version 4 - Page 1 of 10 McMaster University Department of...

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Page 1 of 10 McMaster University Department of Economics ECON 1B03 Midterm Test #1 VERSION 4 Instructor: Professor H Holmes Duration: 1.5 hours Total Number of Pages: 10 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 AND YOU WILL LOSE THE BONUS MARK. You may use the Casio FX calculator. Hand in the scan sheet and this test copy. TOTAL MARKS AVAILABLE : 45 NAME:____________________________________________________ STUDENT #: _______________________________________________ MUGSI ID: ________________________________________________
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Page 2 of 10 Multiple Choice Identify the choice that best completes the statement or answers the question. ____ 1. Economics is the study of a. how society manages its scarce resources. b. the government's role in society. c. how a market system functions. d. how to increase production. Figure 10-7 ____ 2. Refer to Figure 10-7. Which quantity represents the social optimum for this market? a. Q 1. b. Q 2 . c. Q 3. d. Q 4. ____ 3. Refer to Figure 10-7. To internalize the externality in this market the government should a. impose a tax on this product. b. provide a subsidy for this product. c. encourage firms to supply more of this product by taxing them. d. produce the product itself. ____ 4. According to the Coase theorem, private parties can solve the problem of externalities if a. the cost of bargaining is small. b. the initial distribution of rights favors the person being adversely affected by the externality. c. the number of parties involved is sufficiently large. d. All of the above are correct.
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Page 3 of 10 ____ 5. Daniel decides to spend the last two hours of the night before his economics exam studying instead of sleeping. For Daniel, his tradeoff would be a. nothing, since no dollar value can be put on sleep. b. nothing, since studying would be more beneficial than sleep. c. the six hours of sleep he could have had if he had gone to bed before midnight. d. the two hours of rest he would have gotten. ____ 6. Which of the following is the most accurate statement about production possibilities? a. An economy can produce only on the production possibilities frontier. b. An economy can produce at any point inside or outside a production possibilities frontier. c. An economy can produce at any point on or inside the production possibilities frontier, but not outside the frontier. d. An economy can produce at any point inside the production possibilities frontier, but not on or outside the frontier. ____ 7. If an economy is producing efficiently a. there is no way to produce more of one good without producing less of the other. b.
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This note was uploaded on 11/08/2011 for the course ECON 1B03 taught by Professor Hannahholmes during the Fall '08 term at McMaster University.

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version 4 - Page 1 of 10 McMaster University Department of...

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