Quiz 2 Ec21 W2014.pdf

# Quiz 2 Ec21 W2014.pdf - Dartmouth ID(not name Economics 21...

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Page 1 of 10 Dartmouth ID ( not name): ___________________________ Economics 21 Winter 2014 Quiz 2 Instructions: Show all your work! (no credit for correct answers unless the intermediate steps are shown) You can earn 45 points in total. All items (including the axes) in a graph need to be labeled to get full credit There are two pages at the end in case you need additional space Do not remove the staple or tear out pages Books, notes, your own calculators or cell phones are not allowed. You are only allowed to use the calculator provided by me. Good luck!

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Page 2 of 10 1. Short Answer Questions (17 points) a. Give the definition of the “compensating variation” of a policy. b. Draw an Engel curve for a luxury good. Give values to two points on the curve: specify a number on the X-axis and the on the Y-axis for two points on the Engel curve. Be sure to label the axes (as always). c. True/False/Uncertain. “If an individual consumes four goods including one inferior good and one necessity, then at least one of the other two goods must be a luxury good.” Explain why . d. Suppose there is a currently a 3% tax on meals eaten at restaurants. A study has estimated that the DWL of this tax is \$30 million per year.
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