Study Guides (248,422)
Economics (462)
ECON 2J03 (6)

# Q1(2J03).doc

5 Pages
187 Views

School
Department
Economics
Course
ECON 2J03
Professor
Rashid Khan
Semester
Winter

Description
Econ 2J03 Quiz #1 January 17, 2014 Student’s Name: Problem Section: [25 marks] Student’ #: Question #1: [16 marks] Consider the following demand functions and cost functions of a finite resource. P1= 200 – Q 1 [Subscript 1 refers to MWTP in dollars in the current year] MC =1AC = \$10 P2= 200 – Q 2 [Subscript 2 refers to MWTP in dollars next year] MC =2AC = \$20 Q 1 Q =2160 [Resource constraint] (a) Assume zero discount rate. Find the following in an unregulated (untaxed) market: [3 marks] Total net benefit in the current year = \$ Next year’s total net benefit = \$ (b) Assume zero discount rate. Find the optimal resource allocation over time. [10 marks] Q 1 Q = 2 Total net benefit in the current year = \$ Next year’s total net benefit = \$ The optimal tax rate = \$ (c) Assume discount rate is 0.5. In other words, 1 + r = 1.5. Find the optimal resource allocation over time. [3 marks] Q 1 Q 2 The optimal tax rate in the current year = \$ 1 Question #2: [4 marks] Consider the following table, which represents production possibility curve in a given economy. Combination Goods (G) Environmental Quality (EQ) A 100 0 B 90 1 C 70 2 D 40 3 E 0 4 (a) Consider a movement from point E to point D. The opportunity cost of one unit of G = (b) Consider movement from point B to point A. The opportunity cost of one unit of G = Question #3: [5 marks] The willing-to-pay functions of three individuals (A, B, C) for a given public good in a community are given below. PA= 10 – Q A PB= 20 – 2Q B PC= 30 – 3Q C MC = AC = \$24 [Marginal cost as well as average cost of each unit of Q is constant at \$24] (a) Find the equilibrium quantity of public good in this community. (b) Find the total costs of public good. (b) Total payments for public goods by individual A = \$ Total payments for public goods by individual B = \$ Total payments for public goods by individual C = \$ 2 There are 25 true-false questions worth 75 marks. Bubble correct answers in the scan sheet. Answer Question #1 on the basis of the following: TB = Total benefit MB = Marginal benefit Subscript 1 refers to individual one. There are 10 identical individuals consuming public goods. Q TB 1 MB 1 Total Benefit Total MB 1 \$100 \$100 \$1000 \$1000 2 \$180 \$80 \$1800 \$800 3 \$240 \$60 \$2400 \$600 4 \$280 \$40 \$2800 \$400 5 \$300 \$20 \$3000 \$200 1. Public goods satisfy the criteria on non-exclusion and non-rivalry. If the per-unit price of public good is \$300, the socially optimal Q (where the total net benefit is maximized) is 5. Answer Questions #2-5 on the basis of the following equations. The inverse demand function of organic apple is given by the following equation. P = 18 – 0.5Q. The original supply function of organic apples before the improvement in environmental quality was P = 2+ 0.5Q. The new supply function due to improvement in environmental quality is P = 2 + 0.3Q. 2. The original equilibrium price is \$10. 3. Consumer surplus at the original equilibrium price is \$150. 4. The new equilibrium price is \$8. 5. The total surplus at the new (after improvement in environmental quality) equilibrium price is \$200. Questions #6-7 are based on a concave (bowed out) production possibility curve (PPC) with environmental quality (EQ) in the horizontal axis and goods and services (G) in the vertical axis. Assume further
More Less

Related notes for ECON 2J03
Me

OR

Join OneClass

Access over 10 million pages of study
documents for 1.3 million courses.

Join to view

OR

By registering, I agree to the Terms and Privacy Policies
Just a few more details

So we can recommend you notes for your school.