Previous Exams

Spring 2016 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 1

(a,b) Q = 75, P = $300,

(c,d) Q = 100, Psub = $200.

(e) Sub = $200.

(f) Total cost of subsidy = $20,000.

(g) Welfare gain = $1875.

Question 2

(a) Qt = 4000.

(b) Tax = $50.

(c,d) Qai = 100, Qbi = 200.

(e,f) TCAai = $2500, TCAbi = $5000.

(g,h) Tax payments: type-A firm = $10,000; type-B firm = $0.

Question 3

(a) Pp = $100.

(b,c,d) See table below.

Firm Initial Emissions Qa Qp TCA Target Buy Sell Allocation
1 400 200 200 $10,000 $20,000 100 0 100
2 600 200 400 $10,000 $20,000 100 0 300
3 800 400 400 $20,000 $0 0 200 600
Total 1800 800 1000 $40,000 $40,000 200 200 1000

Question 4

(a) Qt = 600, MCA = $800.

(b) Qp1 = 600, Qp2 = 800.

(c) Qt = 500.

(d) DWL = $20,000.

(e) Pp = $1200.

(f) Source 1 will buy 100 permits from 2 for a total of $120,000.

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Peter J Wilcoxen, The Maxwell School, Syracuse University
Revised 04/17/2016