Fall 2015 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.

Question 1

(a) P=$80, Q=84,000, Qai=720, Qbi=1200, Qxi=800, graph omitted.

(b) Pd=$59, Ps=$84, Q=88,200, value of subsidy=$2.205 million, Qai=741, Qbi=1410, Qxi=840, change in CSai=$15,340.5 gain, change in PSxi=$3280 gain.

Question 2

(a) New values: P=$80, market Q=2200, suppy by C=1200, supply by N=1000. change in CS=+$42,000, change in PS for C=-$32,000, change in PS for N=$0, overall change in SS=+$10,000.

Question 3

(a) New values: P=$40, market Q=960, supply by D=360, supply by C=600, change in CS=+$8800, change in PS for D=-$4800, change in revenue=-$6000, change in externality=+$4000, change in SS=+$2000.

Question 4

(a) P=$200, market Q=200, Ql=100, Qh=100, Qz=200.

(b) New values: Pd=$220, Ps=$178, market Q=178, tax revenue=$7476, Ql=80, Qh=98. Tax burdens: L=($220-$200)*80=$1600, H=($220-$200)*98=$1960, Z=($200-$178)*178=$3916. H has a higher burden than L because its demand is less elastic and Qh changes very little.