{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

e130md1_Fall2007A_Answers

e130md1_Fall2007A_Answers - Econ 130 Midterm 1 Version A...

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

View Full Document Right Arrow Icon
Econ 130 Midterm 1 Version A Answer Key 2) Find Q*: 100 – 2Q = ½Q => Q* = 40 Find Q’ (with tax) : 100-2Q = ½Q + 5 or 95 = 2.5Q => Q’ = 38 DWL = (5*(40-38))/2 = 5 3) a) abatement goal: Z = 10 = Z 1 + Z 2 Efficiency condition: 9Z 1 = 6Z 2 Solve to get 5/3 Z 2 = 10 or Z* 2 = 6. Therefore Z* 1 = 4. b) current pollution 20 tons each. Socially optimal pollution: firm 1: 20 tons - Z* 1 = 16 tons firm 2: 20 tons - Z* 2 = 14 tons Allocation of permits is 15 for each firm, so at social optimum firm 2 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.

{[ snackBarMessage ]}