Chapter 1: Basic Economic Concepts

1. Which of the following about economics is INCORRECT?

• A. Economics is a social science.

• B. Economists make both positive statements and normative statements.

• C. Economics studies how people make choices under the condition of scarcity.

• D. Economics only explains and predicts how firms make production decisions.

2. When there is scarcity, this implies that

(1) there is discrimination.

(2) all goods must have a market price.

(3) people have to compete for some goods and services.

(4) not all people’s wants can be satisfied with available resources.

• A. (1), (2) and (3)

• B. (1), (2) and (4)

• C. (1), (3) and (4)

• D. (2), (3) and (4)

3. Which of the following statements about scarcity is CORRECT?

• A. If human wants are limited, there will be no scarcity.

• B. Scarcity does not exist after people have made their choices.

• C. If there is only one person in an economy, scarcity does not exist.

• D. The existence of scarcity implies that there is a cost in obtaining some goods.

4. The Chinese People’s Liberation Army (PLA) Hong Kong Garrison opened its barracks to the public from 30 June to 2 July 2018 and 30,000 free entrance tickets were given out. It was found that most of the people queuing up for the tickets were elderly people or housewives.

Which of the following can explain this phenomenon?

• A. The value of time spent queuing up was lower for elderly people and housewives than for working adults.

• B. Elderly people and housewives incurred no opportunity cost for getting the free tickets.

• C. Elderly people and housewives valued the tickets more highly than other people.

• D. Elderly people and housewives did not have to pay for the tickets.

5. Susan has $100,000. She can keep the money at home, deposit it in a bank and earn an interest of 4% per year, or lend it to her friend and receive $2,000 in interest a year later.

If only monetary return and monetary cost are considered, Susan’s opportunity cost of keeping the $100,000 at home for a year is ________ while her opportunity cost of depositing the money in a bank for a year is ________ .

• A. $2,000 … $2,000

• B. $2,000 … $4,000

• C. $4,000 … $2,000

• D. $4,000 … $4,000

6. A theme park is undergoing an expansion project and the completion of the new zone has just announced to be delayed for one month. Which of the following will lower the opportunity cost of visiting the theme park now?

(1) Discount coupons are given by the park to compensate for the inconvenience due to the delay.

(2) There is loud noise caused by the construction work inside the theme park.

(3) The overcrowding problem is eased as there are fewer visitors because of the construction work.

• A. (1) only

• B. (3) only

• C. (1) and (2) only

• D. (2) and (3) only

7. Raymond is going to Australia on a working holiday for a year. Which of the following will most likely lead to an increase in the opportunity cost for him to go for working holiday for a year?

• A. Salaries in Australia is very high.

• B. Raymond feels that working in an orchard in Australia is hard.

• C. During the year, most jobs in Hong Kong get a pay rise.

• D. During the year, the unemployment rate of Hong Kong is high.

8. Kathy is choosing between two ways of spending her weekend. She can either work as a salesperson in a boutique and earn $1,000, or take a short trip to Macau. Which of the following will raise Kathy’s opportunity cost of taking a short trip to Macau?

• A. Kathy cannot try the SkyJump in Macau because of bad weather.

• B. Free meals provided by the boutique to the staff are cancelled.

• C. The owner of the boutique raises Kathy’s pay to $1,500.

• D. The price of accommodation in Macau decreases.

9. Whitney is going on a trip to Thailand. Which of the following will increase Whitney’s cost of taking a trip to Thailand?

• A. The weather in Thailand is not as good as Whitney expected.

• B. Whitney is sick during her trip and she cannot go swimming in Thailand.

• C. Whitney finds that the tour she joined is more expensive than the tours provided by other travel agencies.

• D. The flight from Thailand to Hong Kong is delayed, making Whitney unable to attend her friend’s birthday party.

10. Jackson spent $6,000,000 on a flat in Tsuen Wan. He can either live in the flat himself or lease it out. Which of the following would reduce his opportunity cost of living in the flat himself?

• A. The management fee of the flat increased.

• B. The view from the flat is blocked by a new building.

• C. The average market rental value of flats in Tsuen Wan decreased.

• D. The interest rate of the mortgage loan that Jackson borrowed decreased.