ECN 437 Environmental and Resource Economics > Previous Exams

Spring 2012 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) Business as usual (BAU) cost: $50M;

(b) Plan A: $40M ($10M gain relative to BAU);

(c) Plan B: $38M ($12M gain relative to BAU);

(d) Plan B is best because it has the lowest cost (alternatively, it has the highest gain relative to BAU).

Question 2

(a),(b) Pm=$480, Qm=240;

(c),(d) Ps=$600, Qs=200;

(e) Gain is $4800.

Question 3

(a) Qt=5838;

(b) T=$10.81;

(c)-(h) in table below:

Type
Original
Emissions
 Qa
 Cost of
abatement
 Unabated
emissions
 Tax
Payments
H 200 21.62 $117 178.38 $1928
L 500 108.11 $584 391.89 $4237

Question 4

(a) Pp=$120 (Qt=90);
(b)-(d) in the table below:

Type
Original
Emissions
 Qa
 Cost of
abatement
 Target
cost
 Change
needed
 Permits
to sell
 Permits
to buy
 Initial
allocation
1 60 40 $2400 $0 -$2400 20 0 40
2 60 30 $1800 $0 -$1800 15 0 45
3 60 20 $1200 $5400 +$4200 0 35 5

Question 5

(a),(b) A=300, B=5;

(c) Qe=55;

(d) Psub=$25;

(e) Subsidy per unit: $55;

(f) $3025.

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Peter J Wilcoxen, The Maxwell School, Syracuse University
 Revised 12/18/2012