Fall 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.

Part 1

(1a) Market P = $400, Q = 4000; Individual production: Qli = 200, Qsj = 20.

(1b) Pb = $350, Q = 4500, cost to government = $450k, change in CS = $212.5k, change in PS = $212.5k, DWL = $25k.

Part 2

(2a) Market P = $100, Q = 1000, Qf = 800, Qr = 200.

(2b) P = $100, Q = 1000, Qf = 400, Qr = 600, change in PSf = -$30k, change in PSr = 0, change in CS = 0.

Part 3

(3a) Change in Q = -8%, does not violate the employment constraint, revenue = $36.8k, DWL = $1,600.

Part 4

(4a) Highest wage = $8.80, total unemployment = 150k, change in CS to firms = -$780k.