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# Final Exam Sample 3 Answers - SCARBOROUGH COLLEGE...

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SCARBOROUGH COLLEGE, University of Toronto Department of Management and Economics Final Exam: Sample #3 ECMA01F: Microeconomics Duration - 3 hours No Aids Allowed Non-programmable calculators only INSTRUCTIONS: This examination consists of TWO PARTS Part I 10 diagrammatic/calculation questions of which you are expected to answer any EIGHT (10 marks each for a total of 80%). If you answer more than 8 questions, only the worst 8 marks will be counted. Part II 10 multiple choice questions worth 2 marks each for a total of 20%. Wrong answers will not be deducted from right in grading Part II. All questions are to be answered in the spaces provided in this question paper booklet Do not remove any pages or add any pages. No additional paper will be supplied. The blank backs of pages may be used for rough work. Show your work where applicable. Print your name and student number clearly on the front of the exam and on any loose pages. Student Name: ______________________________________________________ (Family Name) (Given Name) Student Number : ______________________________ There are 14 pages to the exam. - 1/14 -

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ECMA01F: Final Exam; Sample #3 PART I: Diagrammatic/Calculation: ANSWER ONLY 8 OF THE 10 QUESTIONS Place your answers (and work where necessary) in the space provided . 1. Demand and Supply (10 marks) The diagrams below represent the original equilibrium position for Printer Paper, an inferior good. Vellum Paper is a substitute in consumption for Printer Paper and Ink is a complement in consumption. Pollution (effluents dumped into a river) are a complement in production and Lumber is a substitute in production for Printer Paper. Electricity is an input into production. Evaluate the statement given in each part to show the shift in the demand curve and/or the supply curve or movement along either curve in the short-run. Mark the new equilibrium price P1 and the new equilibrium quantity Q1. Designate Qs and Qd if there is no market equilibrium. Analyze each question independently of the other questions. No explanations are required. (2 marks per graph) a) The price of Vellum Paper increases and the price of electricity decreases. 1 mark: Demand increases 1 mark: Supply increases b) The price of Ink decreases and the government increases the property tax of the firm. 1 mark: Demand increases 1 mark: no change in supply (Fixed in SR) c) An economic recession reduces incomes and the government implements the Kyoto agreement forcing the company to pay a pollution tax per unit. 1 mark: D increases 1 mark: Supply decreases d) The government sets a quota on Printer Paper to help Canadian producers. 1 mark: Q quota < Qo 1 mark: P > Po from D at Q e) The producers of Printer Paper form a cartel to extract maximum profit. 1 mark: Q from MR (< D) intersect S 1 mark: P from Do at Qm - 214 - Po Qo Do So Po Qo Do So Po Qo Do So Po Qo Do So Po Qo Do So
ECMA01F: Final Exam; Sample #3 2. Share (Incidence) of a Subsidy (10 marks) The Federal government is considering a subsidy of \$500/car on Hybrid (gas and battery) Cars to reduce dependence on gasoline. Draw a diagram in the space below indicating the

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