Problem Set 5

Problem Set 5 - Econ 100A Microeconomics Professor Reynolds...

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Econ 100A – Microeconomics Professor Reynolds Department of Economics University of California, Berkeley Problem Set 5 Due 8:10 am April 7 1. 21.12 A except e &g and i & j below. i. Consider an alternative policy to a subsidy on green cars to be a pollution tax on polluting cars. Illustrate how the markets for polluting & green cars change with this new policy. (Assume all cars in each category to produce the same amount of pollution.) j. Finally consider a cap & trade policy for pollution, now with older cars producing more pollution than younger cars. Green cars produce no pollution. Explain what happens the “demographics” of cars on the road. How will that change if greenies decide to purchase some of the pollution rights? 2. The N consumers in the economy have the utilty function x n 1/2 Y 1/2 , where x n is the amount individual n spends on private consumption and Y is the public good national defense. Each consumer has an income I.
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Problem Set 5 - Econ 100A Microeconomics Professor Reynolds...

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