Economics Homework: Market Equilibrium, GDP, and Economic Indicators

This economics homework assignment covers a range of microeconomic and macroeconomic concepts. The questions address market equilibrium under taxation, including the impact on consumer and producer prices. It explores externalities, such as the Pigouvian tax to correct for environmental damage. The assignment also delves into GDP calculations, analyzing the effects of consumption and the role of imports. Additionally, it examines economic indicators like unemployment and participation rates, and their relationship to retirement age. Finally, the assignment includes questions on aggregate expenditure, the multiplier effect, and real GDP growth, requiring students to apply economic principles to practical scenarios and calculations.

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Question 11 pts
The demand curve in a competitive market is given by P = 60 – 4Qd,
where P is price and Qd is the quantity demanded. The supply curve is P = 6Qs,
where Qs is the quantity supplied. The government imposes a $20 per-unit tax to be
legally paid by consumers. Compared with the pre-tax equilibrium:
Consumers pay an extra $20 per unit, Suppliers receive the same amount per unit.
Consumers pay an extra $12 per unit, Suppliers receive $8 less per unit.
Consumers pay an extra $10 per unit, Suppliers receive $10 less per unit.
Consumers pay an extra $8 per unit, Suppliers receive $12 less per unit.
Consumers pay an extra $4 per unit, Suppliers receive $16 less per unit.
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Question 21 pts
Consider a competitive industry that extracts a valuable mineral from deep
underground. The industry faces market demand for the mineral given by P = 200 –
2Q and extraction incurs a constant marginal private cost and average cost of 20.
Suppose that the government realizes that by extracting minerals the industry is
seriously harming and contaminating underground aquifers. The marginal external
cost imposed by the activity is equal to E = 3Q. What is the Pigouvian tax imposed
on firms that pushes the industry to produce at the socially efficient level of output?
20
36
90
108
540
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Question 31 pts
The private marginal benefit a person derives from a year of education is given by
PMB = 110 – 6Q, where Q is the number of years spent in school. The private
marginal cost per year of education is given by PMC = 20. There is a positive
consumption externality of $18 per year of school attended. Which of the following
statements is true?
The market equilibrium is efficient.
In the market equilibrium everyone gets 15 years of education.
In the market equilibrium everyone gets 18 years of education.
In the socially efficient equilibrium everyone gets 15 years of education.
a and b are true.

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Question 41 pts
The University is considering the level of light to provide at night on campus. Cynthia
and Shirley are the only students who work on campus at night. Cynthia’s marginal
benefit for light is given by MBCynthia = 50 – 5Q, where Q is the brightness of light; while
Shirley’s marginal benefit is MBShirley = 10-Q. If there are no fixed costs, and the
marginal cost of providing light is given by MC=12, then what is the optimal
brightness of light for the university to provide?
8
10
7
4
None of the above.
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Question 51 pts
Suppose consumption increases by $100m, all of which is spent on imports.
Thinking in terms of the expenditure approach to calculate GDP, then GDP will:
Decrease by $100m.
Decrease by more than $100m.
Increase by $100m.
Increase by more than $100m.
Be unchanged.
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Question 61 pts
Suppose the age at which people voluntarily retire increases. There is no change in
the number of unemployed people. Then:
The unemployment rate will decrease, and the participation rate will decrease.
The unemployment rate will decrease, and the participation rate will increase.
The unemployment rate will increase, and the participation rate will decrease.
The unemployment rate will increase, and the participation rate will increase.
The unemployment rate and the participation rate will be unchanged.
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Question 71 pts
Suppose the Planned Aggregate Expenditures curve is given by PAE = A + b(Y-tY)
where A is autonomous expenditures, b is the marginal propensity to consume, t is
the proportional tax rate and Y is total output. Suppose the government increases t
from 0 to 0.5 and the multiplier halves. Then, b is equal to:

¼
½
2/3
1
None of the above.
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Question 81 pts
The diagram below shows total output Y on the x-axis and Planned Aggregate
Expenditures on the y-axis. Unplanned inventory investment is:
Positive at YL and positive at YH.
Positive at YL and negative at YH.
Negative at YL and positive at YH.
Negative at YL and negative at YH.
zero at YL and zero at YH.
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Question 91 pts
Suppose GDP in China is 10 times larger than GDP in Australia when measured
using market exchange rates, the population of China is 50 times larger than the
population of Australia, and the cost of living in China is half the cost of living in
Australia. Then GDP per capita in purchasing power parity terms is:
40 per cent larger in Australia than in China.
60 per cent larger in Australia than in China.
150 per cent larger in Australia than in China.
400 per cent larger in Australia than in China.
900 per cent larger in Australia than in China.
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Question 101 pts
The economy in the base year 2016 produced:
Item Quantity Price
Wine 10 cases $100 per case
Whisky 20 litres $70 per litre
Beer 80 kegs $120 per keg
In 2017 the same economy produced:
Item Quantity Price
Wine 12 cases $90 per case

Whisky 18 litres $75 per litre
Beer 90 kegs $110 per keg
Then real GDP growth between 2016 and 2017 was:
-6.7%
2.8%
10.1%
10.5%
None of the above.