eep162_Final_inclass_2009_answerkey

eep162_Final_inclass_2009_answerkey - EEP 162 FINAL EXAM 16...

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EEP 162 FINAL EXAM – 16 MAY 2009 Take time to think about your answer before you begin writing. Points will be awarded both on the content of your answers and in your ability to be concise in your questions. When appropriate, please show relevant calculations. You might find it helpful to use graphs in some of your answers, just explain and label them If a question is unclear, ask Damian for clarification. Write your name and SID on this exam and hand this in with your work. Do not discuss this exam with others who have not taken it. 40 points total—about 4.5 minutes per point Multiple Choice (2/3 point each) 1. Do price changes affect residential water demand? A) Yes, immediately B) Yes, but it may take some time C) No, people need water to survive and thus price has no effect on residential usage D) Only in large lot households 2. Lambda as we have used it in this class represents A) The increase in the objective function from relaxing the constraint one unit B) The demand for water C) The shadow price for water D) Two of the above 3. Spiller and Savedoff say the following in their paper: “Regulation, if credible, solves a key contracting problem between the government and the utilities by restraining the government from opportunistically expropriating the utilities' quasirents." Considering this statement, which if the following is true? A) The utility earns an undue profit after investment in a new water supply project, and therefore the government must make sure they do not raise rates too high B) The utilities’ quasirents refer to money that is the result of price gouging—it is revenue not necessary for provision of water and construction of water projects—and therefore the government should prevent this from happening. C) The government is tempted to raise the rates of utilities, and thus should be restricted. D) The utility earns rents above and beyond what is necessary to encourage the company to deliver water after a water project is built; the government is thus tempted to reduce rates. 4. Kanazawa’s paper on the Bureau Pricing policies said that increasing water prices may not have an effect on water usage in federal districts because A) Farmers are already efficient B) Farmers need a certain amount of water to grow the crops C) Farmers are quantity constrained, and so their value of water is above the marginal price the bureau charges D) All of the above
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5. A coefficient that is statistically insignificant means A) The corresponding independent variable DOES not have an effect on the dependent variable B) The corresponding independent variable DOES have an effect on the dependent variable, but insufficient data were collected to deduce this C) The corresponding independent variable has a nonlinear effect on the dependent variable D) All of the above E) A and B only NOTE—THIS QUESTION WAS NOT COUNTED BECAUSE I FORGOT AN EDIT THAT CHANGES DOES ABOVE TO “MAY”. 6. Summer residential water usage is typically higher than winter usage in California.
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eep162_Final_inclass_2009_answerkey - EEP 162 FINAL EXAM 16...

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