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 = 90`; `Q_m^d = Q_m^s = 6300`; `Q_a = 82`; `Q_b = 55`; graph omitted.

(b) `P^d = 80, P^s=120`; buyer burden = 75%, seller burden = 25%; `Q_m=5400`; `Q_a=76`, `Q_b=40`; `ETR_a= 2.85%`, `ETR_b=4%`, tax is regressive.

Question 2

(a) `P^d = 20,000`, `Q_m = 8 M`, `Q_E = 2 M`, `Q_C = 6 M`.

(b) `P^d = 30,000`, `Q_m = 6 M`, `Q_E = 3 M`, `Q_C = 3 M`; `\Delta CS = -70 B`, `\Delta PS_E = +25 B`, `Rev = 30B`; helps EU producers with higher PS and `Q_E` but slows overall transition to EVs substantially.

Question 3

Initial `P^d = P^s = 400`, `Q=100`; efficient `Q = 150`, `P^d=200`, `P^s=500`; subsidy = 300; `\Delta Rev = -45,000`; `\Delta Ext = +12,500`.

Question 4

`P^d=P^s=100`, `Q_a^d=1000`, `Q_b^d=200`, `Q_c=1200`; prices with policy: `P^d=140`, `P_s=80`; buyer burden = $40 or 67%, seller burden = $20 or 33%; `Q_a=920`, `Q_b=40`, `Q_c=960`; `Rev_a = 36,800`, `Rev_b = 1600`, `Rev_c=19,200`; Sin tax not very effective for A since `Q_a` falls by only 8% but very effective for B, who reduces consumption by 80%. At the same time, the tax raises a lot of revenue from A but not very much from B.