Economics
Part B: Quantitative Analysis

Problem #1: “Consumer Surplus and Producer Surplus” (8 points)
Consider the following graph:

If the market price is $20, and 50 units are traded, calculate consumer surplus, producer surplus, and total net benefit. NOTE: the area of a triangle is (0.5)*(base)*(height).

Problem # 2: “Negative Externality” (10 points)
Graph the following supply and demand curve:
Supply: P = 10 + .4Q
Demand: P = 50 – .4Q
a). What is the equilibrium price and quantity?
b). Suppose production of the good in question creates a negative externality equal to $8 per unit. Draw a new supply curve that represents the marginal cost to society. What is the socially optimal price and quantity?

c). Calculate the net benefit to society if the government imposes a pollution tax of $8 per unit.

Problem # 3: “Environmental Indicators Analysis” (12 points)
Please go to http://www.afdb.org/fileadmin/uploads/afdb/Documents/Publications/GenderPovertyEnvironmental_IndicatorsAfricanCountries2008_01_Full_Report_01.pdf
and

a). Fill in the following table using Central African countries data:

Country Annual Rate of Deforestation (%)
1990-95 Annual Rate of Reforestation (%)
1985-95 C02 Emissions per Capita
2005 Energy Consumption per Capita (kg)

2003 Forest-to-People Ratio (ha)
2005

Cameroon
Central African Republic
Chad
Congo
Democratic Republic of Congo
Equatorial Guinea
Gabon
b). How does your “African Country’s-Gabon” annual rate of deforestation (%) compare with that of other Central African countries?

c). How does your “African Country’s-Gabon” annual rate of reforestation (%) compare with that of other Central African countries?

d). How does your “African Country’s-Gabon” C02 emissions per capita compare with that of other Central African countries?
e). How does your “African Country’s-Gabon” energy consumption per capita compare with that of other Central African countries?

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