ECON 1000 B
Claire Finkbeiner
It is most beneficial to you to write this mock midterm UNDER EXAM CONDITIONS.
This means:
• Complete the midterm in 1 hour.
• 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: Monday November 14 5:30-7pm
CB2400, OR, Wednesday November 16 1-2:30pm RB 1201
ECON 1000 B
Claire Finkbeiner
1. For a price ceiling to be a binding constraint on the market, the government must set it:
a. above the equilibrium price
b. below the equilibrium price
c. precisely at the equilibrium price
d. at any price because all price ceilings are binding constraints
2. Which
a.
b.
c.
d.
side of the market is more likely to lobby government for a price floor?
the buyers
neither buyers nor sellers desire a price floor
the sellers
both buyers and sellers desire a price floor
3. Which of the following statements is true if the government places a price ceiling on gas at
$1.50 per litre and the equilibrium price is $1.00 per litre?
a. a significant increase in the demand for gas could cause the price ceiling to become a
binding constraint
b. a significant increase in the supply of gas could cause the price ceiling to become a
binding constraint
c. there will be a shortage of gas
d. there will be a surplus of gas
4.
A tax placed on a good that is a necessity for consumers will likely generate a tax burden
that
a. falls more heavily on sellers
b. falls entirely on sellers
c. falls more heavily on buyers
d. is evenly distributed between buyers and sellers
5. If a buyer’s willing to pay for a new car is $20 000 and she is able to actually buy it for $18
000, her consumer surplus is
a. 18 000
b. 20 000
c. 2 000
d. 0
e. 38 000
ECON 1000 B
Claire Finkbeiner
6. Adam Smith’s “invisible hand” concept suggests that a competitive market outcome
a. maximizes total surplus
b. decreases producer surplus
c. improves market equity
d. all of the above
7. Suppose that the price of a new bicycle is $300. Nathalie values a new bicycle at $400. It
costs $200 for the seller to produce the new bicycle. What is the value of total surplus is
Nathalie buys a new bike?
a. $500
b. $400
c. $300
d. $200
e. $100
8. Medical care clearly enhances people’s lives. Therefore, we should consume medical care
until:
a. everyone has as much as they would like
b. the benefit buyers place on medical care is equal to the cost of producing it
c. buyers receive no benefit from another unit of medical care
d. we must cut back on the consumption of other goods
9. Joe has ten pairs of football boots and Sue has none. A pair of football boots cost $50 to
produce. If Joe values an additional pair of boots at $100 and Sue values a pair of boots at
$40, then to maximize:
a. efficiency, Sue should receive the glove
b. efficiency, Joe should receive the glove
c. equity, Joe should receive the glove
d. consumer surplus, both should receive a glove
10. If a market generates an externality, then free market solutions:
a. maximize producer surplus
b. are efficient
c. are inefficient
d. are equitable
ECON 1000 B
Claire Finkbeiner
11. Refer to the graph below. If a tax is placed on the product in this market, consumer surplus is
the area:
a. D
b. A
c. A+B+E
d. A+B+C+D
e. A+B
12. Refer to the graph above. Which of the following is true with regard to the burden of the tax?
a. the buyers pay a larger portion of the tax because demand is more inelastic than
supply
b. the sellers pay a larger portion of the tax because supply is more elastic than demand
c. the buyers pay a larger portion of the tax because demand is more elastic than supply
d. the sellers pay a larger portion of the tax because supply is more inelastic than
demand
13. Which
a.
b.
c.
d.
of the following would likely cause the greatest deadweight loss?
a tax on salt
a tax on cigarettes
a tax on gas
a tax on cruise line tickets
ECON 1000 B
Claire Finkbeiner
14. The graph that shows the relationship between the size of a tax and the tax revenue collected
by the government is known as a:
a. Henry George curve
b. Reagan curve
c. Keynesian curve
d. Laffer curve
e. none of the above
15. If a tax on a good is doubled, the deadweight loss from the tax
a. doubles
b. stays the same
c. increases by a factor of 4
d. could rise or fall
16. Suppose the world price is below the before-trade domestic price for a good. If a country
allows free trade in this good then:
a. both producers and consumers will gain
b. both producers and consumers will lose
c. producers will gain and consumers will lose
d. producers will lose and consumers will gain
17. If the world price for a good exceeds the before-trade domestic price for a good, then that
country must have
a. a comparative disadvantage in the production of the good
b. an absolute disadvantage in the production of the good
c. an absolute advantage in the production of the good
d. a comparative advantage in the production of the good
18. Which of the following statements about a tariff is true?
a. A tariff increases producer surplus, decreases consumer
the government, and increases total surplus.
b. A tariff increases consumer surplus, decreases producer
the government, and reduces total surplus.
c. A tariff increases producer surplus, decreases consumer
the government, and reduces total surplus.
d. A tariff increases consumer surplus, decreases producer
the government, and increases total surplus.
surplus, increases revenue to
surplus, increases revenue to
surplus, increases revenue to
surplus, increases revenue to
ECON 1000 B
Claire Finkbeiner
19. Because producers are better able to organize than consumers, we would expect there to be
political pressure to create
a. export restrictions
b. import restrictions
c. free trade
d. none of the above
20. Refer to the graph below. If trade is allowed, producer surplus is the area
a. B+C+D
b. A+B+C
c. B+C
d. A+B+C+D
e. C
21. To internalize a negative externality, an appropriate public policy response would be to:
a. have the government take over the production of the good causing the externality
b. ban the production of all goods creating negative externalities
c. tax the good
d. subsidize the good
ECON 1000 B
Claire Finkbeiner
22. According to the Coase theorem, private parties can solve the problem of externalities if:
a. there are no transaction costs
b. each affected party has equal power in the negotiations
c. the party affected by the externality has the initial property right to be left alone
d. there are a large number of affected parties
e. the government requires them to negotiate with each other
23. A Pigovian tax on pollution:
a. sets the quantity of pollution
b. reduces the incentive for technological innovations to further reduce pollution
c. sets the price of pollution
d. determines the demand for pollution rights.
24. If one person's consumption of a good diminishes other people's use of the good, the good is
said to be:
a. rival
b. a good produced by a natural monopoly
c. a common resource
d. excludable.
25. Suppose each of 20 neighbours on a street values street repairs at €3,000. The cost of the
street repair is €40,000. Which of the following statements is true?
a. It is efficient for the government to tax the residents €2,000 each and repair the road.
b. It is efficient for each neighbour to pay €3,000 to repair the section of street in front
of his/her home.
c. None of these answers are true.
d. It is not efficient to have the street repaired.
26. The Tragedy of the Commons is a parable that illustrates why:
a. common resources are overconsumed
b. public goods are underproduced
c. private goods are underconsumed
d. natural monopolies overproduce goods
ECON 1000 B
Claire Finkbeiner
27. If the Canadian government runs a budget surplus, there is
a. an excess of government receipts over government spending
b. an equality of government spending and receipts
c. a surplus of government workers
d. an excess of government spending over government receipts
28. A tax for which high income taxpayers pay a smaller fraction of their income than do low
income taxpayers is known as:
a. a proportional tax
b. a regressive tax
c. an equitable tax
d. a progressive tax
29. The appropriate tax rate to consider to judge the vertical equity of a tax system is the:
a. marginal tax rate
b. average tax rate
c. horizontal tax rate
d. proportional tax rate
30. Susan values a pair of blue jeans at $40. If the price is £$5, Susan buys the jeans and
generates consumer surplus of $5. Suppose a tax is placed on blue jeans that causes the price
of blue jeans to rise to $45. Now Susan chooses not to buy a pair of jeans. This example has
demonstrated:
a. the deadweight loss from a tax
b. the ability-to-pay principle
c. the benefits principle
d. horizontal equity
e. the administrative burden of a tax