ECON 1001 B. Come to the PASS workshop with your mock exam complete. During the workshop you can work with other students to review your work.

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1 It is most beneficial to you to write this mock midterm UNDER EXAM CONDITIONS. This means: Complete the midterm in _1.5 hour(s). Work on your own. Keep your notes and textbook closed. Attempt every question. After the time limit, go back over your work with a different colour or on a separate piece of paper and try to do the questions you are unsure of. Record your ideas in the margins to remind yourself of what you were thinking when you take it up at PASS. The purpose of this mock exam is to give you practice answering questions in a timed setting and to help you to gauge which aspects of the course content you know well and which are in need of further development and review. Use this mock exam as a learning tool in preparing for the actual exam. Please note: Come to the PASS workshop with your mock exam complete. During the workshop you can work with other students to review your work. Often, there is not enough time to review the entire exam in the PASS workshop. Decide which questions you most want to review the Facilitator may ask students to vote on which questions they want to discuss in detail. Facilitators do not bring copies of the mock exam to the session. Please print out and complete the exam before you attend. Facilitators do not produce or distribute an answer key for mock exams. Facilitators help students to work together to compare and assess the answers they have. If you are not able to attend the PASS workshop, you can work alone or with others in the class. Good Luck writing the Mock Exam!! Dates and locations of mock exam take-up: Friday, November 9 4-6pm Southam 316 & Saturday, November pm Southam 615

2 1. Welfare economics is the study of a) The allocation of resources and how it affects economic well-being b) Government assistance programs c) The consumer s optimal choice on the demand curve d) Subsidies and taxes 2. A consumer s willingness to pay is a) The cost of the good to the buyer b) Consumer surplus c) The amount that the buyer values a certain good d) The external effects-like advertising which have affected consumer preferences 3. As a result of a decrease in price, a) New buyers enter the market, increasing consumer surplus b) New buyers enter the market, decreasing consumer surplus c) Existing buyers exit the market, increasing consumer surplus d) Existing buyers exit the market, decreasing consumer surplus 4. Refer the table below. At the equilibrium price, consumer surplus is a) $480 b) $640 c) $1120 d) $1280

3 5. This table refers to five possible buyer s willingness to pay for a bottle of Sprite Buyer Willingness to Pay Kadejah $8.50 Simran $7.00 Juan $5.50 Anya $4.00 Aman $3.50 Reference the table above. If the price of one bottle of Sprite is $6.90, who will purchase the good? a) All five people b) Juan, Anya, and Aman c) Kadejah, Simran, and Juan d) Kadejah and Simran 6. This table represents the costs of five possible sellers Seller Cost Nicole $1500 Graham $1200 Meet $1000 Tylo $750 Nastasija $500 Reference the table above. If the market price is $1000, the producer surplus would be a) $700 b) $750 c) $2250 d) $ The burden of per unit tax falls more heavily on consumers when a) Both demand and supply are relatively elastic b) Both demand and supply are relatively inelastic c) The demand is relatively inelastic and the supply is relatively elastic d) The demand is relatively elastic and the supply is relatively inelastic

4 8. When is the deadweight loss of a tax large? a) When supply is relatively inelastic b) When demand is relatively elastic c) When supply is relatively elastic d) Both b + c 9. Refer to the graph below. Which one of the following will be the deadweight loss from the tax? a) $150 b) $100 c) $80 d) $ Refer to the graph below. After the tax, consumer surplus is a) Output will increase from 40 to 80 b) Output will increase from 80 to 90 c) Output will decrease from 80 to 40 d) Output will decrease from 90 to Reference the table below. After tax, the consumer surplus is

5 a) A + B + D + F b) B + D c) F d) A 12. Refer to the table above. After tax, the producer surplus is a) A + B + D + F b) B + D c) F d) A 13. The term gains from trade implies that a) International trade leads to an increase in output b) International trade leads to an increase in government revenue c) International trade leads to gains for everyone d) International trade leads to an increase in exports and a decrease in imports 14. For any country, if the world price of apples is higher than the domestic price of apples, that country should a) Export apples, since that country has a comparative advantage in apples b) Import apple, since that country has a comparative advantage in apples c) Not trade apples, since that country cannot gain from trade d) Not trade, since they already produce apple 15. Reference the graph above. What does E represent? a) The dead weight loss from under consumption as a result of tariff b) Gain in welfare of domestic producers as a result of tariff c) Gain in welfare of domestic consumers as a result of tariff

6 d) Government revenue as a result of tariff 16. Refer to the graph above. What does F represent? a) Government revenue as a result of tariff b) The dead weight loss from under consumption as a result of tariff c) Gain in welfare of domestic producers as a result of tariff d) Gain in welfare of domestic consumers as a result of tariff 17. Reference the table below. According to the graph, the increase in total surplus resulting from trade is a) $60, since producer surplus increases by $180 and consumer surplus falls by $240 b) $60, since consumer surplus increases by $180 and producer surplus falls by $240 c) $75, since producer surplus increases by $240 and consumer surplus falls by $165 d) $75, since consumer surplus increases by $240 and producer surplus falls by $ Reference the graph above. According to the graph, the price and domestic quantity demanded after trade would be a) $8 and 300 b) $8 and 900

7 c) $14 and 900 d) $14 and Which one of the following arguments for restricting trade applies to the Canadian government setting up a national policy which protect a new Canadian manufacturing sector from foreign competition? a) The unfair-competition argument b) The national-security argument c) The jobs argument d) The infant-industry argument 20. An externality is the impact of a) Society s decision on the well-being of society b) Society s decisions on the well-being of a bystander c) One person s actions on the well-being of a bystander d) One person s impact on another person s well-being 21. Research into new technologies a) Provides positive externalities because it creates knowledge others can use b) Results in negative externalities because gov. funding causes less gov. funding spent in other areas c) Causes too many resources to be used for the small benefits received d) Should only be funded by the corporations which receive profits from research 22. When a positive externality is present a) The private value curve (demand) is below the social value curve for a product b) The social cost curve is above the private cost curve (supply) of a product c) The private value curve (demand) is above the social value curve for a product d) The social cost curve is below the private cost curve (supply) of a product 23. The Case Theorem implies that private parties can solve externality problems independently if a) They can bargain over the allocation of resources by methods of payment b) They can bargain over the allocation of resources without cost c) The government is involved d) They ignore all costs to third parties 24. A corrective / Pigouvian tax is a) Two different taxes b) Set to equal to the external cost of pollution in order to internalize the negative externality c) Set to equal to the external cost of pollution in order to internalize the positive externality d) A tax applied on imported goods 25. Which of the following statements can be applied to public goods

8 a) They have no production costs b) They are overproduced by the market c) They tend to be overconsumed by society d) They can be consumed by additional people without additional cost once they are produced 26. When a good is excludable it means that a) No more than one person can use the good simultaneously b) People can be prevented from using the good c) Everyone will be excluded from obtaining the good d) One person s use of the good diminishes another person s ability to use it 27. Common resources are both a) Rival and nonexcludable b) Rival and excludable c) Non rival and excludable d) Non rival and nonexcludable 28. The Tragedy of the Commons a) Occurs most often with public goods b) Is eliminated with property rights c) Occurs when social and private incentives line up with one another d) Is when a club good becomes rival in consumption 29. The free-rider problem exists for any goods that are not a) rival b) a private good c) free d) excludable 30. Which of the following statements explains the reason deadweight losses occur? a) Taxes distort behavior b) Inevitably, all government programs cause inefficiency c) Payment of taxes causes a reduction in standard of living d) Tax causes inequities 31. A person is required to pay $ of their $ income. What is their average tax rate? a) 400% b) 25% c) 4% d) If you are rich and want to stay rich, which tax will you be most in favour of? a) Regressive tax b) Progressive tax c) Proportional tax

9 d) Corrective tax 33. Suppose Sally s average tax rate is 25% and the marginal tax rate in 40%. If the person receives an additional $100 of income, which one of the following would be the amount of the implied additional tax payment? a) $10 b) $25 c) $40 d) $ A lump-sum tax is defined as a) A tax that is the same $ amount for every person b) A tax that is the same % amount for every person c) A tax for which high-income taxpayers pay a smaller fraction of their income than do lowincome taxpayers d) A tax for which high-income taxpayers pay a larger fraction of their income than do lowincome taxpayers 35. Which one of the following is associated with vertical equity and horizontal equity? a) The benefits principle of taxation b) The ability-to-pay principle of taxation c) Falling marginal tax rates d) Rising marginal tax rates