mid2 - Economics 290: Canadian Microeconomic Policy Midterm...

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Economics 290: Canadian Microeconomic Policy Midterm #2 July 12, 2006 Instructions: (1) There are 5 questions in this exam. (2) Please limit your answer to the space provided below each question. (3) Please keep your answer short, and clarity will be rewarded. (4) Explain your answers and show how you got them. N a m e : Student Number: Tutorial Section: 1
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1. [5 points] In the Lindahl equilibrium, each consumer of a pure public good pays a price (or tax share) per unit of the good equals the marginal social cost of the good. True/False. Explain. 2. [6 points] Although the marginal cost of producing a pure public good is always positive, some consumers can enjoy the benefit of pure public goods at zero marginal costs. Explain this apparent paradox, if there is one. 2
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3. [17 points] Government is considering the following two options to give childcare subsidies to poor parents: (1) write a check (cash subsidy), and (2) subsidize the hourly rate that a poor family pays for daycare (per-unit subsidy). (a)
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mid2 - Economics 290: Canadian Microeconomic Policy Midterm...

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