Short Question: Choice of Prospects

Question:

‘Peter graduated from the University of Hong Kong and is considering the next step in his life. He has several options and his order of preference is as follows:

First option:     to work in Hong Kong

Second option:   to work in Guangdong-Hong-Kong-Macao Greater Bay Area

Third option:     to further study at university

Explain whether Peter\s opportunity cost of choosing to work in Hong Kong will necessarily remain unchanged

(a) if the Hong Kong government offers wage subsidy to those who are working in Guangdong-Hong-Kong-Macao Greater Bay Area. (2 marks)

(b) If, with the policy stated in (a), the university also grants a scholarship to Peter if he further study at university. (3 marks)

Answer:

(a)   No, it raises the net value of working in Greater Bay Area which is the highestvalued option forgone. The cost rises. (2)

(b)   No, the net value of furthering study at university increases. If the scholarship is greater than the wage subsidy offered in the second choice, the third option may become the highest valued option forgone. The cost may increase. (3)