Question 2 typically presented a demand and supply schedule (or functions) for a good, say Good X. The market was initially in equilibrium. The government then imposed either:
Hypothetical Data (consistent with 2010 standard):
| Price ($) | Quantity Demanded (units) | Quantity Supplied (units) | |-----------|---------------------------|---------------------------| | 2 | 120 | 40 | | 4 | 100 | 60 | | 6 | 80 (Equilibrium) | 80 (Equilibrium) | | 8 | 60 | 100 | | 10 | 40 | 120 |
The intervention: Government imposes a maximum price (price ceiling) at $4.
| Item | Free Market | Price Floor at $80 | Change | |------|-------------|-------------------|--------| | Price | $68 | $80 | +$12 | | Quantity traded | 16 | 10 | -6 | | Consumer surplus | $256 | $100 | -$156 | | Producer surplus | $384 | $450 | +$66 | | Total surplus | $640 | $550 | -$90 (DWL) |
(a) With the aid of a diagram, explain the effects of a price ceiling set at $4 on: (i) market quantity, (ii) consumer surplus, (iii) producer surplus, and (iv) total social surplus. Is there a deadweight loss?
(b) Suppose instead of a price ceiling, the government imposes a specific tax of $2 per unit on producers. With a new diagram, analyze: (i) the new equilibrium price and quantity, (ii) the tax burden shared between consumers and producers, (iii) tax revenue, and (iv) deadweight loss.
The HKCEE examiner’s report highlighted frequent mistakes:
Try this twist: If the government instead sets a minimum price of $80 and agrees to buy the entire surplus at that price, recalculate producer surplus and government expenditure. Answer: Government buys 10 tonnes at $80 = $800 expenditure; PS then includes surplus sale, making PS = ( 450 + (80 \times 10) ) minus cost of producing extra 10 units? That yields even larger PS and huge taxpayer cost.
This extension is common in HKDSE Paper 2.
HKCEE 2010 Economics Paper 2 Question 2 is not just a test of memory; it is a test of economic reasoning. It forces students to move beyond reciting definitions and into the realm of applied welfare economics. A student who can solve Q2 confidently can tackle any first-year university microeconomics problem on price controls and taxation.
So, whether you are preparing for a retake, tutoring a struggling peer, or just revisiting the golden era of Hong Kong’s public exams, treat Q2 as a benchmark of excellence. Draw the diagrams. Calculate the surpluses. And always ask: “Who gains? Who loses? What is the net effect on society?”
Further practice: Try HKCEE 2009 Paper 2 Q3 (minimum wage) and HKCEE 2011 Paper 2 Q1 (subsidy) to complete your intervention arsenal.
Keywords: hkcee 2010 econ paper 2 q2, HKCEE Economics past papers, price ceiling specific tax, deadweight loss calculation, consumer surplus producer surplus, HKDSE Economics market intervention.
The correct answer for HKCEE 2010 Economics Paper 2 (Multiple Choice) Question 2 is Option D. Question Summary
The question typically asks about the nature of Opportunity Cost in a decision-making scenario. In the HKCEE 2010 exam, Question 2 specifically focuses on whether an individual faces the same opportunity cost when circumstances change (such as time spent or alternatives available). Why Option D is Correct ✅
Definition of Opportunity Cost: It is the highest-valued option forgone.
Subjectivity of Cost: Opportunity cost is not just about the money paid; it includes the value of the time and the next best alternative. Even if two people pay the same price for a ticket, their opportunity costs differ if their next best way to spend that time has different values. hkcee 2010 econ paper 2 q2
Variable Factors: If the value of the alternative choice changes (e.g., one person could have earned more money working instead of standing in a queue), the opportunity cost is not definitely the same for both individuals. Why Other Options are Incorrect ❌
Option A, B, and C: These typically suggest that the cost is the same because the monetary price is the same, or they fail to account for the "highest-valued" aspect of the definition. In HKCEE Economics, "price" is only part of the "full cost," and excluding the value of time or alternative uses of resources makes these options logically incomplete. Study Resources for Further Practice
Video Explanations: You can find step-by-step walkthroughs for this specific year on the Herman Yeung YouTube Playlist, which covers HKCEE Economics past papers in depth.
Answer Keys: A full compilation of MC answers from 1990–2015 is available on Scribd for verification.
to Question 2 of the 2010 HKCEE Economics Paper 2 is Question Analysis
While the specific text of the 2010 question is often guarded by copyright, it traditionally falls under the syllabus topic of Scarcity and Choice Opportunity Cost
. In the HKCEE curriculum, early Paper 2 questions (Q1–Q3) almost universally test these fundamental concepts. Key Economic Concepts Opportunity Cost:
This is defined as the value of the next best alternative foregone when a choice is made.
This condition exists because human wants are unlimited while resources are finite. It applies to both rich and poor societies.
Because of scarcity, individuals must make choices, which inevitably involves an opportunity cost. Common Distractors in Paper 2
In previous years (such as 2004), Question 2 also focused on Opportunity Cost
, often using distractors that candidates must carefully evaluate: Incorrect Logic: Claiming opportunity cost exists even when there are choices (false; cost requires an alternative). Incorrect Logic:
Claiming cost does not exist in a planned economy (false; resources are still scarce regardless of the economic system). Key Truth:
If the value of the highest-valued alternative changes, the opportunity cost changes accordingly. Preparation Resources
For further study on the 2010 paper and similar HKCEE materials, you can refer to the following: Answer Keys: Full compilations for 1990–2015 are available on Video Explanations: Educators like Herman Yeung provide detailed walkthroughs of HKCEE past papers. Topical Guides: Sites like Outliers Economics
categorize questions by topic to help identify which concept a specific question targets. remaining questions from the 2010 Paper 2 or a similar analysis for HKCEE Economics Answers 1990-2015 | PDF - Scribd
The correct answer to HKCEE 2010 Economics Paper 2 Question 2 is A. Question Analysis Question 2 typically presented a demand and supply
The question asks about the characteristics of a perfectly competitive firm.
Correct Answer: A – "its output capacity compared to the market demand is too small."
Reasoning: In a perfectly competitive market, each firm is a price taker. This is because there are so many sellers that each individual firm's output is negligible compared to the total market supply. Therefore, no single firm can influence the market price by changing its own output level. Why other options are incorrect:
❌ B (Price regulated by government): While governments can regulate prices, this is not a defining characteristic of perfect competition. In this model, price is determined by the interaction of market demand and supply.
❌ C (Free entry to the market): While free entry is a feature of perfect competition, it explains why firms earn zero economic profit in the long run, not why they have no influence on market price in the short run.
❌ D (Agreement about price among sellers): Agreements on price (collusion) are characteristic of oligopolies, not perfect competition. Perfectly competitive firms act independently. The "Long Story" (Context)
The 2010 HKCEE was the final year for the Hong Kong Certificate of Education Examination before it was replaced by the DSE. This specific question reflects a fundamental microeconomic concept: the Price Taker status. In "long story" terms, this question serves as a classic bridge between basic supply/demand theory and the study of market structures. Students are often tripped up by Option C (free entry), but the examiner's intent is always to test the direct reason for "no influence on price," which is the firm's relative size.
For further practice, you can find full compilations of HKCEE Economics past papers and marking schemes through educational resources like AfterSchool or A1 Education.
The HKCEE 2010 Economics Paper 2, Question 2 focuses on the core concept of opportunity cost in the context of investment choices. Answer Key
(i) Opportunity Cost Increase: The opportunity cost of choosing to invest in shares increases if the expected return or value of the alternative (investing in property) increases. For example, if property prices are expected to rise significantly, the cost of "forgoing" that gain becomes higher.
(ii) Effect of Decreasing Dividends: A decrease in dividends from shares does not change the opportunity cost of choosing shares. Opportunity cost is defined as the value of the next best alternative forgone, which in this case is the investment in property. Since the return on property remains unchanged, the opportunity cost remains the same. Step-by-Step Review 1. Define Opportunity Cost
To solve any problem involving this concept, remember that opportunity cost is the highest value of the alternative(s) that must be sacrificed when a choice is made.
Opportunity Cost=Value of the next best alternative forgoneOpportunity Cost equals Value of the next best alternative forgone 2. Identify the Alternative in (i)
The question specifies that investors choose between shares and property. Choice: Investment in shares.
Next Best Alternative: Investment in property.If the return on property (e.g., rental income or capital gains) increases, the sacrifice made to hold shares is greater. Thus, the opportunity cost of holding shares rises. 3. Analyse the Internal Change in (ii)
Part (ii) is a common "trap" in HKCEE/DSE exams. It asks if a change in the chosen option (shares) affects its own opportunity cost.
A decrease in dividends makes shares less attractive, but it does not change what you gave up to get them. Hypothetical Data (consistent with 2010 standard): | Price
The opportunity cost is the value of the property investment you didn't take. Since nothing changed regarding the property market, the opportunity cost remains constant. 4. Critical Exam Tip
Students often confuse "cost" with "net gain." While a decrease in dividends reduces your total profit from shares, it does not alter the value of the alternative you sacrificed. Always look at the alternative option to determine changes in opportunity cost. Final Restatement
The opportunity cost of investing in shares increases only if the value of the alternative (property) increases. It does not change if the return on shares (dividends) decreases, because the value of the forgone alternative remains the same.
HKCEE 2010 Econ Paper 2 Q2 Report
Introduction
The Hong Kong Certificate of Education Examination (HKCEE) is a public examination taken by students in Hong Kong at the end of their secondary education. In 2010, the Economics paper 2, question 2 (HKCEE 2010 Econ Paper 2 Q2) tested students' understanding of key economic concepts. This report provides an informative analysis of the question, its requirements, and the economic concepts involved.
Question 2: Externalities
HKCEE 2010 Econ Paper 2 Q2 presented a scenario related to externalities:
"With the increasing use of plastic bags, a government is considering introducing a tax on their use. Using examples, explain how a tax on plastic bags can help to internalize the external costs associated with their use."
Requirements
To answer this question, students were expected to:
Economic Concepts Involved
This question required students to demonstrate their understanding of:
Marking Scheme and Common Mistakes
The marking scheme for this question assessed students' ability to:
Common mistakes made by students included:
Conclusion
HKCEE 2010 Econ Paper 2 Q2 tested students' understanding of externalities, market failure, and the role of government intervention in correcting market failure. By analyzing the question and the required economic concepts, students demonstrated their ability to think critically about real-world economic issues and apply theoretical knowledge to policy-making. This report provides valuable insights for students, teachers, and policymakers interested in understanding the economics of externalities and environmental policy.