Spring 2011 Exam 2 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 P1/Q3

(a) Qa total = 600;

(b) Qp1 = 300; Qp2 = 100; 400 permits total;

(c) Qa total = 500;

(d) DWL = $20,000;

(e) P = $1,200;

(f) Firm 1 sells 100 permits to firm 2 for $120,000 of revenue.

Question P2/Q6

(a) Number of visitors=6,300;

(b) A = 25.36, B = -0.00244;

(c) CS = $131,902;

(d) Value to non-visitors = $50,000;

(e) PV = $1.82 million.

Question P3/Q1

(a) Value = $60 million; don't sell.

Question P4/Q4

(a) Q = 250;

(b) $625 million;

(c) Q = 40;

(d) -$332 million;

(e) Neighborhood will vigorously oppose the project unless compensated approximately $332 million.

Question P5/Q5

(a) The table is shown below:

Pd	R	MEC	P	Q
0	50	40	90	205
1	100	50	150	275
2	200	60	260	320

(b) With the backstop, the table becomes:

Pd	R	MEC	P	Q
0	20	40	60	220
1	40	50	90	305
2	80	60	140	380

(c) Backstop production=105.

Question P6/Q2

(a) MDC = $100;

(b) P = $150;

(c) The table without exploration:

Pd	R	MEC	P	Q
0	100	50	150	175
1	200	50	250	175

(d) The table with exploration:

Pd	R	MEC	P	Q
0	50	50	100	200
1	100	50	150	225

(e) Resource found via exploration = 75;

(f) Expected number of wells = 37.5.