Econ_260_Final_Exam_Practice_Questions

# Econ_260_Final_Exam_Practice_Questions - Econ 260 Final...

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Econ 260 Final Exam Practice Questions 1. Use a graph to show the deadweight loss associated with a market equilibrium in a market with a negative production externality. 2. A market has a negative consumption externality with the following marginal costs and benefits: MPC = 4 + 0.004Q MEC = 1 + 0.001Q MPB = 20 – 0.003Q Calculate the DWL at the market equilibrium and show on a graph. 3. Aggregate demand question. 1

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Jack’s demand: P = 20 – 0.01Q Jill’s demand: P = 15 – 0.005Q a) Derive and graph the AD curve if this is a private good. b) Derive and graph the AD curve if this is a public good. c) If MC = \$10, what is Q* for a private and public good? 4. Net present value question. A new sewage system will take one year to build at a cost of \$200 million. It will provide annual benefits of \$5 million for the next 50
years (t = 1, …, 50) and have annual maintenance costs of \$0.5 million. At t = 50 there will be a salvage value of \$50 million. a)

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## This note was uploaded on 01/23/2011 for the course ECON 260 taught by Professor Wainwright during the Summer '10 term at Simon Fraser.

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Econ_260_Final_Exam_Practice_Questions - Econ 260 Final...

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