e130md1_Fall2007B_Answers

e130md1_Fall2007B_Answers - Econ 130 Midterm 1 Version B...

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
Econ 130 Midterm 1 Version B Answer Key 2) Find Q*: 200 – 2Q = ½Q => Q* = 80 Find Q’ (with tax) : 200-2Q = ½Q + 15 or 185 = 2.5Q => Q’ = 74 DWL = (15*(80-74))/2 = 45 3) a) abatement goal: Z = 10 = Z 1 + Z 2 Efficiency condition: 6Z 1 = 9Z 2 Solve to get 5/3 Z 1 = 10 or Z* 1 = 6. Therefore Z* 2 = 4. b) current pollution 20 tons each. Socially optimal pollution: firm 1: 20 tons - Z* 1 = 14 tons firm 2: 20 tons - Z* 2 = 16 tons Allocation of permits is 15 for each firm, so at social optimum firm 1 sells one permit to
Background image of page 1
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 09/08/2008 for the course ECON 130 taught by Professor Staff during the Winter '08 term at UCSD.

Ask a homework question - tutors are online