Question 1 is a review question about price ceilings. This is discussed in detail on page 169 of the text.
Questions 2-4 deal with externalities. To solve question 2, you
need to find the intersection of the supply and demand curve and calculate
externalities. This is discussed in detail in Chapter 6. To
answer question 4, you need to figure out
the profits that each type of demander made without the tax and the
profits that they made with the tax.
Without the tax, 100 vehicles were purchased and everybody suffered
pollution damage of $2000. Net profits of the high value demanders were
4000-1200-2000=800. Net profits of middle value demanders were negative,
$3000-1200-2000= -200. Net profits of low value demanders were $2500-1200-2000=-700.
With the tax, only 30 vehicles were purchased. Everyone
suffered $600 in pollution damage, but everyone got back
$600=(2000x30)/100 as their share of the tax revenue. So pollution
damage and rebated revenue cancel for everyone.
With the $2000 tax, a vehicle costs $3200. Profits of high value demanders
were $4000-3200=800. (they have to pay the $2000 tax.) Middle and
low value demander choose not to buy vehicles and have zero profits.
Therefore middle and low value demanders are better off with the tax than
without and high value demanders are exactly as well off either way.
Questions 5-7 are straightforward applications of material discussed
on pages 240 and 241. To answer question 5 you should also know that
profit is total revenue minus total cost.
Questions 8-10 should be easy if you have read and understood the principles
discussed on pages 227-231.
The answer to question 11 is "false" because in order to sell an extra
unit, the monopolist has to lower his price on every single unit he sells.
If you missed either question 11 or 12, you still haven't grasped
the way monopolies work. Please read pages 230 and 231 once again.
Question 13. Straight out of the book. See page 235. If you missed
this question and are wondering why you aren't doing well in the course,
consider reading the textbook. The discussions aren't long, but they
are crucial.
Question 14. This is the principle of excess burden, much discussed
in previous lectures, experiments, and quizzes. If you still don't
get this, please read page 113.
Question 15. Look at the homework for the externalities chapter.