Fall 2017 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) Q = 6000; P = $150; Qxi = 25; Qzi = 75.

(b) Pd = $162; Ps = $126; Q = 5040; change in CSxi = -$264; revenue from one X household = $228; revenue from one Y household = $552; effective tax rate on an X household = 0.51%; effective tax rate on a Y household = 0.85%; tax is progressive.

Question 2

P = $0.70; market Q = 5 billion; Qu = 4 billion; Qf = 1 billion; change in CS = -$3.5 billion; change in PSu = +$1.05 billion; change in government revenue = +$0.35 billion; change in SS = -$2.1 billion; change in manfacturing employment = +35k; change in installation employment = -150k; net change in employment = -115k.

Question 3

Market P = $300; market Q = 100; efficient Q = 125; efficient Pd = $225; efficient Ps = $350; subsidy rate = $125; change in CS = +$8437.50; change in PS = +$5625; change in government revenue = -$15,625; change in externality benefits = +$2812.5; change in SS = $1250.

Question 4

Extra revenue in U = $200k; WTAr = $175; new Qu = 12,000; new Qr = 2500; change in CSu = +$220k; change in CSr = -$243,750; change in revenue = +$100k; change in SS = +$76,250.