

9. Suppose the government increases the per-unit subsidy for private hospital services. If the demand for and supply of private
hospital services are __________ and __________ respectively, the increase in patients’ share of the subsidy will be larger than
the increase in private hospitals’ share of the subsidy.

A. unitarily elastic ... inelastic

B. inelastic ... elastic
C. perfectly elastic ... elastic
D. elastic ... inelastic

10. Refer to the following demand and supply schedules for Good X.

Unit price ($) 20 24 28 32 36

Quantity demanded (units) 50 40 30 20 10
Quantity supplied (units) 10 20 30 40 50

Suppose the government lowers the price floor from $32 to $24. Which of the following statements are correct?

(1) The market price will drop to $24.

(2) The total expenditure on Good X will increase by $200.
(3) The marginal benefit of the last unit of Good X consumed will decrease.

A. (1) and (2) only

B. (1) and (3) only
C. (2) and (3) only
D. (1), (2) and (3)

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11. The following table shows the employment distribution of an economy.

2016 2021
Primary production 15% 10%
Secondary production 26% 20%
Tertiary production 59% 70%

From the above table, we can conclude that from 2016 to 2021,

A. the number of workers engaged in primary production decreased.

B. the output from secondary production decreased.
C. the relative importance of tertiary production in terms of employment increased.
D. the living standard of people increased.

12. Tam Jai International Co. Limited, which operates restaurant chains TamJai Yunnan Mixian and TamJai SamGor Mixian, was
officially listed on Stock Exchange of Hong Kong in October 2021. After becoming a listed company, Tam Jai International
Co. Limited

(1) has a higher risk of being taken over.

(2) pays a higher profits tax rate.
(3) must disclose its accounting information to the public.

A. (3) only
B. (1) and (2) only
C. (1) and (3) only
D. (2) and (3) only

13. Refer to the following data of Firm A and Firm B. They are engaged in the same industry.

Firm A Firm B
Number of workers 60 30
Total number of working hours per day 180 300
Number of output (units) per day 40 000 55 000

According to the above data, the labour supply of Firm A is ____________ than that of Firm B and the average labour
productivity of Firm A is ____________ than that of Firm B.

A. smaller … lower
B. smaller … higher
C. larger … lower
D. larger … higher

14. The table below shows the input-output relationship of a firm. The only inputs required are machines and workers.

Number of workers Machines (units) Marginal product (units)

10 1 20
10 2 24
10 3 28
10 4 26
10 5 22

Under which of the following quantities of machines is the average product at the highest?

A. 2 units
B. 3 units
C. 4 units
D. 5 units

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2122-S6 MOCK EXAM-ECON 1
15. Burger King opened its first vegetarian restaurant outlet, Verger King, in Spain in October 2021, serving meet-free food. Which
of the following is the LEAST likely motive behind the expansion?

A. to enjoy economies of scale

B. to diversify sources of income and spread risk
C. to take advantage of brand names
D. to ensure a reliable supply of factors of production

16. Which of the following statements about a monopolist is correct?

A. A monopolist does not need to spend resources on promotion.

B. The monopoly power of a monopolist may not come from the government.
C. A monopolist will earn more profits by raising its price.
D. There may be close substitutes for the products sold by a monopolist.

17. The following table shows the cost-output relationship of a profit-maximising firm. Suppose the market price is $12.

Output (units) 2 3 4 5 6
Total cost ($) 10 21 32 45 60

Suppose the average cost of the firm has decreased by $1 for every unit of output. The output of the firm will be
________________ units and the profit of the firm will be _________________.

A. 4 … $18
B. 4 … $20
C. 5 … $18
D. 5 … $20

18. After Facebook announced the plan of building a virtual-reality environment called Metaverse, the information technology
companies offer a higher average salary to attract more high-skilled young people to work on this new business field.

The above case illustrates the _________ function of price because __________.

A. rationing … young people work for employers who can offer the highest salary
B. rationing … more profits can be earned from developing a virtual-reality environment
C. allocative … employers should offer a higher price in order to hire the talents they need
D. allocative … a higher salary leads to a higher quantity supplied of high-skilled talents

19. On 29 October 2021, the US announced that it will eliminate the effective quota on steel imported from the European Union.
Which of the following statements are correct?

(1) The consumer surplus in the market of the US’s imported European steel will increase.
(2) The producer surplus in the market of the US’s local steel will decrease.
(3) There will be deadweight loss in the market of the US’s local steel.

A. (1) and (2) only

B. (1) and (3) only
C. (2) and (3) only
D. (1), (2) and (3)

20. A private good can be

(1) provided by the government.

(2) free of charge.
(3) consumed concurrently by many individuals at the same time.

A. (1) only
B. (2) only
C. (1) and (2) only
D. (2) and (3) only

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2122-S6 MOCK EXAM-ECON 1
21. The full Tuen Ma Line commenced passenger service in June 2021. The line brings more people to the shopping malls near the
new stations. Which of the following statements is/are correct?

(1) There will be no divergence between private and social benefits if the shopping malls are owned by the railway
company.
(2) The government should subsidise the railway company for the construction of the new stations.
(3) There may be no divergence between private and social benefits as the railway company also benefit from building new
stations near the shopping malls.

A. (1) only
B. (1) and (2) only
C. (1) and (3) only
D. (2) and (3) only

22. Which of the following will NOT lead to a decrease in the Gini coefficient based on post-tax post-social transfer monthly
household income in Hong Kong?

A. to increase the supply of public housing

B. to provide a fixed amount of gas charges subsidy to each eligible residential gas account
C. to increase the standard tax rate
D. to lower the double ad valorem stamp duty imposed on buyers of a second residential property

23. Which of the following items are included in the calculation of Hong Kong’s gross domestic product?

(1) The old age allowance paid by the government.

(2) The increased value of existing properties in Hong Kong.
(3) The value of machines produced by a Hong Kong company.
(4) The interest paid by a Japanese who borrowed 1-year bank loan from a Hong Kong commercial bank.

A. (1) and (2) only

B. (1) and (3) only
C. (2) and (4) only
D. (3) and (4) only

24. The following table shows the statistical data of an economy.

Components $ billion
Private consumption expenditure 150
Gross domestic fixed capital formation 65
Change in inventory 20
Depreciation 5
Government consumption expenditure X
Total exports 55
Re-exports of goods 10
Total imports 70
Net factor income from abroad 15
Indirect tax 10

If the gross national income of the economy is $325 billion, the value of X is __________.

A. 90
B. 95
C. 100
D. 105

25. The per capita real gross domestic product of a country may understate the living standard of its people because

A. the value of unpaid household services for self-consumption is neglected.

B. it overestimates the undesirable effects of environmental pollution.
C. the effect of the changes in price is not considered.
D. it does not reflect the poorer quality of goods.

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2122-S6 MOCK EXAM-ECON 1
26. The following diagram shows the gross domestic product (GDP) of Country A.

GDP ($ billion)

Nominal GDP

Real GDP

0 Year
2018 2019 2020 2021

Which of the following statements about Country A is correct?

A. The price level in 2018 was lower than that in 2017.

B. The nominal GDP has been increasing since 2018.
C. The price level increased every year between 2018 and 2021.
D. The price level between 2019 and 2021 was higher than that in 2018.

27. The diagram below shows the aggregate demand (AD) curve, short run aggregate supply (SRAS) curve and long run aggregate
supply (LRAS) curve of an oil-importing country. The economy initially operates at E0.

Price level
LRAS SRAS2
SRAS0
SRAS1
E4
E1
E0
E2

E3
AD2
AD0
AD1
0 Output level

If the international oil price increases sharply, the short run equilibrium of the country will be at __________, and the long run
equilibrium will be at ____________.

A. E1 … E0
B. E1 … E3
C. E2 … E3
D. E2 … E4

28. Suppose some Hong Kong residents who emigrated return to Hong Kong and fill up the vacant posts, Hong Kong’s labour
force would ___________ and her employment rate would ___________.

A. increase … decrease
B. decrease … decrease
C. increase … increase
D. decrease … increase

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2122-S6 MOCK EXAM-ECON 1
29. The following diagram shows the percentage change in the Consumer Price Index of an economy.

Percentage change in the

Consumer Price Index

Year
0
Which of the following statements about the economy in the above period is correct?

A. The purchasing power of money was increasing.

B. There was a deflation.
C. The cost of living was rising.
D. The real wage rate was rising.

30. The Inland Revenue Department provides e-Seminars, explaining things such as tax obligations and procedures of filing tax
returns.

This practice is in line with the ＿＿＿＿＿ principle of taxation put forward by Adam Smith.

A. economy
B. certainty
C. equality
D. convenience

31. The diagram below shows the changes in the salaries tax structure of an economy.
Tax rate (%)

Old tax structure

New tax structure

0 Income ($)

Compared to the old tax structure, the new tax structure will ___________.

A. narrow the tax base

B. discourage the working incentive of the workers.
C. decrease the tax revenue received by the government
D. lead to a reduction in the number of people paying at the standard tax rate

32. Suppose an economy is facing high unemployment and inflation, reducing general sales tax rate is preferred to a cash payout
scheme as a tool to stabilise aggregate output because the latter would __________.

A. lead to a fiscal deficit

B. widen the income gap
C. cause an even higher inflation rate
D. reduce the investment level

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2122-S6 MOCK EXAM-ECON 1
33. Ms Hung plans to put $400 000 as a time deposit for two months. Which of the following financial institutions in Hong Kong
can accept her deposits?

(1) licensed banks

(2) restricted licence banks
(3) deposit-taking companies

A. (1) only
B. (1) and (3) only
C. (2) and (3) only
D. (1), (2) and (3)

34. Refer to the following information about money supply of an economy.

Component $ billion
Total value of legal tender notes and coins issued 750
Total value of legal tender notes and coins in public circulation 560
Demand deposits 300
Savings deposits with licensed banks 1 040
All types of deposits with licensed banks 2 560
NCDs issued by licensed banks held by the public 280
Deposits with restricted licence banks and deposit-taking companies 1 100
NCDs issued by restricted licence banks and deposit-taking companies 260

Money supply M2 equals __________.

A. $2 180 billion
B. $3 400 billion
C. $3 660 billion
D. $4 760 billion

35. Which of the following is correct when the required reserve ratio is 100%?

A. The maximum banking multiplier becomes zero.

B. The money supply remains unchanged if the banking system receives cash deposits from the public.
C. The money supply cannot be altered by the government.
D. Deposit creation can be carried out as long as there is sufficient demand for loans.

36. The required reserve ratio for a banking system is 25% and the banking system does not hold excess reserves. Suppose someone
withdraws $1 000 from his current account and held as cash. Which of the following statements are correct after the deposit
contraction process is completed?

(1) Money supply will decrease by $3 000.

(2) Monetary base will remain unchanged.
(3) The loans will decrease by $3 000.

A. (1) and (2) only

B. (1) and (3) only
C. (2) and (3) only
D. (1), (2) and (3)

37. According to the quantity theory of money, a 15% decrease in the nominal money supply may result in

(1) a less than 15% decrease in the price level.

(2) a less than 15% decrease in the GDP at constant market price.
(3) a less than 15% decrease in the nominal output.

A. (1) and (2) only

B. (1) and (3) only
C. (2) and (3) only
D. (1), (2) and (3)

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2122-S6 MOCK EXAM-ECON 1
38. Refer to the following diagram.

Nominal
interest rate (%)

Ma1
Ma2 Quantity of
0 money

Which of the following can explain the above change in asset demand for money?

(1) a lower commission fee charged by stockbroker firms

(2) a higher preference for liquidity
(3) a lower risk of investing in the stock market

A. (1) and (2) only

B. (1) and (3) only
C. (2) and (3) only
D. (1), (2) and (3)

39. Which of the following people will benefit from unexpected inflation?

(1) a tenant who pays a fixed amount of rent

(2) an Olympic medal winner who is awarded an apartment
(3) a lender who lends money to his friend at a floating interest rate

A. (1) only
B. (1) and (2) only
C. (1) and (3) only
D. (2) and (3) only

40. Which of the following would offset the effect of an open market sale of bonds to the public on aggregate output?

(1) security issues found in the electronic payment systems

(2) a decrease in progressivity of profits tax
(3) adopting a more lenient asset limit of the Old Age Living Allowance

A. (3) only
B. (1) and (2) only
C. (1) and (3) only
D. (2) and (3) only

41. Suppose Country A can produce the same amount of shoes as Country B with fewer amount of resources. Which of the
following statements is correct?

A. Country B produces shoes at a higher opportunity cost than Country A.

B. Country B will loss when it imports shoes to Country A.
C. Country A has an absolute disadvantage in producing another good.
D. Country A has a higher productivity in producing shoes than Country B.

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42. The following table shows the amounts of consumption of two goods in Country X and Country Y before trade. Assume both
countries use one unit of resources in producing oranges and one unit of resources in producing apples.

Consumption before trade (units)

Orange Apple
Country X 10 and 22
Country Y 36 and 24

Suppose both countries completely specialise their production and trade with each other. The apple-exporting country has to
pay a transportation cost of 0.4 units of orange for each unit of export. Which of the following is a mutually beneficial terms of
trade between the two countries?

A. 1 unit of apple exchanged for 0.5 units of oranges

B. 1 unit of apple exchanged for 1 unit of oranges
C. 1 unit of apple exchanged for 1.5 units of oranges
D. 1 unit of apple exchanged for 2 units of oranges

43. When the government of a small open economy increases the unit tariff imposed on an import good,

A. the volume of imports may drop to zero.

B. the tariff revenue must increase.
C. the demand for the imported good will decrease.
D. the international price of the imported good will increase.

44. The exchange rates of the Hong Kong dollar (HKD) against the Australian dollar (AUD) and the US dollar (USD) between
October and December 2019 were as follows:

Date Price of 1 unit of AUD Price of 1 unit of USD

October 2019 5.33 HKD 7.843 HKD
November 2019 5.35 HKD 7.830 HKD
December 2019 5.37 HKD 7.807 HKD

Which of the following would be a result of the above changes in the exchange rates?

A. The competitiveness of Hong Kong exports to Australia would decrease.

B. The prices (in terms of USD) of US exports to Australia would increase.
C. The total value (in terms of AUD) of Hong Kong exports to Australia would decrease.
D. The number of US tourists to Australia would decrease.

45. The following table shows some data of an economy’s balance of payments.

Items $ million
Visible trade balance 3 250
Invisible trade balance -1 950
Net current transfer 1 050
Current account surplus 1 550
Increase in reserve assets 160

According to the above data, which of the following statements are correct?

(1) The value of exports of goods is $3 250 million.

(2) The balance of payments surplus is $160 million.
(3) Gross national income is smaller than gross domestic product.

A. (1) and (2) only

B. (1) and (3) only
C. (2) and (3) only
D. (1), (2) and (3)

END OF PAPER
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2122-S6 MOCK EXAM-ECON 1
 Suggested answer

1 D 2 A 3 B 4 B 5 B 6 A 7 C 8 C 9 B 10 C
11 C 12 C 13 B 14 C 15 D 16 B 17 D 18 D 19 A 20 C
21 C 22 D 23 D 24 A 25 A 26 D 27 A 28 C 29 C 30 B
31 D 32 C 33 A 34 B 35 B 36 D 37 A 38 B 39 A 40 D
41 D 42 B 43 A 44 D 45 C
Answers written in the margins will not be marked.

Answers written in the margins will not be marked.