04 Jun Question CUNY Brooklyn College Elementary Microeconomics
Question
CUNY Brooklyn College
Elementary Microeconomics
Spring 2015
Sample Final
Page 1
Sample Final Instructor: Aboozar Hadavand
Please answer within the space below each question.
Problems
Please carefully read and answer the following questions. Provide your solution and if needed a
short explanation of your answers.
1. A leading environmentalist claims that one way to force market prices to reflect the
private and social costs of greenhouse gases from the use of oil is for governments
around the world to encourage the monopolization of the oil sector. Another leading
business journalist scoffs at this notion by saying that anybody with a brain knows that
monopoly is economically inefficient compared to competition. Who is right and why?
2. Sugar is great but only in small amounts. It is a major health problem in the U.S. and
around the world. The city council of New York decided to impose a tax on sugar. The
following questions explore the microeconomics of sugar in detail.
a) Knowing that sugar causes diabetes and obesity, are the health problems
associated with sugar in NYC a negative externality? Why?
b) What would be the impact of sugar tax on the demand for health care services?
c) How would a sugar tax affect the price for health care services?
d) Health insurance (health care) in one of the costs that NYC employers need to pay
per worker they hire and number of workers is highly correlated with the quantity
of output produced in all sectors. What is the effect of sugar tax on the marginal
cost, variable cost, and average fixed cost of production of goods and services in
NYC?
e) How does the sugar tax affect the equilibrium price and quantity of goods and
services in NYC in the short run?
f) Given your answer in part e, would the imposition of the tax still be a good idea?
3. Brooklyn and Queens are two miles apart. Each borough produces bread and butter – yet
there is no trade between the boroughs, until now. The boroughs have just concluded a
trade agreement after a century of fighting. Brooklyn has 100 workers and Queens has
150 workers. The level of output per worker is shown in each borough is shown in the
table below.
CUNY Brooklyn College
Elementary Microeconomics
Spring 2015
Sample Final
Page 2
Brooklyn Queens
Bread 60 50
Butter 30 20
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