pubsec-ex1 - BRANDEIS UNIVERSITY Department of Economics...

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BRANDEIS UNIVERSITY Department of Economics Economics 134 Mr. Coiner Public Sector Spring, 2009 First Exam 1. Suppose Christina can each work as many hours as she wishes up to 2000 hours per year at a wage of $8 per hour. She chooses to work 1000 hours. Then an income guarantee program is enacted with a guarantee of $2000 per year and a benefit reduction ratio of 25%. a) Draw the 2 budget lines (the original one and the one after the enactment of the guarantee program). Be as precise as you can. In particular, indicate the slopes of the lines precisely, and indicate where the two lines intersect. b) Under the guarantee program, does Christina work more than 1000 hours, less than 1000 hours, exactly 1000 hours, or is it not possible to tell whether she works more or less? Use the income 2. Suppose, during the Cold War era, that Orville’s demand for anti-missile missiles (a public good) is Q = 100 – 2P, and Wilbur’s demand is Q = 80 – P. Each missile costs 70 to produce.
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This note was uploaded on 10/15/2011 for the course ECON 134 taught by Professor Coiner during the Spring '11 term at Brandeis.

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