question #9 & #14

Economics 1001 Final Exam Version A Fall 2019 Scenario 1: Beer Sales in New York City: The table below shows a representative consumer's willingness to pay for a six-pack of beer. Assume the supply of beer is perfectly elastic. First pack $16 – 3: 9 Second pack $12- 79 Third pack $10 – 14 2 C S: 10 Fourth pack $8 – 9 – Fifth pack $5 – > t -2 8. Refer to Scenario 1: Beer Sales in New York City: If in the cost per six pack is $7 how many packs does each person buy and what is her consumer surplus (CS) assuming No negative externalities exist from the consumption of beer. a) 4 packs, CS=$20 b) 3 packs, CS=$17 C 4 packs, CS=$18 at 4 packs, CS-$19 9. Refer to Scenario 1: Beer Sales in New York City: Suppose the government imposes an excise of tax of $2 per six pack on suppliers and the tax revenue is to be used to fund healthcare. Assuming No negative externalities, how much of the tax is borne by consumers and what is the total surplus after the tax? a) all of it because the elasticity of supply is perfectly elastic, total surplus = $17 b) none of it because the elasticity of supply is perfectly elastic, total surplus = $17 sl none of it because the elasticity of demand in inelastic, total surplus = $11 d) all of it because the elasticity of supply is perfectly elastic, total surplus – 511 10. If a shortage exists in a market, then we know that the actual price is a) above the equilibrium price, and quantity supplied is greater than quantity demanded. b) above the equilibrium price, and quantity demanded is greater than quantity supplied. ch below the equilibrium price, and quantity demanded is greater than quantity supplied d) below the equilibrium price, and quantity supplied is greater than quantity demanded Table 2: Consider the town of Springfield with only three residents, Sophia, Amber, and Cedric. The three residents are trying to determine how large, in acres, they should build the public park. The table below shows each resident's willingness to pay for each acre of the park. Acres Cedric Sophia $10 8 6 Amber $24 18 14 TWIP-TC 4o-is 25 31 15 16 243 mond 14 IS Tsiso Version A Economics 1001 Final Exam Version A Fall 2019 11. Refer to Table 2: Suppose the cost to build the bar is $15 per acre. How large should the park be to maximize total surplus from the park in Springfield? (a3 acres that creates a total surplus of $ 50. ) 3 acres that creates a total surplus of $ 9. c) 4 acres that creates a total surplus of $ 50 d) 4 acres that creates a total surplus of $ 49 Unit Permis 10 100,000 100,003 S0200 TOD 083 TOOL 800k 12. The city of Gotham has three large manufacturers, Oscoro, Wayne Enterprises, and Stark Industries. The table below shows each firms current level of pollution and the cost per unit of eliminating pollution from its production L+C o Firm look Initial Pollution Level Cost of Reducing by 1 Unit Oscorp 100,000 150,000 15014 Wayne Enterprises 150,000 200,000 OL Stark Industries 200,000 200C The city government wants to reduce total pollution by 150.000 units. It awards each manufacturer with a permit, giving it the right to emit 100,000 units of pollution. What will be the cost of the pollution reduction if the permits cannot be traded? What will be the cost of the reduction if the permits are E allowed to be traded? a) The reduction will cost $800,000 if the permits cannot be traded, and 5600,000 if they can be traded b) The reduction will cost $600,000 if the permits cannot be traded, and $800,000 if they can be traded The reduction will cost $1,000,000 if the permits cannot be traded, and $400,000 if they can be traded d) The reduction will cost $400,000 if the permits cannot be traded, and $1,000,000 if they can be traded 1011 M C 13. Negative Externality: Suppose demand in a certain market can be represented by P = 100 – 200 and supply can be represented P = 10 + 30 Price is in dollars and quantity is in thousands suppose further that there is a negative externality present in this market. The external cost is $10 per unit. What is the socially optimal quantity which will maximize total surplus? al 12,000 P + lo = 100-20° 80-2Qº: 1030% (b) 14,000 c) 16,000 P = 80 – 200 70 =5Q d) 18,000 Q=14. 14. Which of the following statements is INCORRECT? al One solution to the “Tragedy of the Commons” is to turn the common resource into a private good b)) In some cases, the government can make everyone better off by raising taxes to pay for certain goods that the market fails to provide. Pollution is a negative externality, but it is not appropriate to view the problem of pollution as a common-resource problem. d) Markets may fail to allocate resources efficiently when property rights are not well established Pollution permits Permits used i Cast itoral Took 10 TOD 2ook Sok 2ook zool Boot Todola o Isok Versionhole 1001 200l 11 Milion usok

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