Econ 325: Environmental and Natural Resource Economics Fall 2007 Exam 1: SOLUTIONS

Save this PDF as:
 WORD  PNG  TXT  JPG

Size: px
Start display at page:

Download "Econ 325: Environmental and Natural Resource Economics Fall 2007 Exam 1: SOLUTIONS"

Transcription

1 Econ 325: Environmental and Natural Resource Economics Fall 2007 Exam 1: SOLUTIONS Instructions: Answer 1 question from each of the three sections. I will grade only 3 solutions, so if you answer more than 1 question per section, I will grade only the first question answered in each section. Write all answers in bluebooks. Please read each question carefully and answer each and every part. Each question is worth 33 and a third points. Good luck! Section I. Externalities and public goods 1. Assume that the demand curve for an environmental good is fully coincidental with the marginal social benefit function and can be described as MSB = MPB = 12-3q, where q refers to the quantity of the good. Assume that the marginal private cost function can be described by MPC = q, and that marginal social costs are always triple the marginal private cost. A. Determine an equation for the marginal social costs (MSC). MSC = 3q B. Graph the functions and algebraically determine i. the market level of output MPC=MPB so 12-3q =q and q=3. ii. the optimal level of output MSC=MSB so 12-3q =3q and q=2. 12 p=9 p*=6 pe=3 $ C. Calculate social welfare at the market level of output and at the optimal level of output. What is the deadweight loss from these social costs? MSC=3q MC=q DWL = 6x1/2 = $3 D = MB = MSB q*=2 qe = 3 4 q Efficient social welfare = (12-0)x(2)/2 = $12.00 Market equilibrium SW = (12-0)x(2)/2-1.50= $9.00 1

2 D. Is it possible to correct this externality? Explain. Yes, through taxes (Pigou) or bargaining (Coase). Explain where to tax (at optimal output level.) Answers will vary. 2

3 2. Suppose the state is trying to decide how many miles of a very scenic river it should preserve. There are 100 people in the community, each of whom has an identical demand function given by P=10-1.0q, where q is the number of miles preserved and P is the per mile price he or she is willing to pay for q miles of preserved river. Hint: treat this river as a public good. A. If the marginal cost of preservation is $500 per mile, how many miles would be preserved in an efficient allocation? This is a public good, so add the 100 demand curves vertically. This yields: P = 1, q. This demand curve would intersect the MC curve when P = 500, which occurs at q = 5 1,000 B. What are the net benefits associated with the preservation project? 500 MC = 500 D q 5 ½ * ($1,000-$500) * 5 = $

4 Section II. Environmental valuation and decision making 3. Assume that the data you have suggest that if: i. Travel cost is greater than or equal to $30, no trips are taken ii. If travel costs are zero, 100 trips are taken. A. Draw a travel cost demand curve based on these data. B. Calculate ordinary consumer surplus for the individual whose travel costs are equal to $14. C. Explain potential biases your analysis may have included. The information provides the end points of a straight line. P = 30 (30/100)*Q After find equation for straight line, plug in $14 for price and solve for quantity. 14 = 30 (30/100)*Q => Q = 53.3 trips Calculate consumer surplus, which is area below demand curve and above price at $ $ CS = ½ * (30-14) * 53.3 = $ Trips May not be accounting for true opportunity cost of time, may be incorrectly including travel costs for multiple stops on trip, and may include sample bias from frequent visitors. 4

5 4. Assume that the costs and benefits associated with a proposed government project are as follows: Year Benefits Cost ($ millions) A. If the discount rate is 5 percent, calculate the present value of the net benefits for this project (show your work). ( ) ( ) ( ) ( ) = $ B. Not all of the benefits associated with this project are easily quantifiable in dollar terms. What can be done to account for these factors? It is important to note these benefits and discuss their potential importance, do sensitivity analysis, discuss how results depend on assumptions. 5

6 Section III. Sustainability 5. The notion of sustainability is not the same in the natural sciences as in economics. In the natural sciences, sustainability frequently means maintaining a constant physical flow of each and every resource (e.g., fish from the sea or wood from the forest), while in economics it means maintaining the value of those service flows. When might these two choices lead to different choices? Why? Weak vs. strong vs. environmental sustainability, what each entails and examples of why they would lead to different decisions. (Answers will vary) 6

7 6. Assume society is trying to allocate 40 units of a depletable resource across two time periods. Demand is given by the equation P = Q. The marginal extraction cost for the resource is constant at $1 per unit. The discount rate is MNB1 A. What are the efficient quantities for each of the two periods? MNB Q1*= Q2*= B. What are the efficient prices for each of the two periods? P1*=$5.763 P2*=$6.238 C. What is the marginal user cost associated with this resource in each period? MUC1=$4.76 MUC2=$5.23 7

Midterm Preparation EconS 330

Midterm Preparation EconS 330 Midterm Preparation EconS 330 Instructor: Ana Espinola, Hulbert 111C, anaespinola@wsu.edu This midterm preparation is a guide that will help you to study for Midterm #1. It does not imply that you will

More information

Midterm #1 (SECOND PART) - EconS 330 (September 30 th, 2013)

Midterm #1 (SECOND PART) - EconS 330 (September 30 th, 2013) Name: Midterm #1 (SECOND PART) - EconS 330 (September 30 th, 2013) Instructor: Ana Espinola-Arredondo, Hulbert 111C, anaespinola@wsu.edu Question #1 (Positive Externalities) (40 Points) Some mining companies

More information

a. What is the marginal revenue curve of this monopolist? Take the demand curve and double the slope: MR=130-4Q

a. What is the marginal revenue curve of this monopolist? Take the demand curve and double the slope: MR=130-4Q Economics 101 Spring 2011 Homework #6 Due 5/3/11 Directions: The homework will be collected in a box before the lecture. Please place your name, TA name and section number on top of the homework (legibly).

More information

Chapter 3 Externalities and Government Policy

Chapter 3 Externalities and Government Policy Chapter 3 Externalities and Government Policy What are externalities? Externalities = Classifications 1. Negative Externalities (external costs) to third parties, other than the buyers or the sellers of

More information

Marginal cost. Average cost. Marginal revenue 10 20 40

Marginal cost. Average cost. Marginal revenue 10 20 40 Economics 101 Fall 2011 Homework #6 Due: 12/13/2010 in lecture Directions: The homework will be collected in a box before the lecture. Please place your name, TA name and section number on top of the homework

More information

Econ 380 Practice For Midterm Exam 1

Econ 380 Practice For Midterm Exam 1 Econ 380 Practice F Midterm Exam 1 1. Consider the two period model discussed in class. Instead of oil, suppose we are concerned with allocating a limited supply of water over two time periods. Assume

More information

Chapter 3:Externalities and Government Policy

Chapter 3:Externalities and Government Policy Reading: page 98~130 (Public Finance in Canada, David N. Hyman 10th edition) :Externalities and Government Policy Objectives: Define an externality and understand how such externality can prevent efficiency

More information

Economics 165 Winter 2002 Problem Set #2

Economics 165 Winter 2002 Problem Set #2 Economics 165 Winter 2002 Problem Set #2 Problem 1: Consider the monopolistic competition model. Say we are looking at sailboat producers. Each producer has fixed costs of 10 million and marginal costs

More information

Micro Externalities WCC P E Q Q

Micro Externalities WCC P E Q Q Micro Externalities WCC If it ain t broke, don t fix it consider our standard supply and demand diagram below note the size of the shaded economic surplus generated if we allow the market to reach its

More information

c. Given your answer in part (b), what do you anticipate will happen in this market in the long-run?

c. Given your answer in part (b), what do you anticipate will happen in this market in the long-run? Perfect Competition Questions Question 1 Suppose there is a perfectly competitive industry where all the firms are identical with identical cost curves. Furthermore, suppose that a representative firm

More information

Externality Essentials P E Q E

Externality Essentials P E Q E Micro Externality Essentials If it ain t broke, don t fix it consider our standard supply and demand diagram below note the size of the shaded economic surplus generated if we allow the market to O reach

More information

Economics 101 Fall 2013 Answers to Homework 5 Due Tuesday, November 19, 2013

Economics 101 Fall 2013 Answers to Homework 5 Due Tuesday, November 19, 2013 Economics 101 Fall 2013 Answers to Homework 5 Due Tuesday, November 19, 2013 Directions: The homework will be collected in a box before the lecture. Please place your name, TA name and section number on

More information

Final Exam 15 December 2006

Final Exam 15 December 2006 Eco 301 Name Final Exam 15 December 2006 120 points. Please write all answers in ink. You may use pencil and a straight edge to draw graphs. Allocate your time efficiently. Part 1 (10 points each) 1. As

More information

Find the competitive equilibrium. The competitive equilibrium is where supply equals demand. Since MC=S, where MC = 2Q/3

Find the competitive equilibrium. The competitive equilibrium is where supply equals demand. Since MC=S, where MC = 2Q/3 Problem Set #13-Key Sonoma State University Economics 305-Intermediate Microeconomic Theory Dr. Cuellar (1) Consider the following demand and cost functions for a monopolistic firm. The industry demand

More information

ECONOMICS 336Y5Y Fall/Winter 2011/12. PUBLIC ECONOMICS Spring Term Test Sample Solutions Feb. 28, 2014

ECONOMICS 336Y5Y Fall/Winter 2011/12. PUBLIC ECONOMICS Spring Term Test Sample Solutions Feb. 28, 2014 UNIVERSITY OF TORONTO MISSISSAUGA DEPARTMENT OF ECONOMICS ECONOMICS 336Y5Y Fall/Winter 2011/12 PUBLIC ECONOMICS Spring Term Test Sample Solutions Feb. 28, 2014 Please fill in your full name and student

More information

Exam 1 Spring 2006 Version G Solution

Exam 1 Spring 2006 Version G Solution Peter J. Wilcoxen Economics 410 Exam 1 Spring 2006 Version G Solution The Maxwell School Syracuse University Part 1: Single Source Pollution (20 points) Suppose that electricity can be produced by nuclear

More information

Tutorial 1. Monopoly and Price Discrimination.

Tutorial 1. Monopoly and Price Discrimination. Tutorial 1. Monopoly and Price Discrimination. Question 1. Suppose there are 10 students in a class and teacher brings a bag with 10 candies. Assume all students have identical preferences and have positive

More information

Eco 200 Group Activity 4 Key Chap 13 & 14 & 15

Eco 200 Group Activity 4 Key Chap 13 & 14 & 15 Eco 200 Group Activity 4 Key Chap 13 & 14 & 15 Chapter 13: 1. 4 th Edition: p. 285, Problems and Applications, Q4 3 rd Edition: p. 286, Problems and Applications, Q4 a. The following table shows the marginal

More information

Fall 2007 Economics 431 Mid-Term Exam Prof. Hamilton

Fall 2007 Economics 431 Mid-Term Exam Prof. Hamilton Fall 2007 Economics 431 Mid-Term Exam Prof. Hamilton Name: KEY Question 1A. (15 points) Externalities and Monopoly Markets Demonstrate on a diagram that the deadweight loss from a negative production externality

More information

Marginal Decisions and Externalities - Examples 1

Marginal Decisions and Externalities - Examples 1 Marginal Decisions and Externalities - Examples 1 Externalities drive the free market away from the socially efficient equilibrium. As microeconomists, we re interested in maximizing social welfare, so

More information

Unit 9: Utility, Externalities, and Factor Markets Lesson 4: Externalities

Unit 9: Utility, Externalities, and Factor Markets Lesson 4: Externalities Unit 9: Utility, Externalities, and Factor Markets Lesson 4: Externalities Objectives: - Define externality - Draw negative and positive externality graphs. - Explain the remedies for positive and negative

More information

Lab 17: Consumer and Producer Surplus

Lab 17: Consumer and Producer Surplus Lab 17: Consumer and Producer Surplus Who benefits from rent controls? Who loses with price controls? How do taxes and subsidies affect the economy? Some of these questions can be analyzed using the concepts

More information

CHAPTER 10 MARKET POWER: MONOPOLY AND MONOPSONY

CHAPTER 10 MARKET POWER: MONOPOLY AND MONOPSONY CHAPTER 10 MARKET POWER: MONOPOLY AND MONOPSONY EXERCISES 3. A monopolist firm faces a demand with constant elasticity of -.0. It has a constant marginal cost of $0 per unit and sets a price to maximize

More information

Ans homework 5 EE 311

Ans homework 5 EE 311 Ans homework 5 EE 311 1. Suppose that Intel has a monopoly in the market for microprocessors in Brazil. During the year 2005, it faces a market demand curve given by P = 9 - Q, where Q is millions of microprocessors

More information

What are the conditions that lead to a perfectly competitive market?

What are the conditions that lead to a perfectly competitive market? Review: Lecture 1. Idea of constrained optimization. Definitions of economics. Role of marginal analysis. Economics as a way to explain. Also used to predict. Chapter 1 and 2. What is a market? What are

More information

A Detailed Price Discrimination Example

A Detailed Price Discrimination Example A Detailed Price Discrimination Example Suppose that there are two different types of customers for a monopolist s product. Customers of type 1 have demand curves as follows. These demand curves include

More information

A firm produces an output Q that generates environmental damages according to the

A firm produces an output Q that generates environmental damages according to the Old Exam Solutions (Part ) Question (worth points) A firm produces an output Q that generates environmental damages according to the following marginal damage function: MD ( Q) Q. The firm s marginal benefit

More information

Chapter 18. Externalities and Public Goods. Externalities. Negative Externalities

Chapter 18. Externalities and Public Goods. Externalities. Negative Externalities Chapter 18 Externalities and Public Goods Chapter 18 1 Externalities Externalities are the effects of production and consumption activities not directly reflected in the market They can be negative or

More information

False_ If there are no fixed costs, then average cost cannot be higher than marginal cost for all output levels.

False_ If there are no fixed costs, then average cost cannot be higher than marginal cost for all output levels. LECTURE 10: SINGLE INPUT COST FUNCTIONS ANSWERS AND SOLUTIONS True/False Questions False_ When a firm is using only one input, the cost function is simply the price of that input times how many units of

More information

Chapter 5. Externalities, Environmental Policy, and Public Goods

Chapter 5. Externalities, Environmental Policy, and Public Goods Chapter 5. Externalities, Environmental Policy, and Public Goods Instructor: JINKOOK LEE Department of Economics / Texas A&M University ECON 202 504 Principles of Microeconomics Externalities Externality:

More information

Final Exam 9 December 2008

Final Exam 9 December 2008 Eco 301 Name Final Exam 9 December 2008 125 points. Please write all answers in ink. Please use pencil and a straight edge to draw graphs. Allocate your time efficiently. 1. Suppose a perfectly discriminating

More information

EconS 330, Fall 2013 Homework #1: Due September 13th ANSWER KEY

EconS 330, Fall 2013 Homework #1: Due September 13th ANSWER KEY EconS 330, Fall 013 Homework #1: Due September 13th ANSWER KEY Instructor: Ana Espinola, anaespinola@wsu.edu O ce hours: Tuesdays 3.00-4.00pm, or by appointment 1 Question #1-15 Points Serious problems

More information

Externalities, Market Failure and Government

Externalities, Market Failure and Government Efficient Wage Theory. rinciples of Microeconomics, Fall Chia-Hui Chen December, Lecture Externalities, Market Failure and Government Outline. Chap : Efficient Wage Theory. Chap : Externalities. Chap :

More information

Chapter 17. The Economics of Pollution Control

Chapter 17. The Economics of Pollution Control Chapter 17 The Economics of Pollution Control Economic Rationale for Regulating Pollution Pollution as an Externality -pollution problems are classic cases of a negative externality -the MSC of production

More information

Midterm Exam #1 - Answers

Midterm Exam #1 - Answers Page 1 of 9 Midterm Exam #1 Answers Instructions: Answer all questions directly on these sheets. Points for each part of each question are indicated, and there are 1 points total. Budget your time. 1.

More information

Economics 201 Fall 2010 Introduction to Economic Analysis Problem Set #6 Due: Wednesday, November 3

Economics 201 Fall 2010 Introduction to Economic Analysis Problem Set #6 Due: Wednesday, November 3 Economics 201 Fall 2010 Introduction to Economic Analysis Jeffrey Parker Problem Set #6 Due: Wednesday, November 3 1. Cournot Duopoly. Bartels and Jaymes are two individuals who one day discover a stream

More information

PART A: For each worker, determine that worker's marginal product of labor.

PART A: For each worker, determine that worker's marginal product of labor. ECON 3310 Homework #4 - Solutions 1: Suppose the following indicates how many units of output y you can produce per hour with different levels of labor input (given your current factory capacity): PART

More information

Outline of model. Factors of production 1/23/2013. The production function: Y = F(K,L) ECON 3010 Intermediate Macroeconomics

Outline of model. Factors of production 1/23/2013. The production function: Y = F(K,L) ECON 3010 Intermediate Macroeconomics ECON 3010 Intermediate Macroeconomics Chapter 3 National Income: Where It Comes From and Where It Goes Outline of model A closed economy, market-clearing model Supply side factors of production determination

More information

Chapter 10. Perfect Competition

Chapter 10. Perfect Competition Chapter 10 Perfect Competition Chapter Outline Goal of Profit Maximization Four Conditions for Perfect Competition Short run Condition For Profit Maximization Short run Competitive Industry Supply, Competitive

More information

Chapter 17 Externalities and Public Goods

Chapter 17 Externalities and Public Goods Chapter 17 Externalities and Public Goods Solutions to Review Questions 1. What is the difference between a positive externality and a negative externality? Describe an example of each. With a negative

More information

2 Some economics of price discrimination

2 Some economics of price discrimination 1 Price discrimination Price differences are ubiquitous in the real world In-state residents and out-of-state residents pay different tuition to attend the same public university A passenger who purchases

More information

PROBLEM SET #6: PRODUCTION COSTS, PERFECT COMPETITION, MONOPOLY, PRICE DISCRIMINATION

PROBLEM SET #6: PRODUCTION COSTS, PERFECT COMPETITION, MONOPOLY, PRICE DISCRIMINATION Professor Gregory Clark ECON 1A, Fall 2000 PROBLEM SET #6: PRODUCTION COSTS, PERFECT COMPETITION, MONOPOLY, PRICE DISCRIMINATION Notes: If the total cost function of a firm has the form TC = a + bq + cq

More information

Module 2 Lecture 5 Topics

Module 2 Lecture 5 Topics Module 2 Lecture 5 Topics 2.13 Recap of Relevant Concepts 2.13.1 Social Welfare 2.13.2 Demand Curves 2.14 Elasticity of Demand 2.14.1 Perfectly Inelastic 2.14.2 Perfectly Elastic 2.15 Production & Cost

More information

ECO 300 Fall 2005 January 10 EXTERNALITIES BASIC CONCEPT

ECO 300 Fall 2005 January 10 EXTERNALITIES BASIC CONCEPT ECO 300 Fall 2005 January 10 EXTERNALITIES BASIC CONCEPT Almost every economic action of consumers and producers creates costs and benefits for others When I consume something, there is less left for others

More information

AP Microeconomics 2002 Scoring Guidelines

AP Microeconomics 2002 Scoring Guidelines AP Microeconomics 2002 Scoring Guidelines The materials included in these files are intended for use by AP teachers for course and exam preparation in the classroom; permission for any other use must be

More information

Review for the Midterm Exam.

Review for the Midterm Exam. Review for the Midterm Exam. 1. Chapter 1 The principles of decision making are: o People face tradeoffs. o The cost of any action is measured in terms of foregone opportunities. o Rational people make

More information

Economics questions for Unit 3, page 71, numbers 4 and 5 Sept. 21, 2012

Economics questions for Unit 3, page 71, numbers 4 and 5 Sept. 21, 2012 Economics questions for Unit 3, page 71, numbers 4 and 5 Kaiya Yamada Sept. 21, 2012 4. Using a diagram, explain the concept of community surplus. Community surplus is the welfare of society, and it is

More information

Market Supply in the Short Run

Market Supply in the Short Run Equilibrium in Perfectly Competitive Markets (Assume for simplicity that all firms have access to the same technology and input markets, so they all have the same cost curves.) Market Supply in the Short

More information

Principles of Macroeconomics Prof. Yamin Ahmad ECON 202 Fall 2004

Principles of Macroeconomics Prof. Yamin Ahmad ECON 202 Fall 2004 Principles of Macroeconomics Prof. Yamin Ahmad ECON 202 Fall 2004 Sample Final Exam Name Id # Part B Instructions: Please answer in the space provided and circle your answer on the question paper as well.

More information

1. Suppose demand for a monopolist s product is given by P = 300 6Q

1. Suppose demand for a monopolist s product is given by P = 300 6Q Solution for June, Micro Part A Each of the following questions is worth 5 marks. 1. Suppose demand for a monopolist s product is given by P = 300 6Q while the monopolist s marginal cost is given by MC

More information

Problem Set- Chapter 2 Solutions

Problem Set- Chapter 2 Solutions roblem Set- Chapter 2 Solutions 1. Ch 2, roblem 2.1 The demand for beer in Japan is given by the following equation: d 700 2 N + 0.1I, where is the price of beer, N is the price of nuts, and I is average

More information

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. Chapter 11 Monopoly practice Davidson spring2007 MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) A monopoly industry is characterized by 1) A)

More information

Monopoly and Perfect Competition Compared

Monopoly and Perfect Competition Compared Monopoly and Perfect Competition Compared I. Definitions of Efficiency A. Technological efficiency occurs when: Given the output produced, the costs of production (recourses used) are minimized. or Given

More information

Tutorial 6 - Perfect Competition

Tutorial 6 - Perfect Competition Tutorial 6 - Perfect Competition March 2014 Problem 1 In a small, but perfectly competitive market for pineapples, there are 8 identical growers. Each grower has the following cost function: C = 2 + 2q

More information

Table of Contents MICRO ECONOMICS

Table of Contents MICRO ECONOMICS economicsentrance.weebly.com Basic Exercises Micro Economics AKG 09 Table of Contents MICRO ECONOMICS Budget Constraint... 4 Practice problems... 4 Answers... 4 Supply and Demand... 7 Practice Problems...

More information

Figure 1. D S (private) S' (social) Quantity (tons of medicine)

Figure 1. D S (private) S' (social) Quantity (tons of medicine) Price per ton Practice Homework Pollution & Environment Economics 101 The Economic Way of Thinking 1. Suppose that the production of pharmaceuticals generates pollution of the Columbia River, which is

More information

Suggested Solutions to Assignment 1 (Optional)

Suggested Solutions to Assignment 1 (Optional) EC 238 Environmental Economics Instructor: harif F. Khan Department of Economics ilfrid Laurier University Intersession 2009 uggested olutions to Assignment 1 (Optional) Part A True/ False/ Uncertain Questions

More information

Figure 1. Quantity (tons of medicine) b. What is represented by the vertical distance between the two supply curves?

Figure 1. Quantity (tons of medicine) b. What is represented by the vertical distance between the two supply curves? Price per ton Practice Homework Pollution & Environment Economics 101 The Economic Way of Thinking 1. Suppose that the production of pharmaceuticals generates pollution of the Columbia River, which is

More information

(Perfect) Competition

(Perfect) Competition (Perfect) Competition (Perfect) Competition The model of perfect competition is based on the following assumptions: (Perfect) Competition The model of perfect competition is based on the following assumptions:

More information

Professor Scholz Posted: 11/17/2009 Economics 101, Problem Set #10 Due: 11/24/2009 Externality

Professor Scholz Posted: 11/17/2009 Economics 101, Problem Set #10 Due: 11/24/2009 Externality Professor Scholz Posted: 11/17/2009 Economics 101, Problem Set #10 Due: 11/24/2009 Externality Problem 1 For each of the following examples, state whether there are externalities (positive, negative, or

More information

Chapter 15: Externalities

Chapter 15: Externalities Chapter 15: Externalities Econ 102: Introduction to Microeconomics 1 1.1 Goals of this class Goals of this class Learn about market failure. Learn how economic decisions can negatively affect others in

More information

6. Which of the following is likely to be the price elasticity of demand for food? a. 5.2 b. 2.6 c. 1.8 d. 0.3

6. Which of the following is likely to be the price elasticity of demand for food? a. 5.2 b. 2.6 c. 1.8 d. 0.3 Exercise 2 Multiple Choice Questions. Choose the best answer. 1. If a change in the price of a good causes no change in total revenue a. the demand for the good must be elastic. b. the demand for the good

More information

AP Microeconomics 2011 Scoring Guidelines

AP Microeconomics 2011 Scoring Guidelines AP Microeconomics 2011 Scoring Guidelines The College Board The College Board is a not-for-profit membership association whose mission is to connect students to college success and opportunity. Founded

More information

MATH MODULE 11. Maximizing Total Net Benefit. 1. Discussion M11-1

MATH MODULE 11. Maximizing Total Net Benefit. 1. Discussion M11-1 MATH MODULE 11 Maximizing Total Net Benefit 1. Discussion In one sense, this Module is the culminating module of this Basic Mathematics Review. In another sense, it is the starting point for all of the

More information

Learning Objectives. Essential Concepts

Learning Objectives. Essential Concepts Learning Objectives After reading Chapter 16 and working the problems for Chapter 16 in the textbook and in this Workbook, you should be able to: Essential Concepts Define the concept of social economic

More information

Economics 101 Fall 2011 Homework #3 Due 10/11/11

Economics 101 Fall 2011 Homework #3 Due 10/11/11 Economics 101 Fall 2011 Homework #3 Due 10/11/11 Directions: The homework will be collected in a box before the lecture. Please place your name, TA name and section number on top of the homework (legibly).

More information

Price Ceilings The maximum legal price that can be charged Examples: Gasoline prices in the 1970s, Housing in New York City

Price Ceilings The maximum legal price that can be charged Examples: Gasoline prices in the 1970s, Housing in New York City ECON4 (Fall 00) 5. 9. 00 (Tutorial ) Chapter Market Forces: Demand and Supply Price Ceilings The maximum legal price that can be charged Examples: Gasoline prices in the 970s, Housing in New York City

More information

Externalities. April 12, 2007

Externalities. April 12, 2007 Rosench5 1 Externalities April 12, 2007 1 Outline of Chapter 1. Define externalities: positive/negative 2. Inefficiency and externalities basic problem: lack of property rights 3. Restoring efficiency

More information

C H A P T E R 18 Externalities and. Public Goods CHAPTER OUTLINE

C H A P T E R 18 Externalities and. Public Goods CHAPTER OUTLINE C H A P T E R 18 Externalities and Public Goods CHAPTER OUTLINE 18.1 Externalities 18.2 Ways of Correcting Market Failure 18.3 Stock Externalities 18.4 Externalities and Property Rights 18.5 Common Property

More information

Market Failures. Lecture 13: Market Failure and Government Action. Insufficient Competition. Insufficient Competition. Insufficient Competition

Market Failures. Lecture 13: Market Failure and Government Action. Insufficient Competition. Insufficient Competition. Insufficient Competition Slide 17-1 Lecture 13: Market Failure and Government Action Market Failures Markets can fail to be efficient: Readings: Chapters 13 (pp.313-315), 16, 17 Public goods And Markets can be unfair: Inequality

More information

Chapter 1 The Fundamentals of Managerial Economics Study Outline

Chapter 1 The Fundamentals of Managerial Economics Study Outline Chapter 1 The Fundamentals of Managerial Economics Study Outline I. Introduction A. The Manager B. Economics C. Managerial Economics Defined II. The Economics of Effective Management A. Identify Goals

More information

MICROECONOMICS - EXAM III

MICROECONOMICS - EXAM III MICROECONOMICS - EXAM III Spring 2004 G. Garesché 1. a. On the axes below, graph a production function. Indicate the three stages of the production function and label each with the returns expected. b.

More information

Market Failure. EC4004 Lecture 9

Market Failure. EC4004 Lecture 9 Market Failure EC4004 Lecture 9 Today. Online Exam. Quantity Demanded, Quantity Supplied at each price 10 9 8 7 6 5 4 3 2 1 Supply at each Price, S(p) t Demand at each Price, D(p) 1 2 3 4 5 6 7 8 9 10

More information

AGEC 105 Spring 2016 Homework 7. 1. Consider a monopolist that faces the demand curve given in the following table.

AGEC 105 Spring 2016 Homework 7. 1. Consider a monopolist that faces the demand curve given in the following table. AGEC 105 Spring 2016 Homework 7 1. Consider a monopolist that faces the demand curve given in the following table. a. Fill in the table by calculating total revenue and marginal revenue at each price.

More information

ECON 1100 Global Economics (Fall 2013) Surplus, Efficiency, and Deadweight Loss

ECON 1100 Global Economics (Fall 2013) Surplus, Efficiency, and Deadweight Loss ECON 11 Global Economics (Fall 213) Surplus, Efficiency, and Deadweight Loss Relevant Readings from the Required Textbooks: Economics Chapter 5, Surplus, Efficiency, and Deadweight Loss Definitions and

More information

Cosumnes River College Principles of Macroeconomics Problem Set 9 Due November 10, 2015

Cosumnes River College Principles of Macroeconomics Problem Set 9 Due November 10, 2015 Name: Solutions Cosumnes River College Principles of Macroeconomics Problem Set 9 Due November 10, 2015 Fall 2015 Prof. Dowell Instructions: Write the answers clearly and concisely on these sheets in the

More information

Name Eco200: Practice Test 2 Covering Chapters 10 through 15

Name Eco200: Practice Test 2 Covering Chapters 10 through 15 Name Eco200: Practice Test 2 Covering Chapters 10 through 15 1. Four roommates are planning to spend the weekend in their dorm room watching old movies, and they are debating how many to watch. Here is

More information

Equilibrium is the Intersection of Supply and Demand Curves. Partial Equilibrium Analysis. Price Setting. Supply and Demand Elasticities

Equilibrium is the Intersection of Supply and Demand Curves. Partial Equilibrium Analysis. Price Setting. Supply and Demand Elasticities rof. Jay Bhattacharya Econ 11--Lecture 16 artial Analysis We have now analyzed the intricate workings of market supply and demand curves from the bottom up. Today, we will put together these curves to

More information

2. State whether the following statements are true or false, and explain why.

2. State whether the following statements are true or false, and explain why. 1 Chapter 9 Problems 2. State whether the following statements are true or false, and explain why. a. In a perfectly competitive industry the industry demand curve is horizontal, whereas for a monopoly

More information

Market structure 1: perfect competition

Market structure 1: perfect competition Market structure 1: perfect competition 1. Definition of profit 2. Conditions for profit maximization - general 3. Definition of perfect competition 4. SR supply curve - firm, market 5. SR market equilibrium

More information

Gains From Trade Consumer Surplus Quantifying Welfare Effects Producer Surplus Welfare in Equilibrium. Consumer Surplus and Welfare Measurement

Gains From Trade Consumer Surplus Quantifying Welfare Effects Producer Surplus Welfare in Equilibrium. Consumer Surplus and Welfare Measurement Consumer Surplus and Welfare Measurement Questions Q: How can we... Find a monetary measure of a consumer s utility/happiness? Evaluate a consumer s willingness to pay for a unit of a good? Evaluate whether

More information

Answers to Text Questions and Problems in Chapter 7

Answers to Text Questions and Problems in Chapter 7 Answers to Text Questions and Problems in Chapter 7 Answers to Review Questions 1. If a policy is not efficient, then it can, by definition, be altered in a way that benefits at least some people without

More information

The table below shows the prices of the only three commodities traded in Shire.

The table below shows the prices of the only three commodities traded in Shire. Economics 101 Fall 2012 Homework #4 Due 11/20/2012 Directions: The homework will be collected in a box before the lecture. Please place your name, TA name and section number on top of the homework (legibly).

More information

Good Luck writing the Mock Exam!!

Good Luck writing the Mock Exam!! PASS MOCK EXAM FOR PRACTICE ONLY Course: ECON 1000 B Facilitator: Ben Dates and locations of mock exam take up: FRIDAY DECEMBER 11: 10 12 ME 3380 1 3 ME 3380 It is most beneficial to you to write this

More information

This assignment will teach you how use marginal analysis in making business and personal decisions and review the fundamentals of graphing.

This assignment will teach you how use marginal analysis in making business and personal decisions and review the fundamentals of graphing. Lab 11 Agricultural and Resource Economics (ARE 201) This lab assignment is worth 100 points. Unless instructed differently, you are to complete the assignment and have it to me by this Thursday at 5:00

More information

PROBLEM SET #6: PERFECT COMPETITION,

PROBLEM SET #6: PERFECT COMPETITION, Professor Gregory Clark ECON 1A, Spring 2002 PROBLEM SET #6: PERFECT COMPETITION, Notes: If the total cost function of a firm has the form TC = a + bq + cq 2, then the marginal cost of the firm is MC =

More information

Econ 170: Contemporary Economics Spring 2008 Exam 1 / Section F: SOLUTIONS. 1. Production possibilities and opportunity costs of missiles and houses

Econ 170: Contemporary Economics Spring 2008 Exam 1 / Section F: SOLUTIONS. 1. Production possibilities and opportunity costs of missiles and houses Econ 170: Contemporary Economics Spring 2008 Exam 1 / Section F: SOLUTIONS 1. Production possibilities and opportunity costs of missiles and houses The table below shows the tradeoff between different

More information

Intermediate Microeconomics. Chapter 13 Monopoly

Intermediate Microeconomics. Chapter 13 Monopoly Intermediate Microeconomics Chapter 13 Monopoly Non-competitive market Price maker = economic decision maker that recognizes that its quantity choice has an influence on the price at which it buys or sells

More information

18 EXTERNALITIES. Chapter. Key Concepts. A Product With an External Cost

18 EXTERNALITIES. Chapter. Key Concepts. A Product With an External Cost Chapter 18 EXTERNALITIES Key Concepts FIGURE 18.1 A Product With an External Cost Externalities in Our Lives An externality is a cost or benefit that arises from production and falls on someone other than

More information

Public Goods and Common Resources

Public Goods and Common Resources CHAPTER 16 Public Goods and Common Resources After studying this chapter you will be able to Distinguish among private goods, public goods, and common resources Explain how the free-rider problem arises

More information

(that is to say it takes place in a way other than through changing prices).

(that is to say it takes place in a way other than through changing prices). McPeak Lecture 12 PPA 723 Externalities. An externality occurs when an economic agent s consumption or production activities confer a benefit or impose a cost on other actors, and this benefit is conferred

More information

Principles of Microeconomics

Principles of Microeconomics Principles of Microeconomics David C. Broadstock December 25, 2013 The following questions are to be completed by hand and submitted during the final class on December 23rd. Final homework questions Question

More information

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. ECN 202 Midterm 2 MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) When a sales tax is imposed on sellers, the supply curve shifts so that the vertical

More information

Examples on Monopoly and Third Degree Price Discrimination

Examples on Monopoly and Third Degree Price Discrimination 1 Examples on Monopoly and Third Degree Price Discrimination This hand out contains two different parts. In the first, there are examples concerning the profit maximizing strategy for a firm with market

More information

Problem Set 9 (75 points)

Problem Set 9 (75 points) Problem Set 9 (75 points) 1. A student argues, "If a monopolist finds a way of producing a good at lower cost, he will not lower his price. Because he is a monopolist, he will keep the price and the quantity

More information

ECON 103, 2008-2 ANSWERS TO HOME WORK ASSIGNMENTS

ECON 103, 2008-2 ANSWERS TO HOME WORK ASSIGNMENTS ECON 103, 2008-2 ANSWERS TO HOME WORK ASSIGNMENTS Due the Week of June 23 Chapter 8 WRITE [4] Use the demand schedule that follows to calculate total revenue and marginal revenue at each quantity. Plot

More information

1 SHORT ANSWER QUESTIONS

1 SHORT ANSWER QUESTIONS Tort Law Suggested Answers 1 SHORT ANSWER QUESTIONS Comment on the Following: 1. [2002, Midterm #2a] Suppose that all doctors were held strictly liable for injuries they cause to their patients. What are

More information

ECN 221 Chapter 5 practice problems This is not due for a grade

ECN 221 Chapter 5 practice problems This is not due for a grade ECN 221 Chapter 5 practice problems This is not due for a grade 1. Assume the price of pizza is $2.00 and the price of Beer is $1.00 and that at your current levels of consumption, the Marginal Utility

More information

ECON 2200, John Diggelman. Suppose a farmer has two different fields that can be used to grow either corn or wheat.

ECON 2200, John Diggelman. Suppose a farmer has two different fields that can be used to grow either corn or wheat. ECON 2200, John Diggelman Name: Problem Set #2 1. Production Possibilities Suppose a farmer has two different fields that can be used to grow either corn or wheat. a. Field A consists of 10 acres and each

More information

CHAPTER 8 PROFIT MAXIMIZATION AND COMPETITIVE SUPPLY

CHAPTER 8 PROFIT MAXIMIZATION AND COMPETITIVE SUPPLY CHAPTER 8 PROFIT MAXIMIZATION AND COMPETITIVE SUPPLY REVIEW QUESTIONS 1. Why would a firm that incurs losses choose to produce rather than shut down? Losses occur when revenues do not cover total costs.

More information