2023-2024_HYE_FORM5_ECONOMICS_Suggested Answers

St. Rose of Lima’s College Half-Yearly Examination 2023-2024: Economics Suggested Answers

Section A (40 marks)

• Answer Key

  • 1: B

  • 2: D

  • 3: D

  • 4: A

  • 5: C

  • 6: D

  • 7: B

  • 8: D

  • 9: B

  • 10: A

  • 11: B

  • 12: C

  • 13: A

  • 14: C

  • 15: A

  • 16: A

  • 17: A

  • 18: A

  • 19: C

  • 20: B

  • 21: D

  • 22: D

  • 23: A

  • 24: B

  • 25: C

  • 26: B

  • 27: C

  • 28: B

  • 29: D

  • 30: A

  • 31: D

  • 32: B

  • 33: A

  • 34: B

  • 35: B

  • 36: C

  • 37: B

  • 38: B

  • 39: D

  • 40: D

Section B

1. Interest

   • Definition: Premium for obtaining goods/resources earlier and for deferring consumption (1 mark)

   • Example: Amy receives interest (1 mark)

   • Free private tutorial lessons in Biology are Amy’s compensation for deferring consumption of an Economics textbook (1 mark)

2. Lateral Integration

   • Producing related but not competing goods (2 marks)

   • Possible motives include:

     • Improving corporate image

     • Enjoying economies of scale

     • Efficient use of resources for higher returns

     • Spreading risk through product diversification

     • Any reasonable answer(s) (2 marks)

3. Demand Fall for Japanese Tuna

   • Event: Release of radioactive water from Fukushima led to decreased demand for Japanese tuna (1 mark)

   • Result: Both price and quantity transacted fell (1 mark)

   • Outcome: Total revenue for sellers decreased; does not relate to elasticity (1 mark)

   • Diagram: Demand falls leading to decreased Price and Quantity (1 mark), Total Revenue also falls (1 mark)

Page 2

4a. Supply and Demand Diagram

• Statement 1: Correct (1 mark)

• Explanation: Supply falls (1 mark), Consumer Surplus (CS) increases (old CS > new CS) (1 mark), Producer Surplus (PS) also increases (old PS > new PS) (1 mark)

4b. Supply and Demand Changes

• Statement 2: Incorrect (1 mark)

• Diagram: Supply rises (1 mark), total subsidy > increase in CS + PS (2 marks)

• At Q2, Marginal Benefit < Marginal Cost (1 mark)

• Concept of Deadweight loss explained (1 mark)

5. Negative Externality from Loud Students

   • Explanation: Loud students disturb others, imposing costs without compensation (1 mark)

   • Result: Divergence between private and social costs, indicating a negative externality (1 mark)

   • Conclusion: Marginal social cost exceeds marginal social benefit; overproduction occurs (1 mark)

Page 3

• Solutions to Negative Externality

  • Compensate affected passengers (1 mark)

  • Pay students to lower voices (1 mark)

  • Encourage students to be quieter (1 mark)

6a. Income Inequality Analysis

• Conclusion: More uneven / less even distribution noted (1 mark)

• Reason: Gini coefficient increased (1 mark)

6b. Equalization of Income

• Concept: Equalises income distribution (1 mark)

• Findings: Disposable income of the rich remains unchanged, while that of the poor increases (1 mark)

• Result: Income gap narrows (1 mark)

6c. Cost Calculation

• No, full cost includes money and non-money costs (1 mark)

• Money cost is zero, while non-money cost (time cost) is positive (1 mark)

7a. Labour Market Analysis

• Shortage occurs when wages are set below equilibrium (1 mark)

• Result: Marginal Benefit > Marginal Cost leads to underproduction (1 mark)

• Supply of labour rises and output increases (1 mark)

• Gap between MB and MC reduces (1 mark)

7b. Capital and Robots

• ii. Advantages

  • Improved productivity in construction

  • Enhanced safety by doing dangerous jobs

• iii. Disadvantages

  • Potential job losses for construction workers

  • Decreased incomes for affected workers (1 mark)

7c. WiFi Network Usage

• Yes, non-rival in consumption; multiple passengers can use simultaneously (2 marks)

• Or: No, rivalry as usage may reduce connection speed for others (2 marks)

7d. GDP Inclusion of Imported Labor

• Remuneration paid to imported labor is included in GDP (1 mark)

• If employed in HK for more than a year, included in GNP (1 mark)

Page 4

8a. Preference for Scarce Resources

• No, more of them are preferred (1 mark)

• Explanation: Produced from scarce resources (1 mark)

8b. Demand Impact on HKEAA Past Papers

• Demand rises (1 mark)

• Outcomes: Equilibrium price and quantity transacted rise, increasing total revenue (1 mark)

• Diagram: Demand rises leading to increased price and quantity (1 mark), TR rises (1 mark)

8c. Current Production Status

• No; no current production exists (1 mark)

8d. Market Structure

• Monopoly: Sole seller in Hong Kong (1 mark)

9a. Positive Externality of Education

• Education generates positive externality due to divergence between private and social benefits (1 mark)

• Subsidy reduces marginal private cost (1 mark)

• Potential to address underproduction (1 mark)

9b. Lorenz Curve Analysis

• New Lorenz curve will be left of the old curve (2 marks)

9c. Impact of Education on Opportunities

• Education equalizes opportunities, raising future productivity and income for the poor (1 mark)

• Narrowing of the income gap results (1 mark)

9d. Investment Expenditure in GDP

• Disagreement: Total production value in 2023 included in investment expenditure of GDP (1 mark)

• Diagram: Cumulative percentage of income displayed showing changes before and after subsidy.