Personal hotspot: 1 c. Used 37.8 MB { 3610Lmidterm 20.pdf o Part I: Answer the following two questions concisely: max. 1/2 page each (Links to the papers can be found in the course modules on Learn.) Question 1 (10 marks): Based on the paper below, how does water demand estimation differ in developing versus developed countries? Discuss one of the challenges involved in this estimation in least developed countries and comment on potential solutions. Paper: "Estimating Water Demand in Developing countries: An Overview", by Celine Nauges and Dale Whittington (2010), The World Bank Research Observer 25(2):263-294, 2010. Question 2 (10 marks): Based on the paper below, explain and critique one economic benefit cited by proponents of cities/countries hosting of the Olympic Games. Paper: Baade, Robert A., and Victor A. Matheson. 2016. "Going for the Gold: The Economics of the Olympics." Journal of Economic Perspectives, 30 (2): 201-18. Part II: Answer the following five questions Question 3 (15 marks): The City of Waterloo is considering the adoption of improvements to Waterloo Park and is presented with three mutually-exclusive options. Option A adds a splash pad which is estimated to offer benefits of $20 million and costs $16 million to build. Option B adds basketball courts has estimated benefits of $26 million and costs of $20 million. Option C is a nature exploration area that is estimated to offer benefits of $10 million and has costs of $2 million. In additional, a fourth option D is an improved path and signage project that has estimated costs of $8 million and standalone benefits of $4 million, but it can be combined with any of the first three, changing their respective benefits as follows: if built with A, it augments its benefits by $16 million, if built with B it increase the benefits of project B by $10 million, but if built with C it reduces the benefits of project by $2 million.( i. Generate a table with 2 columns: the benefit-cost ratio and net benefits for each possible option. ii. Which option should be chosen according to the Cost Benefit decision rule? Question 4 (15 marks): The local natural attraction in a touristic location is accessible to people in wheelchairs by a specially equipped bus that takes about 60 minutes one-way to reach it from the natural area entrance. The attraction is accessible to people not in wheelchairs by regular bus and it takes 15 minutes to reach it from the entrance. During the most recent year data was available, 600 people in wheelchairs visited this touristic location. An economist has estimated that the demand schedule for the attraction visits by people in wheelchairs is linear and has a price elasticity of demand equal to -0.8. Assume that people in wheelchairs value their recreational time at $10 per hour. Represent the problem graphically and answer the following question: what is the annual benefit of making the regular bus accessible to people in wheelchairs? Question 5 (20 marks): A small open economy produces domestically 3 billion units of electricity from renewables and imports another 3 billion units annually. The world price is $90 per unit. Assuming linear curves, economists estimate the price elasticity of domestic supply to be 0.25 and the price elasticity of domestic demand to be -0.1 at the current free trade equilibrium. Consider the changes in social surplus that would result from the imposition of a $30 per unit import tariff on renewable electricity that would involve annual administrative costs of $250 million. Assume a horizontal world supply curve: i.e. the world price will not change as a result of the country imposing the import fee, but the domestic price will increase by $30 per barrel. Represent the problem graphically and clearly label all elements. Determine the quantity consumed, the quantity produced domestically, and the quantity imported after the imposition of the import tariff. Then estimate the annual social benefits of the import tariff. Note: only producers, consumers, and taxpayers within the country have standing. ii. Economists have estimated that the marginal excess burden of taxation in the country is 0.25. Assuming that 20% of the increase in producer surplus is collected by the government as tax revenue and also that the net increases in government revenues are used to reduce domestic taxes, re-estimate the social net benefits. i. Question 6 (15 marks): Referring back to the previous question, assume that before the imposition of the import tariff, the country consumed annually 900 million tons of coal mined domestically mined, at a price of $66 per ton. How would the CBA of the import tariff change if, after imposition of the import tariff, the following circumstances are assumed to result from some energy consumers switching from renewably produced energy to coal? i. Annual consumption of coal rises by 40 million tons, but the price of coal remains unchanged. ii. Annual consumption of coal rises by 40 million tons and the price of coal rises to $69 per ton. (here: assume that the prices of other goods, including coal, were not held constant in estimating the demand schedule for renewable energy.) iii. Annual consumption of coal rises by 40 million tons and the price of coal rises to $69 per ton. (here: assume that the prices of other goods, including coal, were held constant in estimating the demand schedule for renewable energy and also that the demand for coal is completely inelastic.) iv. The market price of coal underestimates its marginal social cost because the coal mined in the country generates a pollution externality evaluated at $7 per ton. (here: assume that the annual consumption of coal rises by 40 million short tons, but the price of coal remains unch Question 7 (15 marks): Consider a trace-and-monitor program in the Waterloo Regio monitor whether international travelers arriving into the region respect the mandato quarantine requirements. Analysts estimate that over one year the tracing costs to be $4 monitoring costs to be $22 million, and the inconvenience costs to these patients to be $18 annual benefits of this program are estimated to be $35 million in directly avoided infections the Waterloo Region, $7 million in indirect health costs savings in the Waterloo Region from avoiding hospital overcrowding, and $28 million in avoided infections costs in the rest of the province. From a A
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