Scribd Logo
Upload

Welcome to Scribd!

  • 207 views

    FieldOlewiler3ce Sample Midterm Answer Key

    Uploaded by

    Jessica Tang
    This document is a sample midterm exam for an environmental economics course. It contains 3 parts - true/false questions with explanations, interpreting graphs, and solving problems. The problems involve calculating aggregate willingness to pay for a public good, determining the most cost effective option for a government project, and analyzing market equilibrium with and without an externality.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd

    FieldOlewiler3ce Sample Midterm Answer Key

    Uploaded by

    Jessica Tang
    207 views4 pages
    This document is a sample midterm exam for an environmental economics course. It contains 3 parts - true/false questions with explanations, interpreting graphs, and solving problems. The problems involve calculating aggregate willingness to pay for a public good, determining the most cost effective option for a government project, and analyzing market equilibrium with and without an externality.

    Original Description:

    Sample midterm

    Copyright

    © © All Rights Reserved

    Available Formats

    PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    This document is a sample midterm exam for an environmental economics course. It contains 3 parts - true/false questions with explanations, interpreting graphs, and solving problems. The problems involve calculating aggregate willingness to pay for a public good, determining the most cost effective option for a government project, and analyzing market equilibrium with and without an externality.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    207 views4 pages

    FieldOlewiler3ce Sample Midterm Answer Key

    Uploaded by

    Jessica Tang
    This document is a sample midterm exam for an environmental economics course. It contains 3 parts - true/false questions with explanations, interpreting graphs, and solving problems. The problems involve calculating aggregate willingness to pay for a public good, determining the most cost effective option for a government project, and analyzing market equilibrium with and without an externality.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 4
    At a glance
    Powered by AI
    The exam is testing concepts related to cost-benefit analysis, externalities, public goods, and supply and demand. It involves calculating areas on graphs, deriving aggregate demand curves, and determining socially optimal levels of output and prices.

    Externalities refer to costs or benefits of an economic activity that are not reflected in market prices. An externality is not necessarily 'bad' and efficiency requires internalizing rather than eliminating externalities.

    That public goods refer only to services supplied by government and that all externalities are bad and must be eliminated.

    Sample Midterm Environmental Economics, 3rd Canadian Edition Field & Olewiler

    Your Name: ________________________________ Student #: _______________________


    TA: _______________________________________ Tutorial Group: __________________

    Part I: True/False/Explain (5 marks each)


    1. If the government prices public transit so that it breaks even, then the net benefit of a
    cost-benefit analysis must be zero

    False: Total benefit is total expenditure plus consumer surplus. If priced to break
    even, then the net benefit is the consumer surplus

    2. All externalities are Bad and must be eliminated.

    False: An externality is any cost or benefit not taken into account by the agent
    creating it. Efficiency implies that the externality should be internalized so that the
    correct amount is created.

    3. The equi-marginal principle will ensure that the reduction in emissions will be the same
    for each firm that is subject to regulation.

    False: It ensures that the MCs are equated. Each firms emissions will be different
    but they will be the most cost effective distribution of emissions

    4. Public goods refer to services supplied by government.

    False: Public goods are those where consumption of the good by one does not reduce
    the available amount for others.

    Page 1
    Sample Midterm Environmental Economics, 3rd Canadian Edition Field & Olewiler

    Part II: Interpreting Graphs (5 marks)

    5. The Following refer to the diagram below: answer questions in terms of areas on the
    graph
    a. If emissions are reduced from Eu to E*, what is the net benefit?
    Eu-b-f
    b. If emissions are at E0, what is the net welfare loss?
    b-d-c
    c. If emissions are at E1, what is the net social cost?
    h-b-g
    d. When emissions are E*, what is the total social cost?
    0-b- Eu
    e. If emissions are zero, what is the net benefit or cost?
    0-b-a

    Page 2
    Sample Midterm Environmental Economics, 3rd Canadian Edition Field & Olewiler

    Part III: Problems (10 Marks each) Answer all questions in the exam booklets provided.
    6. Suppose a public good has the marginal cost given by MC = 4 + 2Q. Skippys MWTP is
    given by P = 24 2.4Q. Myrtles MWTP is P = 20 2Q.
    a. Find the Aggregate MWTP function.
    MWTP = 44 4.4Q
    b. Find the socially optimal Q.
    44 4.4Q = 4 + 2Q
    Q = 6.25, MWTP = 16.5
    c. What would be the fair price? Would they both agree to pay it?
    Fair = 16.5/2 = 8.25
    At Q = 6.25 Skippys MWTP = 9 Myrtles MWTP = 7.5
    Myrtle wouldnt agree to the Fair Price

    7. The demand for trips across a river is Q = 1000 100P, where Q is the number of trips
    per WORK day (assume 250 workdays per year). If the interest rate is 6% determine
    which of the following options you would recommend to the government:
    a. They can build a ferry for $350,000. It takes one year to build the ferry and it will
    run for three years. They would charge a price of $2 per ride, which would just
    cover the operating costs.
    b. They can build a bridge for a cost of $20 million. The bridge would last forever
    and it would be free.

    Page 3
    Sample Midterm Environmental Economics, 3rd Canadian Edition Field & Olewiler

    8. Suppose an industry has 4 firms, each with the following marginal (private) cost function
    MCi = 4qi (i=1,...,4) and the market demand function is P =12 Q.
    a. Find the equation for the industry supply curve
    Firm q = 1/4P, Industry Q = P or P = Q
    b. Find the equilibrium price and quantity and output per firm.
    Q = 6, P = 6, q=3/2

    Now suppose that each firm's production causes external damage. The marginal external
    cost per firm is MECi = 2qi.
    c. What is the marginal social cost per firm (MEC+MC)? If the marginal external
    cost was taken into account by all the firms (MEC+MC), what would be the
    supply curve and the equilibrium price and quantities.
    MSC = 6q; firm supply is q =1/6P industry Q = 2/3P or P = 1.5Q
    Q = 24/5 =4.8 P = 7.2
    d. Calculate the net welfare cost when firms DO NOT take the MEC into account

    Page 4

    You might also like