Test 2 version 4

# Test 2 version 4 - Page 1 of 13 McMaster University...

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Page 1 of 13 McMaster University Department of Economics ECON 1B03 Midterm Test #2 VERSION 4 Instructor: Professor H Holmes Duration: 2 hours Total Number of Pages: 13 INSTRUCTIONS : Answer all questions on the scan sheets. USE AN HB PENCIL ONLY. Make sure you carefully fill in the bubbles. YOU MUST FILL IN YOUR STUDENT NUMBER, AND VERSION NUMBER ON THE SCAN SHEET OR YOUR GRADE WILL NOT BE RECORDED. You may use the Casio FX calculator. Hand in the scan sheet and this test copy. TOTAL MARKS AVAILABLE : 50 NAME:____________________________________________________ STUDENT #: _______________________________________________ MUGSI ID: ________________________________________________ SECTION : Circle One: 9:30-10:20 11:30-12:20 Wednesday Night

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Page 2 of 13 Multiple Choice Identify the letter of the choice that best completes the statement or answers the question. Figure 1 ____ 1. Refer to Figure 1 . If the government imposes a binding price ceiling of \$8.00 in this market, the result would be a a. surplus of 20. b. surplus of 40. c. shortage of 20. d. shortage of 40. Figure 2 ____ 2. Refer to Figure 2 . Without the price ceiling in this market for gasoline, when the supply curve shifts from S1 to S2 the price will a. increase to P3, but a shortage will still exist. b. increase to P3 and the market will clear. c. remain at P1 and a shortage will still exist. d. eventually move to P2 without government assistance.
Page 3 of 13 ____ 3. Assume that the demand and supply curves for cars are elastic. If the government imposed a \$500 tax on the buyer of each car, we can assume that the a. equilibrium price of a car would decrease by less than \$500. b. price of a car would decrease by exactly \$500. c. price of a car would decrease by more than \$500. d. price of a car would not change if both curves were elastic. Figure 3 ____ 4. Refer to Figure 3 . The price sellers receive after the tax is imposed is a. \$1.00. b. \$3.50. c. \$5.00. d. \$6.00. ____ 5. Refer to Figure 3 . The amount of the tax that sellers would pay would be a. \$1.00. b. \$1.50. c. \$2.50. d. \$3.00.

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Page 4 of 13 Figure 4 ____ 6. Refer to Figure 4 . In which market will the majority of a tax be paid by the seller? a. market (a) b. market (b) c. market (c) d. All of the above are correct. ____ 7. If a tax is imposed on a market with elastic demand and inelastic supply, a. buyers will bear most of the burden of the tax. b. sellers will bear most of the burden of the tax. c. the burden of the tax will be shared equally between buyers and sellers. d. it is impossible to determine how the burden of the tax will be shared. ____ 8. Assume that the demand for pretzels is relatively inelastic and that the demand for potato chips is relatively elastic. If the same percentage tax were placed on both goods, the tax on which product would create a larger deadweight loss? a.
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## This note was uploaded on 04/17/2010 for the course ECON 1B03 taught by Professor Hannahholmes during the Winter '08 term at McMaster University.

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Test 2 version 4 - Page 1 of 13 McMaster University...

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