It is most beneficial to you to write this mock midterm UNDER EXAM CONDITIONS. This means: Complete the midterm in _2_(You are Given 2 ½ hours) 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: Sunday December 10 th, 2017 14:00 to 16:00 Mackenzie Building 3275 Tuesday December 12 th, 2017 13:30 to 15:30 Mackenzie Building 3275
PART 1: Multiple Choice 30 Questions 1. A lighthouse is an example of a? a. Club Good b. Private Good c. Public Good d. Common Resource 2. A good that is excludable, but not rival in consumption is an example of? a. Ice Cream b. Algonquin Park c. Highway 401 d. Ontario Provincial Police 3. From the list below, what does not shift the demand curve in the labour market? a. Output Price b. Technological Change c. Changes in Alternative Opportunities d. The Supply of other Factors 4. If W = P*MPL, what is another way to express this? a. P = MC b. P=VMPL c. P=MPL/W d. P=W 5. The demand curve is a perfectly competitive market is? a. Perfectly elastic because goods are not perfect substitutes b. Perfectly elastic because goods are perfect substitutes c. Perfectly inelastic because goods are perfect substitutes d. Perfectly inelastic because goods are perfect complements 6. In a perfectly competitive market a firm would shut down if? a. P<ATC b. P>AVC c. P<AVC d. P>ATC
7. A monopolies profit is equal to? a. Q (P - ATC) b. P (Q ATC) c. P (ATC Q) d. Q (ATC P) 8. Economies of scale is when? a. Average cost decreases while the quantity increases b. Average cost increase while the quantity increase c. Average cost decrease while quantity decreases d. Average cost decreases and price increases 9. In economics profit is maximized when economic profit is at zero, this is because of? a. Explicit Costs b. Implicit Costs c. Explicit and Implicit Costs d. Opportunity Cost 10. On average, the R-Factor measures? a. The percentage difference between income elasticity and Gini coefficient b. The percentage difference between the top fifth and bottom fifth of the income distribution c. The percentage difference between the Gini coefficient based on aftertax/transfers and the Gini coefficient based on market income d. The difference between the rate of return of capital relative to growth in the economy (i.e. r>g). 11. The entry of new firms in a monopolistic competitive market produces a for consumers. a. Positive business stealing externality b. Positive product variety externality c. Negative product variety externality d. Negative social cost externality
12. A defence for a firm advertising their product is? a. Firms advertise to manipulate people s tastes b. Firms advertise to impede healthy market competition c. Firms advertise to increase product differentiation and product loyalty d. Firms advertise to provide valuable information to their customers 13. The long-run equilibrium for a monopolistic competitive firm is at point? a. MR=MC, P>ATC b. MR=MC, P<AVC c. MR=MC, P=ATC d. MR=MC, AR = ATC 14. In a monopolistic market second degree price discrimination refers to the practice of? a. Charging different prices to consumers because of differences in elasticity of demand b. Charging different prices to consumers based on the quantity that is bought c. Charging different prices to consumers by exactly knowing each consumers willingness to pay d. Charging different prices to consumers based on inelasticity of demand 15. A 20 percent ad-valorem import tariff on an importing country for good X will in the domestic market for good X. a. Have a negative welfare effect and the government will lose revenue b. Have a positive welfare effect for consumers and the government will gain revenue c. Have a negative welfare effects and the government will gain revenue d. Have negligible welfare effects and the government will gain revenue 16. The marginal tax rate is 60 percent for income above $50,000, suppose the government tax rate is 20 percent on the first $50, 000. Suppose this person makes $60,000 annually. What is the amount of taxes paid and the average tax rate? a. $16, 000; 26.6 percent b. $60, 000; 26.6 percent c. $50,000; 26.6 percent d. $16,000; 20.6 percent
17. The Nash Equilibrium is best represented by? a. The dominate strategy b. Choose best strategy given what other actors have chosen c. Choose worst strategy given what other actors have chosen d. Collusion among firms 18. Section 45(1) of Canada s Competition Acts does not state that anyone conspires, combines, agrees or arranges with another person: is guilty of an indictable offence. a. To limit unduly facilities for transporting, producing, manufacturing, supplying, storing or dealing in any product b. To otherwise restrain or injure competition unduly c. To enter into collusion with another partner to increase competition d. To prevent, limit or lessen, unduly, the manufacture or production of a product to enhance the price 19. A competitive firm s marginal costs curve is representative of the firms? a. Demand Curve b. Average Revenue Curve c. Variable Cost Curve d. Supply Curve 20. Two policies towards managing externalities are? a. Corrective Taxes; Gasoline Tax b. Corrective Taxes; Stock Trading c. Corrective Taxes; Pollution Permits d. Corrective Taxes; Import Licence 21. The opportunity cost of good X in a PPF graph with good X on the horizontal axis and good Y on the vertical axis can be represented as? a. Y/X b. X/Y c. Comparative advantage d. Increasing opportunity cost
22. An increase in emigration would? a. Decrease labour supply and increase employment b. Decrease labour supply and decrease unemployment c. Increase labour supply and decrease employment d. Decrease labour supply and increase unemployment 23. Canada post is an example of a? a. Natural Monopoly b. Oligopoly c. Government created Monopoly d. Duopoly 24. The output effect is when? a. Q is higher and total revenue decreases b. Q is higher and total revenue marginally increases c. Q is higher and total revenue decreases in relation to price d. Q is lower and total revenue decreases 25. A key difference between a monopoly and competitive firm is? a. P=MR=MC; P=MR>MC b. P>MR=MC; P=MR=MC c. P<MR=MC; P=MR=MC d. (P-ATC)Q=π; P=(π/Q)+ATC 26. Economies of scale in an economy leads to? a. Coordination Problems b. Increased Costs c. Specialization d. Constant Average Costs 27. Relative to income the goods and services tax (GST), or a Value Added Tax (VAT), is representative of a? a. Proportional Tax b. Progressive Tax c. Lump-Sum Tax d. Regressive Tax
28. Coase theorem asserts that private parties is the best means to solve problems of externalities unless there are substantial? a. Efficiency Gains b. Transaction Costs c. Social Costs d. Efficiency Losses 29. Regulation is one way for the government to manage monopolies. One might conclude that by making the price equal to the monopoly marginal cost, through government regulation, total surplus would be maximized and resources would be allocate efficiently. An adverse effect of this policy is? a. Marginal cost would be below average total cost and firms would enter the market. b. Marginal cost would be below average total cost and firms would shutdown. c. Marginal cost would be below average total cost and firms would exit the market. d. Marginal cost would be above average total cost and firms would exit the market. 30. Which economist argued that advertising artificially enhanced the desire for private goods while public spending on schools, parks, hospitals suffered? a. Friedrich Hayek b. John Galbraith c. Milton Friedman d. Jeremy Bentham --SHORT AND LONG ANSWER FOLLOW--
PART 2: Short Answer 3 Questions Answer all THREE Questions. 1. Use a production costs table and a diagram to illustrate the effects of a shift in labour supply and labour demand. Give one example that would shift the labour supply and one example that would shift the labour demand. Then discuss your findings in detail explaining all the changes in the labour market. Remember to label all necessary parts of the diagram and to show all necessary calculations in the production costs table (i.e. MPL, VMPL etc.).
2. Suppose there are two countries, Home and Foreign. Home imports bananas and Foreign exports bananas. Using a diagram show the effect of a 20 percent ad valorem tariff on Home imports of bananas, then show the effect of an export subsidy on foreign exports of bananas (Note: that the tariff and subsidies occur in isolation). Afterwards calculate that net welfare effect of the tariff on Home, then calculate the net welfare effect of the export subsidy on foreign market for bananas. Discuss the gains and losses. Remember to label all necessary parts of the diagram and to show all necessary calculations.
3. In a market with similar but differentiated products, show one diagram with short run profits and one diagram with short-run losses. Then, in a separate diagram, show the long-run market equilibrium in the market. Explain two externalities in the market that occur because of profits and losses. Remember to label all necessary parts of the diagram and to show all necessary calculations.
PART 3: Long Answer 1 Question: Answer BOTH parts a) and b). 1. a. In a market where everyone is a price taker and goods are perfect substitutes show the short-run and long-run effect of a decrease in the market price in both the firm and market diagrams, assuming that there are supply rigidities. Then show the long-run supply curve and explain two reasons why the long-run supply curve is upward sloping. b. Again, for the firm and the market diagrams show the effect of a decrease in demand in the short-run in the whole market. Give an example of a factor that would decrease demand in this market. Compare and contrast your answer from part a) discuss if this market is operating at an efficient scale of production. Remember to label all necessary parts of the diagram and to show all necessary calculations.
!!!Congratulations on Finishing the Mock for Microeconomics ECON 1000 C. You will do great in the Exam!!!