ECONOMICS INQUIRY FOR HKDSE

HONG KONG DIPLOMA OF SECONDARY EDUCATION EXAMINATION

ECONOMICS PAPER 1
(Mock Test 1)

Time allowed: 45 minutes

INSTRUCTIONS

1. Read carefully the instructions on the Answer Sheet. Stick a barcode label and 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.

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 answers can be completely erased with a clean rubber.

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.

Not to be taken away before the

end of the examination session

HKDSE-ECON 1-1 (Mock Test 1) © 2009 Aristo Educational Press Ltd.

There are 40 questions in this paper. Choose the BEST answer for each question.

1. Which of the following is implied in a society where scarcity exists?

A. opportunity cost
B. competition
C. exchange
D. Both A and B are correct.

2. Interest
A. is the price paid for earlier consumption.
B. may exist in a society without exchange.
C. exists in monetary economies only.
D. may exist in a one-man economy.

3. Scarcity
A. exists for both economic goods and free goods.
B. exists as long as human wants are unlimited.
C. does not exist in a one-man economy.
D. is the source of all economic problems.

4. May is choosing between buying a laptop computer and a desktop computer. Which of the following will change
May’s cost of buying a laptop?
A. The battery of the laptop computer she wants goes out very quickly.
B. Many kinds of software cannot be installed in the laptop computer she wants.
C. Performance of the desktop computer May wants is not as good as the producer claims.
D. May’s uncle is going to give a laptop computer to her as birthday gift.

5. Scarcity implies
A. specialisation of production.
B. all goods must have a high market price.
C. competition and discrimination.
D. limited resources and unlimited wants.

6. In cinema A, customers are given a coupon for each ticket bought. The coupons can be used to exchange the
following gifts:

Number of coupons required Gifts

5 1 can of Coke
10 1 cinema ticket
20 1 film camera
20 + $1000 1 mobile phone

Diane has 20 coupons. What is Diane’s opportunity cost of using 20 coupons to exchange for two cinema
tickets?
A. the price of 2 cinema tickets
B. 4 cans of coke
C. 1 mobile phone
D. 4 cans of coke, 1 film camera and 1 mobile phone

HKDSE-ECON 1-2 (Mock Test 1) © 2009 Aristo Educational Press Ltd.

7. Which of the following descriptions about goods are correct?
(1) No one wants any of a free good.
(2) Natural resources are free goods.
(3) Free-of-charge goods may be economic goods.
(4) A good may be regarded as a free good or an economic good in different circumstances.

A. (1) and (2) only

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

8. In economics, rainfall in the Sahara Desert is ____________ because ____________.

A. an economic good ... only a small amount of water is found in the desert
B. a free good ... anyone can get it without paying a cost
C. an economic good ... people prefer more of it
D. a free good ... it has no alternative uses

9. Which of the following statements regarding choice is correct?

A. When scarcity does not exist, people still need to make choices.
B. When there is only one option, people may still need to decide whether to choose it or not.
C. With more than one choice, an individual’s cost of choosing an option is the sum of values of the
remaining options.
D. When resources and human wants are both limited, people may still need to choose.

10. Which of the following is a cost of building a theme park in Hong Kong?
A. the entrance fee of the park
B. noise pollution created during construction
C. maintenance cost of the park
D. the expenses involved in recruiting the staff

11. Below is the circular flow model of an economy.

Flow X
Money flow

Firm Household
Real flow

Flow Y

Flow X refers to the flow of ____________ while Flow Y is the flow of ____________.
A. household’s consumption expenditure ... factors of production
B. cost of production ... final goods and services
C. factor income ... factors of production
D. firm’s revenue ... final goods and services

HKDSE-ECON 1-3 (Mock Test 1) © 2009 Aristo Educational Press Ltd.

12. If exchange is absent, with specialisation of production,
A. all people in the economy enjoy a higher living standard.
B. people do not need to produce everything they need.
C. productivity of people becomes lower.
D. people can produce goods at a lower opportunity cost.

13. A normative statement

A. may have no value judgment.
B. is either true or false.
C. cannot be refuted by facts.
D. None of the above.

14. The government of Country X is planning to strengthen national defense by producing more tanks. What basic
economic problem(s) is/are related?
A. “what to produce”
B. “how to produce”
C. “for whom to produce”
D. “what and how to produce”

15. When compared with a market economy, a command economy

A. has more poor people.
B. has more resources owned by the government.
C. has more productive activities guided by price signals.
D. has a more even income distribution.

16. Which of the following goods in Hong Kong are mainly guided by price signals in their resource allocation?
(1) rice
(2) water supply
(3) petroleum
(4) electricity supply

A. (1) and (3) only

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

17. Which of the following largely determine the allocation of goods and services in a planned economy?
(1) consumers’ demand
(2) government planning
(3) consumers’ purchasing power

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

HKDSE-ECON 1-4 (Mock Test 1) © 2009 Aristo Educational Press Ltd.

18. Which of the following regarding private property rights is correct?
A. Private property rights are totally absent in a planned economy.
B. If private property rights are not well-protected, people may not engage in exchange.
C. If one possesses the right to transfer a good, he or she must also possess the exclusive rights to use
and to derive income from the good.
D. With well-defined private property rights, there will be no competition for goods and services.

19. When a firm becomes unlisted,

A. it is not a legal entity anymore.
B. it cannot issue new shares.
C. its profit-earning ability is weakened.
D. its number of shareholders must be reduced if the existing number of shareholders exceeds 200.

20. Tony is one of the partners of an accounting firm in Hong Kong. Which of the following is correct?
A. Tony’s liability is not confined to his investment in the firm.
B. He needs to share profits with his partners equally.
C. The accounting firm may be a private limited company.
D. Tony can sue the firm.

21. A ____________ has the fewest ways to raise capital.

A. sole proprietorship
B. listed company
C. private limited company
D. public limited company

22. If a firm is a ____________, it is possible for its owners to sue the company.
(1) sole proprietorship
(2) partnership
(3) private limited company
(4) public limited company

A. (4) only
B. (1) or (2) only
C. (3) or (4) only
D. (2), (3) or (4) only

23. Tina, a small investor, prefers to buy shares of public limited companies rather than shares of private limited
companies. This may be because
A. she wants to transfer her ownership more easily.
B. she wants to have a higher rate of return.
C. she wants to enjoy limited liability.
D. she wants to have the right to sue the company.

24. Which of the following ways of raising capital will reduce the flexibility of a firm in retaining profits for future
development?
A. issuing bonds
B. issuing ordinary shares
C. borrowing from banks
D. None of the above

HKDSE-ECON 1-5 (Mock Test 1) © 2009 Aristo Educational Press Ltd.

25. Which of the following is a possible motive for a firm to change from a sole proprietorship to a private limited
company?
A. The owners can raise funds by inviting new shareholders to join the firm.
B. Financial information of the company can be kept secret.
C. Shares of the company can be traded in the stock market.
D. The profits tax rate will be lower.

26. Refer to the table below.

Firm A Firm B
Number of owners 1 4
Liability of owners limited limited

Firm A is a _____________ while firm B is a ____________.

A. sole proprietorship ... partnership
B. private limited company ... partnership
C. public limited company ... private limited company
D. There is not enough information to tell.

27. Production
A. refers to the processes of turning natural resources into output.
B. may not generate monetary returns.
C. involves more than one firm.
D. helps solve the problem of scarcity.

28. Which of the following regarding producer goods and consumer goods is/are correct?
(1) A good may be a producer good or a consumer good, depending on how it is used.
(2) Consumer goods directly satisfy human wants while producer goods do not directly satisfy human
wants.
(3) Both consumer goods and producer goods must be private goods.

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

29. Private goods

A. must have a high market value.
B. are goods used to produce other goods and services.
C. may be consumed by many individuals at the same time.
D. have a positive cost of serving it to an additional consumer after they have been produced.

HKDSE-ECON 1-6 (Mock Test 1) © 2009 Aristo Educational Press Ltd.

30. The table below shows the employment distribution of three countries in a certain year.

Country
A B C
Sector
Primary 16.8% 4.4% 0.3%
Secondary 55.3% 18.6% 35.6%
Tertiary 28.9% 77.0% 64.1%
Total 100% 100% 100%

From the above table, we can conclude that

A. in terms of employment, the tertiary sector is the largest sector in Country B and Country C.
B. the number of people engaged in the tertiary sector in Country B is the largest.
C. Country A is less developed than Country B and Country C.
D. in Country A, the secondary sector contributed most to gross domestic product (GDP).

31. Which of the following are the advantages of practising division of labour?
(1) Labour productivity can be raised.
(2) Occupational mobility of labour can be raised.
(3) Capital can be utilised more intensively.
(4) Machines can be used to replace workers.

A. (1) and (3) only

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

32. With division of labour,

A. only workers with the highest productivity are employed.
B. quality of outputs improves.
C. training time of workers can be shortened.
D. time in moving around tasks increases.

33. Which of the following is classified as “land”?

A. fertilised soil
B. trees in a rainforest
C. rainfall resulting from cloud seeding (種雲)
D. a piece of abandoned farmland

34. In economics, a house is classified as __________ and return from renting it out is classified as __________.
A. capital ... rent
B. land ... rent
C. capital ... interest
D. land ... interest

35. Which of the following is a difference between capital and land?

A. Capital requires human effort in production while land does not.
B. Capital may increase while the quantity of land is fixed.
C. The use of capital involves costs while the use of land does not cost anything.
D. Capital is occupationally mobile while land is not.

HKDSE-ECON 1-7 (Mock Test 1) © 2009 Aristo Educational Press Ltd.

36. Which of the following events will not lead to a change in the labour supply of Hong Kong?
A. an increase in the number of public holidays
B. many people plan to retire later due to the financial turmoil
C. an increase in the number of people immigrating to Hong Kong
D. a fall in the unemployment rate

37. Refer to the table.

Firm X Firm Y
Number of workers X Y
Average working hours of 10 12
workers
Total output (units) 36,000 54,000

If the productivities of workers in both firms are the same, the ratio of X to Y would be
A. 4 : 5.
B. 5 : 4.
C. 2 : 3.
D. 3 : 2.

38. Suppose tour guides of a travel agency are paid by a percentage of the company’s profit instead of the traditional
“basic salary plus commission” scheme. Which of the following is a result?
A. an increase in income received by the tour guides
B. an increase in the cost of supervising the tour guides
C. an improvement in the quality of service provided by the tour guides
D. an increase in the business risk borne by the travel agency owner

39. Geographical mobility of labour in Hong Kong increases if

A. the government launches a large-scale retraining programme.
B. the MTRC lowers the fares of all routes.
C. immigrating to Hong Kong becomes more difficult due to the tightening of immigration policies.
D. some firms provide a housing allowance for staff living in distant districts.

40. Which of the following occupations has the lowest geographical mobility?
A. Teacher
B. Driver
C. Waiter
D. There is not enough information to tell.

END OF PAPER

HKDSE-ECON 1-8 (Mock Test 1) © 2009 Aristo Educational Press Ltd.