mock exam (for practice only) - carleton university€¦ · the purpose of this mock exam is to...

NAME: Emily Van Hoeve COURSE: ECON 1001 C

MOCK EXAM (FOR PRACTICE ONLY)

It is most beneficial to you to write this mock midterm UNDER EXAM CONDITIONS. This means:

• Complete the midterm in 2 1/2 hours. • 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: Monday, December 9th 4pm-6pm in ME 3269

Tuesday, December 10th 2pm-4pm in ME 3269



PART1:MULTIPLECHOICE

1. Whichpoliticalphilosophyarguesthatthegovernmentshouldchoosepoliciesthatwillmaximizethetotalsatisfactionofeveryoneinsociety?

a. Utilitarianismb. Liberalismc. Libertarianismd. Marxism

2. Whichofthefollowingisacommonlyusedmeasureofinequalitythatcalculatestheextenttowhichthedistributionofincomeamongindividualswithinacountrydeviatesfromaperfectlyequaldistribution?

a. LafferCurveb. TheilIndexc. GiniCoefficientd. EquityCoefficient

3. UnderwhatcircumstancecantheTragedyoftheCommonsoccur?a. Whenagoodisbothexcludableandrivalinconsumptionb. Whenagoodisneitherexcludableorrivalinconsumptionc. Whenagoodisexcludable,butnotrivalinconsumptiond. Whenagoodisrivalinconsumption,butnotexcludable

4. Nationaldefenceisanexampleofwhichtypeofgood?a. PrivateGoodb. PublicGoodc. CommonResourced. ClubGood



5. Whatwillhappentotheequilibriumpriceandquantityoficecreamconesifthepriceoffrozenyogurt(asubstitute)decreasesandanew,muchmoreefficient,icecreammachinegetsinvented.

a. Boththeequilibriumpriceandquantityincreaseb. Theequilibriumpricedecreasesandthequantityincreasesc. Theequilibriumpricedecreasesandtheeffectonquantityisambiguousd. Theequilibriumquantitydecreasesandtheeffectonpriceisambiguous

6. SupposethatittakesCanadianworkers2,000hoursoflabourtoproduceacarand500hoursoflabourtoproduceaTV.IntheUSittakesworkers1,500hoursoflabourtoproduceacarand200hoursoflabourtoproduceaTV.Whatwillthesenationstrade?

a. TheUSwillexportcarsandCanadawillexportTVsb. TheUSwillexportTVsandCanadawillexportcarsc. TheUSwillexportbothcarsandTVsd. Therearenogainsfromtradeinthissituation

7. Accordingtothegraphabove,whatisthefarmer’sopportunitycostofproducingakilogramofpotatoes?

a. 4kgofmeatb. 2kgofmeatc. 1/2kgofmeatd. 1/4kgofmeat



8. Acompanyhasanopenpositionandreceivesresumesfromtwoapplicants.Theydecidetocallintheapplicantwhohasahigherlevelofeducationlistedontheirresume.Whichofthefollowingequilibriumwagedeterminantswouldthisscenariobecharacterizedas?

a. HumanCapitalb. Educationasasignalc. TheSuperstarPhenomenond. CompensatingDifferentials

9. SupposethemarketdemandscheduleforconcertticketsisQD=250–5PandthemarketsupplyscheduleisQS=40+2P.Whichofthefollowingpriceswouldconstituteabindingpriceceiling?

a. $25b. $30c. $35d. $40

10. Whichofthefollowingisanexampleofapositiveexternality?a. WalterwashesJodie’scarandispaid$50fortheserviceb. Whilewashingthecar,thefumesfromthedetergentgiveJodie’sneighboura

headachec. Jodie’scleancarsittinginherdriveway,makesherneighbourhoodmore

attractived. Jodie’sneighbourspayherifshepromisestokeephercarcleanonaregular

basis.

11. Ifthepriceelasticityofdemandforagoodis2,whatwouldresultfroma10%increaseinthepriceofthegood?

a. 20percentdecreaseinquantitydemandedb. 16percentdecreaseinquantitydemandedc. 20percentincreaseinquantitydemandedd. 16percentincreaseinquantitydemanded



12. Inthelastyear,thepriceofchickenstayedthesame,butthequantitydemandedincreasefrom80to100.Atthesametime,thepriceofbeefincreasedfrom$15to$20andthequantitydemandeddecreasedfrom150-100.Whichofthefollowingistrueaboutchickenandbeef?

a. Theyarecomplementsandhaveacross-priceelasticityof0.5b. Theyaresubstitutesandhaveacross-priceelasticityof0.7c. Theyarecomplementsandhaveacross-priceelasticityof0.7d. Theyaresubstitutesandhaveacross-priceelasticityof0.5

13. Ifthedemandforagoodismoreinelastic,whowillbearmoreoftheburdenifthisgoodistaxed?

a. Producersb. Consumersc. Theywillsharetheburdenequallyd. Neitherproducersnorconsumerswillbeburdened

14. Fredvalueshistimeat$50anhour.Hespends2hoursdoingFrank’staxes.Frankwaswillingtopayasmuchas$200forsomeonetodohistaxesforhim,buttheynegotiateapriceof$180.Whichofthefollowingistrueofthistransaction?

a. Consumersurplusis$20largerthanproducersurplusb. Consumersurplusis$60largerthanproducersurplusc. Producersurplusis$20largerthanconsumersurplusd. Producersurplusis$60largerthanconsumersurplus

15. Whatdoestheareaabovetheequilibriumpriceandbelowthedemandcurverepresent?

a. ProducerSurplusb. TaxRevenuec. DeadweightLossd. ConsumerSurplus



16. “Thecostofsomethingiswhatyougiveuptogetit”isthedefinitionofwhichofthefollowingkeyconceptsineconomics?

a. Scarcityb. Efficiencyc. OpportunityCostd. Productivity

17. Ifthegovernmentrequireseveryonetopay$10,000intaxeachyear,whichofthefollowingtypesoftaxwouldthisbe?

a. ProgressiveTaxb. ProportionalTaxc. Lump-SumTaxd. RegressiveTax

18. Whichofthefollowingistrueaboutalabourmarketwithabindingminimumwage?a. Therewillbeasurplusoflaboursupply,resultinginunemploymentb. Therewillbeashortageoflaboursupplyresultinginnotenoughworkersc. Therewillbeasurplusoflabourdemandresultinginunemploymentd. Therewillbeashortageoflabourdemandresultinginnotenoughworkers

19. TheLaffercurveillustratesthatifthegovernmentreducesalargetaxonagood,itmaybeabletoincreasewhichofthefollowing?

a. TaxRevenueb. ProducerSurplusc. DeadweightLossd. EquilibriumQuantity

20. Whatisatariff?a. Arestrictiononthequantityofimportsb. Ataxonimportsc. Arestrictiononthequantityofexportsd. Ataxonexports



21. Onthegraphabove,whicharearepresentstaxrevenue?a. A+B+D+Fb. C+Ec. B+Dd. B+D+C+E

22. Trevor’sbandpracticesinhisapartmenteveryothernightandtheloudmusicbothershisneighbourHelen.TrevoragreestopracticeduringthedaywhenHelenisatworkinsteadofatnight.Whichofthefollowing,explainsthissolutiontothenegativeexternalityofTrevor’sband’sloudmusic?

a. GovernmentRegulationb. Subsidiesc. TheCoaseTheoremd. TradablePermits

23. Whatisitcalledwhenagroupoffirmsactinunisontomaximizetheirprofits?a. Acartelb. Acooperativec. Nashcompaniesd. Anoligopoly



24. InSaudiArabia,thedomesticpriceofoilis$300USDpertonandtheworldpriceis$400USDperton.Whichofthefollowingistrue?

a. TherewillbeashortageandSaudiArabiawillimportoilb. TherewillbeashortageandSaudiArabiawillexportoilc. TherewillbeasurplusandSaudiArabiawillimportoild. TherewillbeasurplusandSaudiArabiawillexportoil

25. Robertearns$90,000ayear.Hisaveragetaxrateis30percent.Hepaid25percentintaxesonthefirst50,000heearned.WhatwasthemarginaltaxrateontherestofRobert’sincome?

a. 30percentb. 15percentc. 36percentd. 24percent

26. Whichofthefollowingisanexampleofafixedcostforamilkshakeshop?a. Icecreamb. Wagesc. Rentd. Theshophasnofixedcosts

27. Whichofthefollowingistrueforamonopolisticallycompetitivefirminthelongrun?

a. P=MR,MC=MR,P=ATCb. P<MR,MC>MR,P>ATCc. P>MR,MC=MR,P>ATCd. P>MR,MC=MR,P=ATC

28. Whichofthefollowingisnottrueaboutanyfirm’scostcurves?a. Averagetotalcostisu-shapedb. Marginalcostcrossesaveragetotalcostatitshighestpointc. Marginalcostisincreasingd. Profitmaximizationoccurswheremarginalcostintersectswithmarginal

revenue



29. Sharonquitherjobasahairdressertoopenherownbakery.WhichofthefollowingwouldbeanimplicitcostforSharon?

a. Wagesforheremployeesatthebakeryb. Rentforthebuildingspacewheresheopensthebakeryc. Interestshepaysonaloanshetookoutfromthebanktoopenthebakeryd. Theincomeshewasmakingasahairdresserthatsheforgoestoopenthe

bakery

30. IfthepriceofthegoodtheyproducefallsbelowtheirATC,whatwillafirminacompetitivemarketdointheshortrunvsthelongrun?

a. Theywillshutdownintheshortrun,anticipatingthepricetorisebackupaboveATC,andexitthemarketinthelongrun

b. Theywillcontinuetoproduceintheshortrunandexitthemarketinthelongrun

c. Theywillcontinuetoproduceintheshortrunandthelongrund. Theywillexitthemarketintheshortrunandthelongrun

31. Whichofthefollowingisnottrueforamonopolisticallycompetitivefirm?a. MC=MRisthepointofprofitmaximizationb. Thereareeconomicprofitsinthelongrunc. Thereisamarkupabovetheequilibriumpriced. Priceisabovemarginalrevenue

32. Whatisabsoluteadvantagebasedon?a. OpportunityCostsb. Productivityc. Labourcostsd. Equity

33. Whatwillhappeniffirmsinacompetitivemarketaremakingpositiveprofits?a. Somefirmswillexitthemarketb. Thepricewillincreasec. Thequantityproducedwilldecreased. Somenewfirmswillenterthemarket



34. SupposeSwarovskiwastheonlyfirminthemarketfordiamondjewelrybecausetheyhadcontroloveralldiamondproduction.WhattypeofmonopolywouldSwarovskibeinthissituation?

a. Agovernment-createdmonopolyb. Anaturalmonopolyc. Acompetitivemonopolyd. Resourcemonopoly

35. Accordingtothegraphabovewhatisthismonopoly’sprofitwithoutpricediscrimination?Ifthismonopolycouldperfectlypricediscriminate,whatwouldtheirprofitbe?

a. $2400withoutand$3100withperfectpricediscriminationb. $800withoutand$1200withperfectpricediscriminationc. $800withoutand$1500withperfectpricediscriminationd. $2400withoutand$2800withperfectpricediscrimination

36. Whichofthefollowingisanexampleofaninferiorgood?a. Waterb. Diamondearringsc. No-namebrandfoodsd. Aprivatejet



37. InPrisoner’sdilemmascenarioabove,whatistheNashequilibrium?a. BothJohnnyandFrankieconfess,leavingthemwith3yearsinprisonb. NeitherJohnnynorFrankieconfess,leavingthemwith2yearsinprisonc. Johnnyconfesses,leavinghimwith1yearandFrankiedoesn’tconfess,

leavinghimwith6yearsinprisond. Johnnydoesn’tconfess,leavinghimwith6yearsinprisonandFrankie

confesses,leavinghimwith1yearinprison

38. Underwhatcircumstancecanacountryoperateoutsideofitsproductionpossibilitiesfrontier(PPF)?

a. Whentheyallocatetheirresourcesefficientlyb. Whentheytradewithanothercountryc. Whentheydiscoveranewproductivityenhancingtechnologyd. ItisimpossibleforacountrytooperateoutsideofitsPPF

39. Wheneachadditionalworkerthatafirmhirescontributesprogressivelysmalleramountsofinput,thefirmisexperiencingwhichofthefollowing?

a. Constantreturnstoscaleb. Diminishingmarginalproductc. Decreasingaveragetotalcostsd. Increasingmarginalprofitability



40. WhatwouldhappentotheequilibriumwageandquantityinthelabourmarketforCanadianapplesiftheoutputpriceofapplesincreasedandmanyrecentimmigrantstoCanadabecameapplepickers?

a. Thequantityofapplesincreasesandthewageforapplepickersdecreasesb. Thequantityofapplesisambiguousandthewageforapplepickersincreasesc. Thequantityofapplesincreasesandthewageforapplepickersisambiguousd. Thequantityofapplesdecreaseandthewageforapplepickersincreases

PART2:SHORTANSWER

1. Themarketforsoftdrinksisaduopolywithtwocompanies,CokeandPepsi.IfbothCokeandPepsichargeahighpriceforsoda,theywilleachearn$500millioninprofits.Iftheybothchargealowpricetheywilleachearn$200millioninprofit.Ifonecompanychargesahighpriceandtheotherchargesalowprice,thecompanywithahighpricewillearn$800millioninprofitandtheonewiththelowpricewillearn$100million.

a. DrawadecisionboxforCokeandPepsianddetermineeachcompany’sdominantstrategy.

b. WhatisaNashequilibrium?IsthereaNashequilibriuminthemarketforsoftdrinks?

c. IsitpossibleforCokeandPepsitoreachtheoptimaloutcomeandmaximizetheirjointprofit?Ifso,explainhow.

2. Anincreaseinthedemandforcoffee,causesthepriceofcoffeetorise.Drawagraphshowinghowthiswillaffectthemarketforbaristas.Explainwhathappenstothebaristas’employment,wagesandmarginalproductoflabour.Doesthisanswerdependontheelasticityofbaristas’laboursupply?

3. In2016,thefederalgovernmentannounceditwouldbeintroducingataxonthepurchaseofsingle-useplasticbags.

a. Showonagraphtheinitialandpost-tacpricetoproducersandconsumers,changesinconsumersurplus,producersurplus,taxrevenue,andthedeadweightlossresultingfromthetax

b. Howwouldtheimpactofthetaxchangeifthedemandforplasticbagswasinelastic?



4. Drawagraphdepictingtheprice,quantity,marginalcost,marginalrevenueandaveragetotalcostforamonopolisticallycompetitivefirminthelongrun

a. Isthisfirmmakingprofits?Whyorwhynot?b. Describetwowaysinwhichthisfirmissimilartoamonopoly.c. Describetwowaysinwhichthisfirmissimilartoperfectlycompetitivefirm.

5. Supposethepriceoft-shirtsintheUnitedStatesis$20andtheworldpriceoft-shirtsis$15.

a. Usingadiagram,explainwhethertheUnitedStateswillexperienceasurplusorshortageoft-shirtswhentheyopentheirtextilemarkettointernationaltrade.Willtheyimportorexportt-shirts?

b. SupposetheUSgovernmentimposesatariffonimportsoft-shirts.Howwillthisaffectimportsandtheproducerandconsumersurplusforthet-shirtmarket?

mock exam (for practice only) - carleton university€¦ · the purpose of this mock exam is to...

Documents