Test 2 Version 1 Night SOLUTIONS

Test 2 Version 1 Night SOLUTIONS - Page 1 of 21 McMaster...

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Page 1 of 21 McMaster University Department of Economics ECON 1B03 NIGHT SECTION Midterm Test #2 Wednesday November 7, 2007 VERSION 1 Instructor: Professor H Holmes Duration: 2 hours; 2:00 – 4:00pm Total Number of Pages: 15 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, VERSION NUMBER AND SECTION NUMBER ON THE SCAN SHEET OR YOUR GRADE WILL NOT BE RECORDED. You may use the Casio FX calculator. Hand in the scan sheet, your rough work paper and this test copy. TOTAL MARKS AVAILABLE : 60 NAME:____________________________________________________ STUDENT #: _______________________________________________ MUGSI ID: ________________________________________________ SECTION : Circle One: C01 (9:30-10:20) C02 (12:30-1:20) EC01 (Wednesday night)
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Page 2 of 21 Multiple Choice Identify the choice that best completes the statement or answers the question. ____ 1. When negative externalities are present in a market a. private costs will be greater than social costs. b . social costs will be greater than private costs. c. government regulation to resolve the problem is always necessary. d. the market will not be able to reach any equilibrium situation. Figure 1 ____ 2. Refer to Figure 1. The optimum amount of this product from society's standpoint would be a. Q 1 . b. Q 2 . c. Q 3 . d. Q 4 . ____ 3. Refer to Figure 1. If this market currently produces Q 3 , total economic well-being would be increased if a . production decreased to Q 2 . b. production increased to Q 4 . c. this product were no longer produced. d. Since well-being is maximized at Q 3 it cannot be increased. ____ 4. Refer to Figure 1. If this market currently produces Q 2 , total economic well-being would be maximized if a. production decreased to Q 1 . b. production increased to Q 3 . c. this product were no longer produced. d . output stayed at Q 2 . ____ 5. Internalizing a negative externality will cause the supply curve of an industry to
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3 of 21 a. shift to the right. b . shift to the left. c. expand. d. remain unchanged. ____ 6. A price floor a . is a legal minimum on the price at which a good can be sold. b. is a legal maximum on the price at which a good can be sold. c. will generally result in a market shortage. d. will benefit the consumer, but hurt the supplier. Figure 2 ____ 7. Refer to Figure 2 . A binding price floor would exist at a. a price of $10.00. b. a price of $8.00. c . any price above $10.00. d. any price below $10.00. ____ 8. A price floor is binding if it is a . higher than the equilibrium market price. b. lower than the equilibrium market price. c. equal to the equilibrium market price. d.
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Test 2 Version 1 Night SOLUTIONS - Page 1 of 21 McMaster...

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