EEP 1 Quiz II 2012 Solutions (2)

7/24/2019 EEP 1 Quiz II 2012 Solutions (2)

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EEP 1/Econ 3 Peter Berck Exam II Fall 2012

Do all four questions. Points are shown in !.

1. "! #our assi$nment is to %n& the 'alue of ur(an farmin$ on a hi$hl) 'isi(le

lot. *omeone else will calculate the costs of farmin$ so )ou &o not ha'e to (e

concerne& with them. #ou ha'e alrea&) &isco'ere& that the actual +ro&uct of

the farmin$, tomatoes, is worth in total -1". #ou &eci&e to con&uct a

contin$ent 'aluation stu&) so see if this acti'it) has 'alue to non

+artici+ants.

a. 1! h) &o )ou &o a state& rather than re'eale& +reference stu&)

I want to estimate a money measure of the non-use benefits that non-participants may

derive from urban farming on the land, and I cannot observe any actions of these non-

participants related to the land use.

(. 2! hat question will )ou ask, who will )ou ask it to, an& how will )ou

'ar) )our question to $et a &eman& cur'e

1 point for what question you will ask, 0.5 point for who you will ask, and 0.5 point for

getting a demand curve.

I will ask respondents would you be willing to pay !"" for there to be farming on the

lot#$ It%s also fine to ask an open-ended question such as how much would you be

willing to pay for there to be farming on the lot#$I will randomly sample some citi&ens from the nearby cities'towns to ask the question.

(o get a demand curve, I need some variation for the payment amount. If I askrespondents would you be willing to pay !"" for there to be farming on the lot$, I will

randomly change the amount !"" asked to pay in the question, and collect the number of

respondents who would be willing to pay for each amount If I ask the open ended


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respondents who would be willing to pay for each amount If I ask the open-ended

iv conducting a debriefing to ensure the respondent understood the questions or check

whether protest responses were made. (he debrief typically also includes questions about

the respondent%s characteristics, such as income, education level, and attitude towardsenvironmental issues.

2. 4! 5his question refers to the &ia$ram (elow, which &escri(es a %rm6s choice

of in+uts. rite )our name on the &ia$ram an& turn it in with )our exam.

5he +rice of 78ther *tu9: is ;.a. 2! hat is the +rice for 7


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In my eample, whenpair=8 , the -coordinate for the tangency of the solid isocost

line and the isoquant curve is )*. 9hen pair=32 , the -coordinate for the tangency

of the dashed isocost line and the isoquant curve is 12. (herefore, I get the following

chart

:rice of clean air ;lean air demanded

2 )*

*) 12

&. 2!ow &raw one further line on )our &ia$ram an& use it to show the

cost for the 7with hi$h +rice: in+ut (un&le if the +rice of clean air were

the low +rice instea&. 200.


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If p>minimum AVC , the firm%s profit of producing output @ will be less negative

compared to produce nothing, so the firm will produce Anot shutdown.If

p;A@D1-;A@

;. ea&in$s Do A or Ba. 3! hat is $ran&fatherin$ an& new source re'iew ow woul& )ou

un&ermine the intent of the


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Fne way to undermine the new source review is to institute new rules as the Hush

administration did, making )0 of the value of the generating unit be the threshold for

what constituted a ma/or modification versus a routine maintenance instead of the 0.G5suggested by the 4:8. 9ith this increased threshold, in practice most plants were able to

do whatever upgrades they wanted without having to conform to the 4:8 standards.8nother way to frustrate is /ust inaction. Jon%t prosecute. In addition to making new

rules, the Hush administration simply did not spend the money ;ongress appropriated for

enforcement.

(. 3! hat are three im+ortant conce+ts from rutilla6s 7


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4 8 12 16 2 24 28 32 36 4

4

8

12

16

2

Air

Other Stuff

with hi$h

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EEP 1 Quiz II 2012 Solutions (2)