Previous Exams

Spring 2011 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) Plan 1: $8255.

(b) Plan 2: $6808.

(c) Plan 2 is better: lower expected NPV cost.

Question 2

(a),(b) Market Q=300, P=$600.

(c) Efficient Q=400.

(d) Subsidized price: Psub = $400.

(e) Subsidy rate: S=$400.

(f) Total cost of the subsidy: $160,000.

Question 3

(a) Qat=42,000.
(b) T=$6.
(c)-(h) in table below:

Type
Original
Emissions
Qa
Cost of
abatement
Unabated
emissions
Tax
Payments
 A 100 60  180  40  240
 B 800 600  1800  200  1200 

Question 4

(a) P=$40 (Qt=70).
(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 60  40  800  700  -100   2.5  --  22.5
 2 60  20  400  700  +300  --  7.5  32.5 
 3 60  10  200  -200  --  55 

Question 5

(a),(b) B=5, C=2.

(c),(d) Q=200, P=$300.

(e) DWL=$6500.

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