Exam_2009_Mid_Term_1

# Exam_2009_Mid_Term_1 - AREC/ECON 478 EXAM I PROF LUECK...

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478 Exam 1 Spring 2008 A R E C / E C O N 4 7 8 P R O F . L U E C K E X A M I S P R I N G 2 0 0 9 1. EMPIRICAL ANALYSIS [20 points] A recent empirical study estimates the determinants of potential state carbon tax revenues using the equation Y = α + β 1 X 1 + β 2 X 2 + β 3 X 3 + ε , where β i is the estimated coefficient for variable X i and Y is the amount the tax revenues (in \$millions) per year. The variables X 1 through X 3 are: the tax on CO2 emissions; the price per barrel of oil (\$); and the state’s per capita income (in \$1,000s/year). The table below shows the estimated coefficients ( β s) from a regression analysis using data from all 50 states for a single year. Assume that all of the estimated coefficients have a low enough variance (standard error) so they are statistically significant. Answer the specific questions below. Independent Variables Estimated coefficients X 1 TAX RATE (\$ per ton of CO2) 12.02 X 2 PRICE OF A BARREL OF OIL (\$) -2.44 X 3 PER CAPITA INCOME (\$1,000s/year) -10.05 (A) Does the evidence support the hypothesis that higher carbon tax rates lead to a reduction in state tax revenues? (B) How much will tax revenues change if the price of oil goes down by \$10 per barrel? (C) Does higher average income increase tax revenues? *** PUT YOUR NAME ON THE BACK ONLY. USE ONLY THE SPACE ALLOTTED FOR YOUR ANSWERS. SHOW ALL WORK. LABEL ALL

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478 Exam 1 Spring 2008 2. WRITING ASSIGNMENT [10 points]. (A) What is the title of the article you are writing about? Author? Publication? (B) Briefly describe the article and the economic questions that you will examine. 3. POLITICAL ECONOMY [15 points]. The table below shows how three voters value (in \$) three government projects designed to provide environmental benefits. (A) What will be the outcome if each project must be decided by majority rule on a separate vote? (B) Which of the projects generate net benefits to the ‘society?’ (C) What will the outcome be, under majority rule, if all three projects are rolled together in an omnibus bill? (D) What will the outcome be voters 1 and 2 agree to support each other but not make any agreements with voter 3? Project Voter 1 – net value Voter 2 – net value Voter 3 – net value New Park \$400 -\$220 -\$210 River Cleanup -80 300 -240 Wildlife Refuge -540 -280 800
478 Exam 1 Spring 2008 4. BUREAUCRACY VS. ENVIRONMENT? [20 points]. Consider a tract of forest land with two uses: commercial timber (T) and wildlife habitat (W). W and T are both measured in acres, so the total land area is W + T. The graph below shows the demand curves (net of production costs) for both uses in terms of land area. The horizontal axis is the total amount of land (W+T) in the tract. (A)

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Exam_2009_Mid_Term_1 - AREC/ECON 478 EXAM I PROF LUECK...

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