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Suggested Answers
1
S6 Economics Revision Ex: Market Failure
1. What is Coase Theorem?
2. Radio broadcast is a public good. What are the problems in its pricing? What are the ways to
overcome the problems so that it can be provided privately? Is the situation efficient?
3. “To achieve consumption efficiency, a private good should be consumed by the individual with the
highest MUV, while a public good should be consumed by all individuals with positive MUVs.”
Comment.
4. “The existence of deadweight loss implies inefficiency.” Comment.
5. Before 1991, there were two routes that drivers might take to travel from Shatin to Kowloon: the Lion
Rock Tunnel and the Tai Po Road. Suggest how drivers determined which route to use.
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2
S6 Econ. Rev. Ex. (21st May, 2008)
1. Distinguish among the following terms: free good, land (gift of nature), and common property.
2. “Tax is by nature inefficient.” Do you agree? Explain your answer.
3. A city has imposed rent control on residential housing for many years. The new city government then
relaxes the control. Rents shoot up but the quantity of rented flats increases. Is it contradictory to the
law of demand? Explain your answer with the aid of a diagram.
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3
S6 Econ Rev. Ex. (23rd May, 2008)
1. (B1, HKAL 2002)
2. (C8, HKAL 2001)
3. (C7, HKAL 1998)
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5
S6 Econ. Rev. Ex. IV
1. (B1, HKAL 2006)
2. (B2, HKAL 2006)
3. (B3, HKAL 2006)
4. (B4, HKAL 2006)
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7
S6 Econ. Rev. Ex. V
1. (B3, HKAL 2007)
2. (B6, HKAL 2007)
3. (B1, HKAL 2007)
4. (B2, HKAL 2007)
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9
S6 Econ. Rev. Ex. VI
1(a)-1(c). (C7, HKAL 2007)
10
S6 Econ. Rev. Ex. VII
1. (C8, HKAL 2006)
2. (C8(b), HKAL 2005)
3. (C8(c), HKAL 2005)
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