PAI 723 Economics for Public Decisions > Exams from Previous Semesters

Fall 2009 Exam 1 Solution

Here are the final numerical results for each section of the exam.  You can use them to check your work if you do the exam for practice.  If you have trouble with the problems, or don't get the answers shown here, stop by during office hours or make and appointment and we can go over them.

Part 1, Question A

P=$20, Q=1800, Qai=15, Qbj=30.

Part 1, Question B

Pd=$25, Ps=$18, Q=1500, revenue=$10,500, change in CS to a type-A buyer=-$68.75, change in CS to a type-B buyer=-$137.50, change in PS=-$3,300, DWL=$1,050.  The total change in CS was not required but was $8,250.

Part 2, Question A

P=$15, Qd=4000, Qf=1000.

Part 2, Question B

Q=4000, P=$30, change in CS=-$67,500, change in PS for domestic firms=+$60,000, change in PS for foreign firms=-$2,500, DWL=$10,000, substantial shift of surplus from consumers to domestic suppliers, with some additional loss to foreign suppliers.

Part 3

Pd=$90, Ps=$120, subsidy per unit=$30, total cost of subsidy=$36,000, change in CS=+$11,000, change in PS=+$22,000, DWL=$3,000.

Part 4

Change in Q supplied=-10%, new Q=1,800, W2P at 1800=$1,575, DWL=(1/2)*(1575-1200)*200=$37,500.

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Peter J Wilcoxen, The Maxwell School, Syracuse University
Revised 10/18/2009