Jim Whitney Economics 101
Midterm: Fall 1998: Supplementary Worksheet
Exam # ______
 
For question 5a: 
   (1) Illustrate the effect of each of the two programs in the diagram. 
   (2) Indicate whether each of the following rises (+), falls (-), remains the same (0), or changes in an uncertain direction (?) as a result of the combined effect of the two programs: 
   Cigarette consumption (Q): ____ 
   Price of cigarettes (P): ____		 For question 5b: 
How large must the external benefits associated with vaccinations be in order for it to be efficient to offer them for free?  
   (1) Size of external benefits = $____ 
   (2) Illustrate your answer in the diagram.
 
For question 5c: 
   (1) Which area(s) in the diagram correspond to the tax revenue collected by the government when the tax equals t1? _________ 
   (2) Now consider what happens when the tax is increased to t2.  
   Size of tax increase = _________ 
When the market moves from its equilibrium with t1 to its equilibrium with t2, indicate which area(s) correspond to each of the following: 
   Change in consumer surplus:   ____________ 
   Change in producer surplus:   ____________ 
   Change in government revenue: ____________ 
   Change in social welfare:     ____________