ECN 437 Environmental and Resource Economics > 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  0  -200  5  --  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