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Midterm

ECO100Y1 Study Guide - Midterm Guide: Autonomous Consumption, Nominal Interest Rate, Time 100

3 pages233 viewsFall 2017

Department
Economics
Course Code
ECO100Y1
Professor
James Pesando
Study Guide
Midterm

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1
UNIVERSITY OF TORONTO
Faculty of Arts and Science
ECO100Y L0101 & L0201 Introductory Economics
Term Test 3 March 3, 2016
Instructor: Jessica Burley
(MULTIPLE CHOICE QUESTIONS)
SOLUTIONS
Instructions:
• You have 70 minutes to complete this test.
There are 10 multiple-choice questions and three short answer questions.
• You may use a non-programmable calculator. No other aids are permitted.
• This book (5 pages) contains the multiple-choice questions only and will not be
graded. All multiple-choice responses must be recorded in the answer grid. Make
sure to transfer your responses.
• There are a total of  marks, distributed as indicated in each question.
• Answer all questions. Marks are awarded for clear and concise explanations.
Answer in the space provided.
2
DO NOT RECORD YOUR ANSWERS IN THIS BOOK
PART 1A: Multiple-Choice Questions (40 marks; 4 marks each)
[MC 1]. Consider an activity that generates a positive externality for all activity levels. What
must be true at the efficient quantity Qeffic (i.e., the quantity that maximizes total surplus)?
A. The external benefit must be equal to zero.
B. The marginal private cost must be greater than the marginal private benefit.
C. The marginal private cost must be less than the marginal private benefit.
D. The marginal private cost must be equal to the marginal private benefit.
E. None of the above.
[MC 2]. Three firms currently emit five tons of pollution each. Table 1 shows the marginal
benefit of each ton of pollution for the three firms. If the Government wishes to reduce
pollution by 7 tons as efficiently as possible, how many tons will firm C emit?
A. 1
B. 2
C. 3
D. 4
E. 5
[MC 3]. Assume negotiation is costless and property rights are well defined and
transferable. Sam’s benefit from listening to loud music at 7:00 AM is $10, while the harm
to his two roommates is $7 each. Which of the following is consistent with the Coase
Theorem?
A. If Sam owns the right to play music, his roommates will pay him $16 in total not to.
B. If Sam owns the right to play music, his roommates will pay him $8 in total not to.
C. If his roommates own the right to a quiet morning, Sam will pay each roommate $3
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