Hkcee 2010 Econ Paper 2 Q2 -

: If you have options A, B, and C, and you choose A, your opportunity cost is not B plus C. It is whichever option (B or C) had the higher value to you.

The marking scheme for this question would have assessed the candidate's ability to:

PS = area below price and above supply. [ PS_free = \frac12 \times (68 - 20) \times 16 = \frac12 \times 48 \times 16 = 384 ] Total surplus = ( 256 + 384 = 640 ). hkcee 2010 econ paper 2 q2

In this article, we will:

: Never add the values of your alternative options together. If a scenario lists three alternative jobs, the opportunity cost is only the single best job left behind. : If you have options A, B, and

A subtle follow-up sometimes implied in Q2(c) is:

Area under supply from 0 to 10: Supply P=20+3Q, integral = ( 20Q + 1.5Q^2 ) evaluated 0 to 10 = ( 200 + 150 = 350 ). Revenue = ( 80 \times 10 = 800 ). So PS_new = ( 800 - 350 = 450 ). [ PS_free = \frac12 \times (68 - 20)

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Discuss whether the price floor at $80 improves social welfare.