BK 1 CH 6 Question Bank

Chapter 6 Market intervention (I) P ($)
S
Multiple Choice Questions
P2
Question code: B1C06Q001 (new)
P1
Suppose landlords are not allowed to charge tenants more than the
maximum rent set by the government. Which of the following are the D
effects of abolishing rent control? Q (units)
0
(1) The quality of rental units will improve.
(2) The total rental income of landlords will increase. If the government changes the price ceiling to P2,
(3) More units will be rented. A. the price ceiling will become effective.
A. (1) and (2) only B. the price will increase.
B. (1) and (3) only C. total revenue will increase.
C. (2) and (3) only D. there will be a surplus of the good.
D. (1), (2) and (3)
Which of the following are the possible results of increasing an effective
Question code: B1C06Q002 (new) price ceiling on a good?
Refer to the following diagram about the market for a good. The (1) The price of the good will increase.
government imposes a price ceiling of P1 on the good. (2) The shortage of the good will become more serious.
(3) Producers’ total revenue will increase.
A. (1) and (2) only
B. (1) and (3) only
NSS Exploring Economics 1 (2nd edition) © Pearson Education Asia

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Question Bank (Chapter 6)
C. (2) and (3) only Question code: B1C06Q006 (new)
D. (1), (2) and (3) Refer to the following diagram about the market of a good.
P ($)
Question code: B1C06Q004 (new) S
Suppose there is an effective price ceiling on Good X. The price ceiling
P2
may become ineffective when
P0
A. the supply of Good X decreases.
P1
B. the demand for Good X decreases.
C. the price ceiling is lowered. D
D. All of the above Q (units)
0 Q1 Q0 Q2
Question code: B1C06Q005 (new) Which of the following statements is correct?

* Suppose there is an effective price ceiling on Good Y. The price ceiling A. If a price ceiling is set at P1, there will be a (Q2 – Q1) unit shortage of
may become ineffective when the good.
(1) the price of the complement of Good Y increases. B. If a price ceiling is set at P2, there will be a (Q2 – Q1) unit surplus of
(2) the input price of Good Y decreases. the good.
(3) the government raises the price ceiling. C. If a price ceiling is set at P1, the black market price will be P0.
A. (1) and (2) only D. If a price ceiling is set at P2, the market price will be P2.
B. (1) and (3) only
C. (2) and (3) only
D. (1), (2) and (3)

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Question code: B1C06Q007 (new) Question code: B1C06Q009
Suppose the market price of a good is $4. If the government imposes a Suppose the government regulates the price of rice so that it is below the
price ceiling of $3 on the good, which of the following statements is market price. As a result, a __________ develops and rice may be
correct? allocated to buyers __________.
A. The new market price will be $4. A. shortage … through an auction (拍賣)
B. The total revenue will increase only if the demand for the good is B. shortage … by drawing lots
elastic. C. surplus … through an auction
C. The total revenue will decrease only if the demand for the good is D. surplus … by non-price competition
elastic.
D. None of the above Question code: B1C06Q010
Study the following diagram.
Question code: B1C06Q008 Price ($)

Which of the following is/are the result(s) of an effective price ceiling?
(1) The quality of the good increases. S
(2) The price increases. P0
(3) Producers’ total revenue decreases.
A. (1) only
P1
B. (3) only
C. (1) and (2) only P2
D. (1), (2) and (3)
D
0 Quantity

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An effective price ceiling must be set Question code: B1C06Q012
A. above P0. In Hong Kong, public housing rent is set below the equilibrium price,
B. below P1. resulting in
C. between P0 and P1. A. excess supply.
D. between P0 and P2. B. a long waiting list for public housing.
C. elastic supply of public housing.
D. more income for the government.
Question code: B1C06Q011
Study the following data for the soya bean market: Question code: B1C06Q013
In Hong Kong, the public medical service fee is set _________, therefore
Price ($) 20 21 22 23 24 25 26 ___________.
Quantity supplied (kg) 40 50 60 70 80 90 100 A. above the equilibrium level … the average lifespan of Hong Kong
Quantity demanded (kg) 95 90 80 70 60 55 48 people is very long
B. at the equilibrium level … everyone can enjoy the services
If the government imposes a price ceiling at $24/kg, the quantity C. below the equilibrium level … the queuing time is very long
transacted is D. at a reasonable level … people are satisfied with it
A. 60 kg.
B. 70 kg. Question code: B1C06Q014
C. 80 kg. The queue outside public clinics will be shorter if
D. None of the above A. the government reduces the quota of outpatient medical services (門
診服務).
B. the proportion of the aged in the population increases.

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C. the government increases the price of outpatient medical services. the equilibrium price.
D. the prices at private clinics increase. Question code: B1C06Q017
When the price ceiling on rice is removed,
Question code: B1C06Q015 (1) the price of rice increases.
Which of the following is/are the result(s) of an effective price ceiling? (2) the quantity transacted of rice increases.
(1) The equilibrium price decreases. (3) the change in total revenue depends on the price elasticity of
(2) The quantity transacted decreases. demand.
(3) Producers’ total revenue may increase, decrease or remain A. (1) and (2) only
unchanged, depending on the price elasticity of demand. B. (1) and (3) only
(4) A shortage occurs. C. (2) and (3) only
A. (1) only D. (1), (2) and (3)
B. (2) and (3) only
C. (2) and (4) only
D. (1), (2) and (4) only Question code: B1C06Q018
* Suppose the government imposes an effective price ceiling on a good
Question code: B1C06Q016 (new) with perfectly inelastic supply. Which of the following statements is
Good X is now subject to an effective price ceiling. Which of the correct?
following statements is correct? A. The market price of the good will increase.
A. If the price ceiling is abolished, fewer consumers can afford Good X. B. There will be excess supply at the controlled price.
B. If the quality of Good X improves, the shortage of Good X will C. The quantity transacted will decrease.
disappear. D. The total revenue will fall.
C. Non-price competition among the sellers is keen.
D. If a black market for Good X emerges, the price will be higher than

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Suppose there is an effective price ceiling on parking space at Home A price ceiling set __________ is ineffective.
Ownership Scheme estates. Which of the following can reduce the A. above P1
shortage? B. below P2
A. Increasing the price of parking space C. between P2 and P3
B. Reducing the supply of parking space D. below P3
C. Allocating according to the need for parking space
D. All of the above Question code: B1C06Q021
Study the following data for luncheon meat (午餐肉) imported from the
mainland:
Study the following diagram: Unit price ($) 4 8 12 16 20 24
Quantity
1,000 2,000 3,000 4,000 5,000 6,000
Price ($) supplied (cans)
S Quantity
P1 demanded 5,000 4,000 3,000 2,000 1,000 0
(cans)
P2
Suppose the government imposes a price ceiling of $16 per can. What
P3 will the total revenue for sellers of luncheon meat be?
D A. $32,000
Quantity B. $36,000
0

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C. $48,000
D. $64,000
Question code: B1C06Q022 Question code: B1C06Q024
In Hong Kong, the charge for leisure facilities run by the Leisure and To combat inflation (通脹), suppose the Hong Kong Government
Cultural Services Department on public holidays is usually set imposes an effective price ceiling on food imported from the mainland.
__________ the equilibrium level as _____________. Which of the following are possible consequences?
A. above … these facilities are usually fully booked (1) The equilibrium price of imported food decreases.
B. above … these facilities are usually vacant (2) The quantity of food imported decreases.
C. below … some people usually complain that they cannot book these (3) A black market may emerge in which people pay a price higher
facilities than the legal maximum.
D. below … these facilities are usually vacant A. (1) and (2) only
B. (1) and (3) only
Question code: B1C06Q023 (new) C. (2) and (3) only
The amount of time that customers need to wait to buy an iPhone 6 will D. (1), (2) and (3)
be longer if
A. Apple employs more factories to produce the iPhone 6. Question code: B1C06Q025
B. the price of the iPhone 6 Plus increases. If a government removes an effective price ceiling on rental housing,
C. many users complain about the camera on the iPhone 6. which of the following will increase?
D. retailers increase the price of the iPhone 6. (1) The equilibrium rent
(2) The number of rental transactions
(3) Rental income for landlords as a whole
A. (2) only
B. (1) and (2) only

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C. (2) and (3) only
D. (1), (2) and (3)
Question code: B1C06Q026 (new) Question code: B1C06Q028 (new)
Suppose the demand for red wine is perfectly inelastic. If the government In 2013, a Japanese ramen (拉麫) restaurant opened its first branch in
imposes an effective maximum price on red wine, which of the following Hong Kong. Despite the hot weather, customers queued for up to four
is correct? hours to try the ramen during the first few days after the restaurant
A. The quantity transacted of red wine will remain unchanged. opened. Which of the following can explain this phenomenon?
B. The market price of red wine will remain unchanged. A. The restaurant must be very small.
C. Consumers will spend less on red wine overall. B. The ramen must be very delicious.
D. The quality of red wine will increase. C. The price of the ramen must be set below the equilibrium level.
D. None of the above
To prevent the price of rice from rising to an unaffordable level, the Question code: B1C06Q029 (new)
government imposes a price ceiling on rice. It has been reported that rice In 2013, a Japanese ramen (拉麫) restaurant opened its first branch in
is often sold out. Which of the following can alleviate (減輕) this Hong Kong. Despite the hot weather, customers queued for up to four
problem? hours to try the ramen during the first few days after the restaurant
A. Raising the price ceiling opened. Which of the following could reduce customers’ waiting time?
B. Lowering the price ceiling A. The restaurant improves the service quality of the waiters.
C. Increasing the quality B. The restaurant raises the price of its ramen.
D. Increasing the price of noodles C. The restaurant reduces the number of seats.
D. The restaurant airs a TV advertisement.

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C. have no effect on the total revenue.
D. increase the total revenue.
Which of the following causes the quantity demanded of a good to be
larger than its quantity transacted? Question code: B1C06Q033 (new)
A. The market price is fixed below the equilibrium level. Suppose the government has imposed an effective price floor on
B. The market price is fixed at the equilibrium level. cigarettes. If the government decides to ban smoking in more public
C. The market price is fixed above the equilibrium level. areas,
D. None of the above A. the surplus of cigarettes will grow.
B. the price floor may become ineffective.
Question code: B1C06Q031 (new) C. the total expenditure on cigarettes may increase.
If a __________ on a good is set __________ the equilibrium price, there D. None of the above
will be a surplus of the good.
A. price ceiling … below
B. price ceiling … above Question code: B1C06Q034 (new)
C. price floor … below A __________ set __________ will decrease the total revenue if the
D. price floor … above demand is elastic.
A. price ceiling … above the equilibrium price
Question code: B1C06Q032 (new) B. price floor … above the equilibrium price
Suppose the demand for Good Y is elastic. Abolishing the effective price C. quota … above the equilibrium quantity
floor on Good Y will D. None of the above
A. decrease the quantity transacted.
B. create a larger excess supply.

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Question code: B1C06Q035 (new) Question code: B1C06Q036 (new)
Refer to the following diagram about the market of a good. Refer to the following diagram about the market of a good.
P ($) P ($)
S D S
P2 P2
P0
P1 P1
D
Q (units) Q (units)
0 Q1 Q0 Q2 0 Q1 Q2
Which of the following statements is correct? If the government sets a price floor of P2 on the good, the total revenue
A. If a price ceiling is set at P2, the market price will be P0. will be
B. If a price floor is set at P2, there will be a (Q2 – Q1) unit surplus of the A. P1 × Q1.
good. B. P2 × Q1.
C. If a price floor is set at P1, the quantity transacted will be Q0. C. P1 × Q2.
D. All of the above D. P2 × Q2.

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Which of the following is/are the result(s) of an effective price floor?
Question code: B1C06Q037 (new) (1) The price decreases.
Refer to the following diagram about the market for a good. (2) The quantity transacted decreases.
P ($) (3) Producers’ total revenue decreases.
S A. (1) only
B. (2) only
P2
C. (1) and (2) only
D. (1), (2) and (3)
P1
D
Q (units) Question code: B1C06Q039
0 Q1 Q2
As shown in the diagram below, the government has set a price floor for
Which of the following statements is correct? Good X at P0.
A. The effects of a price ceiling at P1 and a price floor at P2 are the same. $
B. The effects of a price ceiling at P2 and a price floor at P1 are the same. S
C. A price ceiling at P2 creates a shortage of (Q2 – Q1) units.
P0 Price floor
D. A price floor at P1 creates a surplus of (Q2 – Q1) units.
D
Q
0

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Suppose research shows that Good X can help extend human life. Which Question code: B1C06Q042
of the following will most likely happen? If the government sets a price floor below the equilibrium price,
A. Excess demand will be greater. A. the market price will increase.
B. The market price will increase. B. there will be excess supply at the controlled price.
C. The quantity transacted will increase. C. quantity transacted in the market will fall.
D. Excess supply will be greater. D. there will be no effect on the market price and quantity transacted.

Which of the following will occur when the government lowers the Study the following diagram.
effective price floor for a good?
A. The quantity transacted decreases.
Price ($)
B. The non-price competition becomes more intense.
S
C. The excess demand for the good decreases.
P1
D. The excess supply of the good decreases.

Suppose the price floor of a good is originally set at the equilibrium
level. A decrease in supply will D2
A. lead to a decrease in quantity transacted. D1
0 Quantity
B. have no effect on price.
C. lead to excess demand. Assume that the price is fixed at P1. When the demand increases from D1
D. lead to excess supply. to D2,
A. the total expenditure of consumers decreases.

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B. the quantity transacted remains unchanged. price elasticity of demand.
C. the excess demand increases.
D. there is still pressure for the price to fall. Question code: B1C06Q045
If an effective price floor is imposed, an increase in demand
Question code: B1C06Q044 A. will lead to an increase in the quantity transacted.
Study the following diagram. B. must cause an increase in the price.
C. may cause a decrease in the quantity demanded.
Price ($)
D. will eliminate the shortage.
S
P0
D0
D1
0 Quantity
Assume that the price is fixed at P0. When the demand decreases from D0
to D1,
A. the price is under pressure to increase.
B. the price is under pressure to decrease.
C. producers’ total revenue remains unchanged.
D. producers’ total revenue may increase or decrease, depending on the

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Question code: B1C06Q046 Question code: B1C06Q047
Study the following diagram: Suppose the HKSAR government increases the minimum wage for
foreign domestic helpers. As a result,
A. Hong Kong will employ more foreign domestic helpers.
Price ($)
B. a shortage will occur in the market for foreign domestic helpers.
S0 C. the quantity supplied of foreign domestic helpers will increase.
S1
P1 D. the total wage income of foreign domestic helpers will increase.

D Which of the following is NOT an effect of removing an effective price
0 Quantity floor?
Q1i A. The market price must fall.
Suppose the government imposes a price floor at P1. If supply increases B. The quantity transacted must increase.
from S0 to S1, C. There will be no surplus.
A. the quantity transacted will increase. D. The total revenue of sellers as a whole must increase.
B. the equilibrium price will remain at P1.
C. the surplus will increase.
D. the quantity demanded will increase.

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Question code: B1C06Q049 B. (1) and (3) only
Which of the following is NOT an effect of raising the level of an C. (2) and (3) only
effective price floor? D. (1), (2) and (3)
A. The market price of the good increases.
B. The quantity transacted falls.
C. The amount of excess supply increases. Question code: B1C06Q051 (new)
D. The total revenue of the sellers increases if the demand is elastic. * Study the following table.
Question code: B1C06Q050 Price ($) 1 2 3 4 5 6

The following table shows the demand and supply schedules for Good X. Quantity demanded (units) 100 100 100 100 100 100
Unit price ($) 10 11 12 13 14 15 Suppose the equilibrium price is $3. Which of the following is correct?
Quantity demanded (units) 40 35 30 25 20 15 A. The quantity transacted will remain unchanged if a price ceiling is set
Quantity supplied (units) 20 25 30 35 40 45 at $2.
B. The income of producers will increase if a price floor is set at $4.
Suppose the market is in equilibrium originally. If the government C. The total revenue is maximised when the price is $3.
imposes a price floor at $13 and it does not buy up the surplus, which of D. A shortage will occur if the price floor is set at $5.
the following statements are correct?
(1) The income of producers will increase.
(2) The quantity transacted will decrease.
(3) It may create a black market.
A. (1) and (2) only

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Study the following diagram:
Study the following diagram:
Price ($)
D
Price ($)
S1
S S2
P1
P1
D1 0 Quantity
D2
0 Quantity
Suppose the government imposes a price floor at P1. If the supply
Suppose the government imposes a price floor at P1. When the demand increases from S1 to S2, which of the following is correct?
decreases from D1 to D2, which of the following is correct? A. The quantity transacted will increase.
A. The quantity transacted will remain unchanged. B. Sellers’ total revenue will decrease.
B. Sellers’ total revenue will increase. C. The price floor will become ineffective.
C. The price will tend to rise. D. Consumers’ total expenditure will increase.
D. Consumers’ total expenditure will decrease.

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Suppose the government imposes a price floor at $14,000. Which of the
following statements is/are correct?
Question code: B1C06Q054 (1) The total income for imported workers will decrease.
Suppose the price floor for Good X is set below the equilibrium price. (2) The market wage rate for imported workers will increase.
Which of the following is an effect of removing the price floor? (3) A black market where workers offer to take less than the legal
A. The market price will increase. wage may emerge.
B. The quantity transacted will increase. A. (1) only
C. The amount of excess supply will decrease. B. (1) and (2) only
D. None of the above C. (2) and (3) only
D. (1), (2) and (3)
The following table shows the demand and supply schedules of imported Question code: B1C06Q056
labour: Study the following table which shows the supply schedule of a local
crop.
Wage rate ($) 10,000 11,000 12,000 13,000 14,000 15,000
Quantity Price ($) 1 2 3 4 5 6
demanded 80 70 60 50 40 30 Quantity supplied (units) 200 200 200 200 200 200
(units/period)
Quantity Suppose the government imposes a price floor of $5 which is lower than
supplied 40 50 60 70 80 90 the equilibrium price. Which of the following would result?
(units/period) A. The market price will increase.
B. The quantity transacted will increase.

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C. The total revenue for sellers will decrease. Price ($) 10 12 14 16 18
D. None of the above Quantity transacted
100 200 300 250 200
(units)
Question code: B1C06Q057 Suppose the demand curve for Good X is downward sloping and the
* An economic researcher comes up with the following data about Good supply curve for it is upward sloping. If the government imposes a price
X: floor at $12, which of the following is correct?
A. The market price will increase.
Price ($) 10 12 14 16 B. The quantity transacted will remain unchanged.
Quantity transacted (units) 100 200 300 250 C. The total revenue will decrease.
D. The total expenditure will increase.
If the demand curve for Good X is downward-sloping and the supply
curve for it is upward-sloping, what is the equilibrium price?
A. $10 Question code: B1C06Q059
B. $12 Study the following diagram.
C. $14
D. $16

*An economic researcher comes up with the following data about Good
X:

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Price ($) Quantity demanded (units) 40 35 30 25 20
S What of the following is correct?

P1 A. If a price ceiling is set at $4, the quantity transacted is 25 units.
P0 B. If a price floor is set at $2, the quantity transacted is 20 units.
C. Without any price controls, the quantity transacted is 30 units.
P2
D. All of the above
D
0 Quantity Question code: B1C06Q061

Suppose the quantity demanded and the quantity transacted of bananas
P1 and P2 show ________________ and ________________, are equal. Which of the following situations CANNOT exist?
respectively. A. There is no tendency for the price of bananas to change.
A. an effective price ceiling … an effective price floor B. The price of bananas is equal to the equilibrium price.
B. an effective price floor … an effective price ceiling C. The price of bananas is higher than the equilibrium price.
C. excess supply … excess supply D. All of the above are possible situations.
D. None of the above
Question code: B1C06Q060 (new) If an effective price floor is imposed on Good X, which of the following
Study the following table. can increase the quantity transacted?
A. Raising the price floor
Price ($) 1 2 3 4 5 B. Good Y is a close substitute for Good X. Recently, the price of Good
Quantity supplied (units) 10 20 30 40 50 Y has increased rapidly due to an increase in its production cost.

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C. Allocating the good on a first-come, first-served basis. Question code: B1C06Q065
D. The production cost of Good X decreases. * Although taxi fares in Hong Kong are standardised by law, some taxi
drivers illegally offer a 20% discount to customers. This phenomenon
Question code: B1C06Q063 indicates that
Which of the following CANNOT be a consequence of setting the price A. taxi drivers only engage in price competition.
at a non-equilibrium level? (Assume there are no other types of B. there is excess demand for taxi services.
government intervention.) C. taxi fares are below the equilibrium level.
A. The quantity transacted is higher than the equilibrium level. D. taxi fares are above the equilibrium level.
B. The total expenditure of consumers is higher than the equilibrium
level. Question code: B1C06Q066 (new)
C. There will be excess demand. Which of the following are the effects of an effective quota on a good?
D. There will be price changes. (1) An increase in the price
(2) Excess supply of the good
Question code: B1C06Q064 (3) An improvement in the quality of the good
* Which of the following is NOT a common feature of an effective price A. (1) and (2) only
ceiling and an effective price floor? B. (1) and (3) only
A. Both will lead to non-price competition. C. (2) and (3) only
B. Both will make the quantity demanded unequal to the quantity D. (1), (2) and (3)
supplied.
C. Both will make the quantity demanded unequal to the quantity Question code: B1C06Q067 (new)
transacted. Refer to the following diagram about the market for a good.
D. Both will lead to a decrease in quantity transacted.

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P ($) A. P ($) B. P ($)
S S S
P2
P1
D D1 D2 D1 D2
Q (units) Q Q
0 Q1 Q2 0 0
(units) (units)
Which of the following statements is correct? C. P ($) D. P ($)

A. A quota at Q2 is effective. S1 S2 S2 S1
B. The effect on the total revenue of a price ceiling at P1 is the same as
that of a quota at Q1.
C. The effect on the price of a price floor at P2 is the same as that of a
quota at Q1.
D. None of the above D D
Q Q
0 (units) 0 (units)
Suppose the government imposes an effective quota on a good. The
quota becomes ineffective after an increase in the price of its
complement. Which of the following diagrams can illustrate the above
event?

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Suppose the government of Country T lowers the effective quota on Question code: B1C06Q070 (new)
imported diesel. Which of the following diagrams illustrate the results of The following table shows the supply-demand schedule of a good.
the above event in Country T? Price ($) 12 13 14 15 16 17
A. P ($) Imported diesel B. P ($) Imported diesel Quantity supplied (units) 500 525 550 575 600 625
S1 S2 S2 S1 Quantity demanded (units) 800 750 700 650 600 550
Suppose the government imposes a quota of 550 units on the good, the
market price will
A. remain unchanged.
B. increase by $1.
D D C. increase by $2.
Q Q D. decrease by $1.
0 (units) 0 (units)
C. P ($) Private Cars D. P ($) Locally produced diesel

S S1
S2
D2 D1 D
Q Q
0 (units) 0 (units)

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Question code: B1C06Q071 (new) D. remain unchanged.
The following table shows the supply-demand schedule of a good.
Price ($) 12 13 14 15 16
Quantity supplied (units) 500 525 550 575 600 Question code: B1C06Q073
Quantity demanded (units) 800 750 700 650 600 Refer to the diagram below.
Suppose the government imposes a quota of 550 units on the good, P ($ / unit)
A. the quantity transacted will be smaller than 550 units. S2
S1
B. there will be a surplus of 50 units.
5
C. the total revenue will decrease by $250.
D. a price ceiling at $17 will have the same effect on price and quantity 4
transacted. 3
D
Question code: B1C06Q072 (new) 25 40 Q (units / week)
0
The following table shows the supply-demand schedule of a good.
Price ($) 23 24 25 26 27 Initially, there is no government intervention in the market. If the
Quantity supplied (units) 200 220 230 240 250 government sets a quota of 25 units per week, consumers’ total
Quantity demanded (units) 270 260 250 240 230 expenditure will
Suppose the government increases the quota from 230 units to 250 units. A. increase.
The total revenue will B. decrease.
A. increase by $30. C. remain unchanged.
B. increase by $40. D. There is insufficient information to determine the change in total
C. decrease by $460. expenditure.

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C. (2) and (3) only
Question code: B1C06Q074 D. (1), (2) and (3)
An effective ___________ will lead to an increase in producers’ total
revenue under __________ demand Question code: B1C06Q076
(1) price ceiling … elastic * In the case of a downward sloping demand curve and an upward
(2) price floor … inelastic sloping supply curve, an effective price ceiling is similar to an effective
(3) quota … elastic quota in that
(4) quota … inelastic A. it lowers the quantity transacted.
A. (1) and (3) only B. it creates a shortage.
B. (1) and (4) only C. it must reduce the total revenue of sellers.
C. (2) and (4) only D. it lowers the market price.
D. (1), (2) and (4) only
Suppose the US government increases the import quota for Hong Kong
Question code: B1C06Q075 garments. Which of the following statements is correct?
* The government has imposed a quota on the number of taxi licences in A. The total tax revenue collected by the US government will increase.
Hong Kong. Suppose the taxi fare remains unchanged. Which of the B. The price of imported Hong Kong garments will increase.
following will occur when the economy turns bad? C. The total revenue of US garment producers will decrease.
(1) Taxi drivers’ total income will decrease D. If the demand for imported garments in the US is inelastic, total
(2) There will be a surplus of taxi services expenditure of US consumers on imported garments will increase.
(3) The price of taxi licences will decrease
A. (1) and (2) only
B. (1) and (3) only

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Suppose the mainland government has recently imposed an effective Suppose the European Union decreases the quota for textile products
quota on imported baby formula (嬰幼兒配方奶粉) while Hong Kong from China. Which of the following statements is correct?
does not have such a quota. Which of the following is INCORRECT? A. The price of Chinese textile products in Europe decreases.
A. The total revenue of baby formula producers in the mainland will B. The price of European textile products in Europe increases.
increase. C. The quantity of Chinese textile products imported into Europe
B. The price of baby formula produced in the mainland will decrease. increases.
C. The quantity of imported baby formula sold in the mainland will D. If the demand for European textile products in Europe is inelastic,
decrease. European consumers’ expenditure on European textile products will
D. More mainlanders will travel to Hong Kong to buy imported baby decrease.
formula.
Question code: B1C06Q079 Which of the following is NOT an effect of an increase in the quota of
Which of the following is NOT an effect of an increase in quota? imported professionals from the mainland?
A. The market price of the good will decrease. A. The market wage rate of these imported professional falls.
B. The quantity transacted will increase. B. If the demand for these imported professionals is elastic, total income
C. The total revenue of the sellers will increase if the demand for the for them will increase.
good is elastic. C. The wage rate of local professionals falls.
D. The demand for the good will increase. D. The employment of these professionals decreases.

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Short Questions
Question code: B1C06Q301 (new) The rent for private residential housing has risen sharply. Some people
Many poor people in Country Y have complained about the unaffordable have urged the government to impose a ceiling on rent to help poor
price of rice saying that they cannot buy enough rice. They have urged families rent a flat.
the government to impose price controls to lower the price of rice. (a) Would it be easier or harder to rent a flat after the government
(a) Which price control should the government impose to lower the price imposes an effective price ceiling? Explain your answer with the aid
of rice? How it should be set in order to achieve the goal? Explain of a diagram. (4 marks)
your answer with the aid of a diagram. (b) Under a price ceiling, what would happen to the quantity transacted if
(b) With the aid of the same diagram, explain whether the poor can buy more families are allowed to move from the mainland to Hong Kong?
enough rice after the imposition of the price control. Explain.
(4 marks)
Buckwheat (蕎麥) is a staple food of Russians. Suppose the Russian Question code: B1C06Q304
government imposes a price ceiling on buckwheat at the level above its Study the following demand and supply schedules of a good.
equilibrium price.
(a) Explain whether the price ceiling on buckwheat is effective. Unit price ($) Quantity demanded (units) Quantity supplied (units)
(b) Suppose the harvest of buckwheat is very poor due to a serious 70 10 22
drought (旱災). With the aid of a diagram, explain the economic 60 14 20
phenomenon which can be observed in the market for buckwheat. 50 18 18
marks) 40 22 16
30 26 14
(1 mark)

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circumstance the goal can be achieved. (7 marks
(a) What is a price ceiling? Question code: B1C06Q308
(b) If the government imposes a price ceiling of $60, find and explain the To increase farmers’ income, a government imposes an effective price
market price and quantity transacted. floor on wheat.
(a) How will the quantity transacted and the price of wheat change after
Question code: B1C06Q305 (new) the imposition of a price floor? Explain your answer with the aid of a
The price of Home Ownership Scheme (HOS) flats is set below the diagram.
equilibrium price. The right to purchase the flats is allocated by drawing (4 marks)
lots. Explain with the aid of a diagram how an increase in the price of (b) Explain whether the above policy will necessarily increase farmers’
private housing will affect the chance of gaining the right to purchase an total income.
HOS flat. (6 marks) (3 marks)
Question code: B1C06Q306 An economist says, ‘If the government imposes a minimum wage,
Study rooms in public libraries are provided to students for free. Yet the unemployment will be worse when there is an economic downturn.’
number of seats is fixed. Explain with the aid of a diagram why long (a) Explain this statement with the aid of a diagram. (4 marks)
queues are found outside the study rooms. (b) Draw another diagram to explain how the development of the West
(2 marks) Kowloon Cultural District would help reduce unemployment. (4
marks)
Fishing is a declining industry in City H. Many fishermen have left the
industry because of the low income. To preserve this industry, the
government decides to impose a price floor on seafood to increase the
total income of fishermen. With the aid of a diagram, explain under what

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Chapter 6 Market intervention (I) P ($)

NSS Exploring Economics 1 (2nd edition) © Pearson Education Asia

Question code: B1C06Q005 (new) Which of the following statements is correct?

NSS Exploring Economics 1 (2nd edition) © Pearson Education Asia

Question code: B1C06Q008 Price ($)

NSS Exploring Economics 1 (2nd edition) © Pearson Education Asia

NSS Exploring Economics 1 (2nd edition) © Pearson Education Asia

NSS Exploring Economics 1 (2nd edition) © Pearson Education Asia

NSS Exploring Economics 1 (2nd edition) © Pearson Education Asia

NSS Exploring Economics 1 (2nd edition) © Pearson Education Asia

NSS Exploring Economics 1 (2nd edition) © Pearson Education Asia

NSS Exploring Economics 1 (2nd edition) © Pearson Education Asia

NSS Exploring Economics 1 (2nd edition) © Pearson Education Asia

NSS Exploring Economics 1 (2nd edition) © Pearson Education Asia

Question code: B1C06Q040 (new) Question code: B1C06Q043

Question code: B1C06Q041

NSS Exploring Economics 1 (2nd edition) © Pearson Education Asia

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Question code: B1C06Q048

NSS Exploring Economics 1 (2nd edition) © Pearson Education Asia

Question code: B1C06Q050 Price ($) 1 2 3 4 5 6

NSS Exploring Economics 1 (2nd edition) © Pearson Education Asia

NSS Exploring Economics 1 (2nd edition) © Pearson Education Asia

NSS Exploring Economics 1 (2nd edition) © Pearson Education Asia

Question code: B1C06Q058

NSS Exploring Economics 1 (2nd edition) © Pearson Education Asia

S What of the following is correct?

0 Quantity Question code: B1C06Q061

NSS Exploring Economics 1 (2nd edition) © Pearson Education Asia

NSS Exploring Economics 1 (2nd edition) © Pearson Education Asia

Which of the following statements is correct? C. P ($) D. P ($)

NSS Exploring Economics 1 (2nd edition) © Pearson Education Asia

C. P ($) Private Cars D. P ($) Locally produced diesel

NSS Exploring Economics 1 (2nd edition) © Pearson Education Asia

NSS Exploring Economics 1 (2nd edition) © Pearson Education Asia

NSS Exploring Economics 1 (2nd edition) © Pearson Education Asia

NSS Exploring Economics 1 (2nd edition) © Pearson Education Asia

NSS Exploring Economics 1 (2nd edition) © Pearson Education Asia

NSS Exploring Economics 1 (2nd edition) © Pearson Education Asia

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