Hkcee 2010 Econ Paper 2 Q2

Firms can enter or leave the industry easily in the long run.

Negative externalities of production occur when a firm’s output imposes uncompensated costs on third parties. In the case given, the factory’s pollution harms local residents, so private marginal cost (MPC) underestimates marginal social cost (MSC = MPC + marginal external cost). The unregulated market equilibrium is where MPC equals marginal private benefit (MPB), producing Q_market which exceeds the socially optimal Q_social determined by MSC = MSB. This overproduction causes a deadweight loss equal to the triangular area between MSC and MPC from Q_social to Q_market.

Provide a specific example (e.g., property prices/rents rising). State that the opportunity cost remains unchanged. Explain that dividends are part of the option, not the

When constructing an answer for Paper 2, precision in language ensures maximum marks. Scenario Example: A Shift in Alternatives hkcee 2010 econ paper 2 q2

Public exams love to ask: "If the value of the unchosen option changes, how does the opportunity cost change?" Remember, if the value of your second-best choice rises, your opportunity cost . If the value of a third-best choice changes, your opportunity cost remains unchanged . Direct Comparison: Cost Classifications

Which would you like?

For Question 2 of the 2010 HKCEE Economics Paper 2, students were likely asked to demonstrate their understanding of economic concepts and apply them to real-life scenarios. Firms can enter or leave the industry easily in the long run

once paid; they do not change the value of the next best alternative (the rent you could receive) in the context of current decision-making. Incorrect Option (C): An increase in business profit reflects the return on your activity, not the value of the alternative you gave up. Further Exploration Access a comprehensive compilation of past answers from to verify year-by-year trends.

: Determine which is the "highest-valued" and which is the "second-highest-valued" (the next best alternative).

Claiming a gift or free ticket carries zero opportunity cost. The unregulated market equilibrium is where MPC equals

When a change occurs (e.g., a ticket price rise), ask yourself: Does this change affect the value of the forgone option? Does it change the explicit cost of the chosen option? Common Pitfalls and Misconceptions

For further practice, you can find compiled past paper answers from 1990-2018 at A1 Education or specialized topic guides on AfterSchool . HKCEE Economics Answers 1990-2008 | PDF - Scribd

Paper 2 was the multiple-choice paper. Question 2 was thus one of 40 MCQs, testing a specific economics concept. The question would have provided four options (A, B, C, D), with only one correct answer.

(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?