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202--S08 Last Problem Set!

# 202--S08 Last Problem Set! - Economics 202 Last Problem Set...

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Economics 202 Last Problem Set Spring 2008 1. Suppose that the total cost of reducing the amount of sulfur dioxide emitted from the nation’s smokestacks is given by the indicated amounts. Tons of Emissions Reduced (in millions) 0 3.8 6.3 8.2 12.8 Total Cost (in billions) \$0 \$0.5 \$1.1 \$1.9 \$6.9 A. What is the marginal cost of reducing emissions by one ton at each level of emission reduction? B. Suppose that the MSB of reducing emissions is constant and equal to \$300 per ton of emissions reduced. What is the optimal emission reduction? Please answer the same question if MSB = \$750. 2.A. There are two phone-econ lines: Andrei’s True Economic Confessions Line (“I’ve never told anyone this before, but I’m taking Econ 202 and I still don’t understand the profit max rules. Please , Andrei, tell me that I’m not a bad person!”) and Andrew’s Economics Party Line (“I’m just looking to have a good time. Would you think I’m too kinky if I want to talk about oligopoly?”). The following payoff matrix shows the profit, in millions of dollars, as a function of the prices of a ten minute call.

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