Fall 2020 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) `P^d`=`P^s`=128; `Q_M`=11,800; `Q_{Ai}^d`=436; `Q_{Ci}^s`=59; graph omitted.

(b) `P^d`=112; `P^s`=132; `Q_M`=12,200; `Q_{Ai}^d`=444; `Q_{Bi}^d`=1552; `Sub_A`=7104; `Sub_B`=24,832; effective subsidy rate for A=14.2% and effective subsidy rate for B=16.5% so the policy is regressive since the effective subsidy rate is larger for wealthier households; tax burder on buyers=`\Delta P^d`/`T`=16/20=80%.

Question 2

`P`=60; `Q_M`=2700; `Q_W`=2000; `Q_C`=700; `\Delta CS`=-$57k; `\Delta PS_W`=+$30k; `Delta PS_C`=$0; spending on equipment=$14k.

Question 3

`Q_1`=200; `P_1^d`=`P_1^s`=600; `Q_2`=250; `P_2^d`=250; `P_2^s`=750; `\Delta CS`=+$78,750; `\Delta PS`=+$33,750; `Delta Rev`=-$125k; `Delta Ext`=$22,500; `\Delta SS`=+$10k.