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Unformatted text preview: EC314-Fall 2008 Problem Set 3 Matt Turner When you write up your answers, your goal should be to (1) be correct, and (2) convince your reader that your answer is correct. Answers which do not achieve these goals will not be awarded full credit. To accomplish the second objective, it is helpful if your work is legible and if all steps are presented, possibly with a line of explanation. Please STAPLE pages together so that we do not lose them. (This problem set updated: 24 September 2008) . Problems 1. Suppose that the willingness to pay for seal products, y t , at time t , is given by P ( y t ) = 100- y t , and that the slope of the marginal cost of producing seal products is constant at one and fixed costs are zero (so that the supply curve is a line through the origin with slope one). The government is considering an increase in the quota on seal products from 25 to 50. (a) Find the social surplus associated with both policies....
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- Winter '08