Quiz 3 Ec21 S2015.pdf

Quiz 3 Ec21 S2015.pdf - Dartmouth ID(not name Economics 21...

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Page 1 of 8 Dartmouth ID ( not name): ___________________________ Economics 21 Spring 2015 Quiz 3 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 one extra page 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 8 1. Short Answer Questions (12 points) a. Define “the law of diminishing marginal returns.” b. Suppose there are 5 possible allocations, as indicated in the table below. Write down the letter(s) of the Pareto efficient allocation(s): Allocation: A B C D E Hours worked by: Rose 40 60 20 30 40 Vered 45 30 30 40 50 Zahra 30 20 40 70 60 After-tax earnings of: Rose 80 100 40 60 80 Vered 90 60 80 70 100 Zahra 100 80 110 90 120 Utility of: Rose 12 0 12 17 12 Vered 15 12 18 12 12 Zahra 15 17 15 0 12
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Page 3 of 8 c. In the country of Equilandia, the government decrees that no dairy farm may produce more than 1000 Gallons of milk per day (because the government wants to “equitably” divide the production of milk across farms).
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