RRMA FOR TEACHERS’ USE ONLY yas, Please note that the answers suggested in the marking scheme are not necessarily the only possible answers to the questions. All well-reasoned alternative answers are acceptable. Section A 1 Cost 4 +: value of the noodle + / value of the highest-valued alternative | 3 2. = afallindemand 1 = a fall in supply 1 + As the fall in demand was equal to the fallin supply, the price remained the same. 1 Unit price Quantity 3. (Company A is using) time rate and (Company B is using) piece rate. Ie Time rate : to avoid the disadvantage of using piece rate under which workers may forego quality for quantity / to maintain a steady supply of workers within a time period / no need to ‘measure the output for determining the wage payment / any other relevant point {Mark the FIRST POINT only.] Piece rate : to improve the incentive to produce more or to increase productivity of workers / to save the monitoring cost of workers / less rigid to adjust the total production cost : extra workers ean be employed or dismissed according to the business volume / any other relevant point 2 [Mark the FIRST POINT only.} 4. Advantage : no interest burden / no redemption obligation 2 {Mark the FIRST POINT only.] Disadvantage : easier to be taken over 2 [Mark the FIRST POINT only.) 5. MI = currency in the hands of the non-bank public + demand deposits 2 M2 = MI + savings deposits + time deposits held with banks + negotiable Certificates of Deposit. issued by banks held outside the monetary sector 2 6 (a) $10.00 + $10 000 x (1 ~25%) 2 = $17 500 2 (©) Not included. «> this $10 000 is not the value of a service, 2 7. (a) Not included. ~ charity donation is not a production 2 (b) Included, 2 + itis in exchange for certain service rendered in the current year. 99.CE ECON 1-9° ARAMA FOR TEACHERS’ USE ONLY yuu; 8. Taxtoincome ratio average tax rates are; 51000 5 T oseq; $2700 $1000 520000 ‘330000 oR 2 marginal tax rates are: 819007 $1000__ gp, _$2700-$1900_. go, '$20000-$10000 '530000-$20000 ‘The conclusion is : Not a progressive tax. .+ the marginal tax rate decreases/the average tax rate decreasesithe tax amount increases less proportionately than the taxable income. oR 3 +s the marginal tax rate does not increase / the average tax rate does not increase / the tax amount does not increase more proportionately than the taxable income. max: 2 Effective communication for Section A Total 40 99-CE ECON 1-10ARAME FOR TEACHERS’ USE ONLY suas Section B 9. (a) France has a higher cost of cars production relative to that of Japan « France's opportunity cost of producing one unit of cars is 2 ( 4/2) units of red wine 1 Japan's opportunity cost of producing one unit of cars is 1/2 (= 1/2) units of red ‘wine. / France's import price of one unit of eas is 1.5 (~ 3/2) units of red wine 1 France should import cars ftom Japan. 1 France's gain 2 units of red wine ~ 1.5 units of red wine = 0.5 units of red wine 3 O Unit price * 3 ° = > Q#Q Quantity of French cars “The devaluation => price (in HKS) of Japanese cars 4 1 Japanese cars and French cars are substitutes 1 demand for French ears 4 1 both the equilibrium price and quantity of French cars | Wl = sales revenue of French cars 4 (From OP,E,Q, to OPiE,Q;) 1 (©) (i) Value-added approach {230 + 60 ~ 100] + ${(350 ~ 230) + (160 ~ 60)] 2 = S410 1 (ii) Expenditure approach $1350} + ${160} ~ ${100] 2 = 3410 1 (4) - many buyers 2 anumber of sellers / few dominating firms + interdependency = free entry and exit . ~ differentiated products 1@, max.:2 + imperfect information = non-price competition = any other relevant point [Mark the FIRST TWO points only.] max:2 Effective communication 99-CE ECON I-11