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ECO 320 MIDTERM EXAM NEWEST 2025
ACTUAL EXAM COMPLETE 120
QUESTIONS AND CORRECT DETAILED
ANSWERS (VERIFIED ANSWERS) |ALREADY
GRADED A+/UNIVERSITY OF TORONTO
Should the smoking of marijuana be regulated the same way as cigarettes? - CORRECT ANSWER-- Both create negative public and private health externalities
- Grey markets: illegally sold compete as substitute with
legally sold
- If cigarette regulation is optimal, then marijuana
regulation should be similar
What is Pareto optimal? - CORRECT ANSWER-Making A better off without making B worse off (e.g. roommates dividing chores)
What is cost-benefit (potential Pareto improvement)? - CORRECT ANSWER -Making A well enough off that it 1 / 4
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exceeds the degree to which B is worse off (e.g. parking fees)
What three laws are comparable to the barriers cause by a rent ceiling? - CORRECT ANSWER -- Ceilings on compensation awards (e.g. minimum wage)
- Property standards
- Expropriation procedures (take land for public use) that
limit prices people can charge
What are three reasons for which rent ceiling are barriers to entry? - CORRECT ANSWER-- Tenants are blocked from entering due to shortage
- Some tenants face new forms of discrimination (e.g.
- Some landlords will have to exit due to reduced profits
credit checks, need guarantors)
What happens when the government allows for a rent controlled and non-rent controlled markets? - CORRECT ANSWER-- Make the mistake of ignoring that both involve the same apartments 2 / 4
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- In short run, demand and supply shift right
- In long run, equilibrium for non-rent controlled will fall
somewhere in between rent controlled price and market price
What are property rights? - CORRECT ANSWER-Rules that explain what it means to own something
When is there a scope for bargaining? - CORRECT ANSWER-When people value things differently
Can a transaction still be efficient even if redistribution isn't equal? - CORRECT ANSWER-Yes
What is a threat point? - CORRECT ANSWER-The lowest price a party is willing to accept
When is the utility of a good/service weakened? - CORRECT ANSWER -When property rights are weakened 3 / 4
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What are are three examples of how property rights can be weakened? - CORRECT ANSWER-- Rights are unclear
- Remedies are unavailable
- Courts or lawyers are unavailable (hard to enforce)
(all three reduce surplus)
What is the open vs closed range rule? - CORRECT
ANSWER-Open: farmer bears damages
Closed: rancher bears damages
If no transaction costs, is the open or closed range rule efficient? - CORRECT ANSWER-Either provided that no fence is built
What is the converse to Coase? - CORRECT ANSWER- When transaction costs are high enough to prevent private bargaining, the efficient use of resources depends on how property rights are assigned
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