Midterm 2: Part 2 Short Answer
EC 435
F15
Papke/Loaiza
1. Suppose that you are going to save $3,000 of your income for one year, after which you will
spend it along with any accumulated interest you earned. Assume that your marginal income
tax rate is 25%
Solutions to Midterm 1
EC 435
F15
Papke/Loaiza
This section is worth 50 points. Sub parts of problems 1 and 2 are worth 5 points, and problem
3 is worth 10.
1a. Q = 100-2BP
P = 5; MED = 3
No government intervention: P0= 5, Q0= 90.
A corrective tax = $3 pe
Problem Set 2 Solutions
EC 435
F15
Papke/Loaiza
1a. None no individual has a MB above $350 and they cost $450.
b. 4 should be purchased where the sum of the MBs equals the cost.
c. Merchant 1 will pay her MB*4 = 200*4 = 800.
Merchant 2 will pay his MB*4 =
Problem Set 4: Tax-deferred saving and health insurance
EC 435
Due November 16, 2015
F15
Papke/Loaiza
1.
Consider the new MyRA program targeted at small savers that was announced this week.
a. Explain the mechanics of a MyRA where can deposits come from?
EC 435
Problem Set # 5
Due 12/9/15
F15
Papke/Loaiza
1. Suppose that currently the government provides everyone with a guaranteed income
of $12,000 per year, but this benefit level is reduced by $1 for each $1 of work income.
The government is considering
EC 435
Problem Set #5
F15
Papke/Loaiza
1. Suppose that currently the government provides everyone with a guaranteed income of $12,000 per
year, but this benefit level is reduced by $1 for each $1 of work income. The government is considering
changing this
Policy Memo 2
Due February 15, 2016
S16
Papke/Fowler
A local Chamber of Commerce group has brought a proposal before the City Council. A
member of the Chamber has been approached by a major league baseball team. The
teams current facilities in the eastern
EC 435 Analysis Packet 2
Market Failure of Public Goods, Open Access Resources, and C-B Analysis
Due February 15, 2016
Team # _
S16
Papke/Fowler
Instructions: These problems provide you with practice applying the theory of public
goods, open access resour
Analysis Packet 2 Solutions
EC 435
S16
Papke/Fowler
1a. No individual has a MB above $350 and cameras cost $450.
b. 4 cameras should be purchased where the sum of the MBs equals the marginal
cost. This is the rule for choosing the optimal quantity of a pu
Analysis Packet 1: Pollution Policy Solutions
EC 435
Papke/Fowler
S16
1. a. See graph 1a.
b. First calculate what the free market would do by setting demand equal to supply:
1,200 4P = 2P, or 1,200 = 6P. P = 200,
so Q Free Market = 1,200 4(200) = 400.
The
EC 435
Analysis Packet 1: Pollution Policy
Due February 3, 2016
Team # _
S16
Papke/Fowler
Instructions: These problems provide you with practice applying the theory of
externalities. This is group work to be done as a team. Your answers may be typed or
ha
Problem Set # 1 Solutions
EC 435
Papke/Loaiza
F15
1a. MACA (150) = 75; MACB = 150.
This is not the least cost because the two MACs are not equal.
The total cost of this command and control scheme is $16,875.
TC = .5(150)(75) + .5(150)(150) = 16,875.
b. So