Previous Exams

Spring 2010 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 G1/H4

(a) EV of PV of risk = $2 per unit
(b) tax = $2
(c) efficient price of the resource = $22
(d) percent change in extraction = 5% decrease

Question G2/H2

(a) market P = $1200
(b) market Q = 150
(c) efficient Q = 300
(d) efficient P = $900
(e) subsidy needed per unit = $300
(f) total cost to the government = $90,000

Question G3/H1

(a) efficient abatement = 1200
(b) efficient tax rate = $4
(c)-(g) in table below:

Type
Original
Emissions
Qa
Cost of
abatement
Unabated
emissions
Tax
Payments
 1  50  (c) 8  (e) 16  42 (g) 168
 2  50  (d) 40  (f) 80  10 (h) 40

Question G4/H5

(a) equilibrium permit price = $8
(b)-(d) in the table below:

Type
Original
Emissions
Qa
Cost of
abatement
Target
cost
Change
needed
Permits
to sell
Permits
to buy
Initial
allocation
 1  32  8  32
 56  +24  0 3
 (b) 21
 2  32  16  64  56  -8  1  0  (c) 17
 3  32  32  128  112  -16  2  0  (d) 2

Question G5/H3

(a) A = 130
(b) B = 3
(c) market P = $65
(d) market Q = 650
(e) efficient P = $75
(f) efficient Q = 550

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Peter J Wilcoxen, The Maxwell School, Syracuse University
Revised 12/18/2012