Basic Economic Concepts: practice questions

6 questions · 10 marks · free, no account · Read the notes first

1. Question 1Multiple choice · 1 mark

   Which of the following is a free good?

   A

   Books borrowed free of charge from a public library

   B

   Air in an open field

   C

   Free samples handed out in a shopping mall

   D

   Tap water

2. Question 2Multiple choice · 1 mark

   Ken chooses to watch a football match tonight. His other options are to work a part-time shift (his second choice) or to go to the cinema. Which of the following will increase the cost of watching the match?

   A

   The match turns out to be very exciting.

   B

   The cinema reduces its ticket price.

   C

   His employer raises the hourly wage for tonight's shift.

   D

   His seat at the stadium has a poor view.

3. Question 3Multiple choice · 1 mark

   Which of the following is a normative statement?

   A

   Hong Kong's Gini coefficient is higher than Singapore's.

   B

   A minimum wage will reduce the employment of low-skilled workers.

   C

   Hong Kong's Gini coefficient is too high for a developed economy.

   D

   The unemployment rate rose last year.

4. Question 4Multiple choice · 1 mark

   Under a housing scheme, owners may live in their flats and let them out, but may sell them only back to the government. Compared with private flats, which right is weakened?

   A

   The right to use

   B

   The right to receive income

   C

   The right to transfer

   D

   None of the above

5. Question 53 marks

   During a promotion, an MTR line offers free rides on Sundays. Is a free ride a free good? Explain.

   Show worked solution

   No. (1)

   A free good is one whose quantity available is sufficient to satisfy all wants at zero price, so it involves no opportunity cost. (1)

   Providing the ride uses scarce resources (trains, electricity, staff) that have alternative uses, so there is a positive cost to society. The ride is an economic good provided free of charge. (1)

6. Question 63 marks

   Amy can choose between studying medicine (first choice) and studying law (second choice) at university. A newspaper reports that lawyers' average income has fallen sharply. Explain whether the opportunity cost of studying medicine will change.

   Show worked solution

   Opportunity cost is the highest-valued option forgone. (1)

   The highest-valued option forgone in studying medicine is studying law. (1)

   A fall in lawyers' income lowers the value of studying law, so the opportunity cost of studying medicine decreases. (1)