eco333_exam

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University of Toronto *

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333

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Economics

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Jan 9, 2024

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pdf

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7

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Questions on last third of course 1. (5 points) Why are we able to say there is too much traffic congestion? 2. (5 points) What reasons are there for subsidizing mass transit? The best answers will include a graph. 3. (4 points) When the number of vehicles on the road grows too large, they create frictions which reduce road throughput. What are two reasons this reduction in throughput occurs? (You need to have an explanation, not just a title for the reason).
Page 2/7 4. (2 points) When there are no tolls, what induces some drivers to be willing to arrive at 5 am ? 5. (6 points) When adding tolls increases capacity and all drivers are identical, why does adding optimal tolls make all drivers better off before using the revenue? 6. (6 points) When some drivers are rich and some are poor, adding tolls to all of the lanes is likely to hurt some drivers. Why? 7. (8 points) How would a 200% sales tax on vehicles affect the six types of choices we discussed in class?
Page 3/7 8. (2 points) What are two causes of socially inefficient parking? 9. In this problem we will analyze the effects of traffic congestion graphically. Assumewe have a downward sloping demand curve, D ( q ) , and an upward sloping travel time function T ( q ) which tells us what travel time is as a function of the number of people using the road ( q ). Everyone values their time at the same dollar amount. (a) (6 points) Draw a figure that illustrates the equilibrium when there is no toll and when a socially optimal toll is charged. To be clear, your goal is to recreate the figure discussed in class. Label the following: • q 0 - the quantity of road users when there is no toll • q 1 - the quantity of road users when there is a toll • p 0 - the total cost of traveling on the road when there is no toll • p 1 - the total cost of traveling on the road when there is a toll • τ - the amount of the toll • The dead weight loss when there is no toll. • The amount of total toll revenue • The amount of toll revenue that comes from converting travel time into toll revenue • The amount of toll revenue that comes from converting consumer surplus into toll revenue (b) (3 points) Why is the dead weight loss as you labeled it?
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Page 4/7 (c) (3 points) For those who are still using the road after the toll is added, are they better or worse off? Why? Comprehensive Final 10. (4 points) Describe how two changes in energy technology affected where factories locate, as discussed in the textbook. 11. (5 points) Is the following statement true, false, or uncertain, and why? When you graduate and enter the labor market, you will increase the supply of workers and push down wages a small amount. Thus you are imposing an externality on the other workers, and so the government should tax employment (perhaps via an income tax) in order to internalize this externality, and doing so would increase social welfare. 12. (6 points) What are three costs of rent control? The very best answers will include a graph.
Page 5/7 Mathematical questions 13. How transportation costs effect population in the factory city. In British Columbia individuals produce and consume two goods, salmon and baskets. Everyone wants to end the 10 hour workday with one basket and as many salmon as they can get. All workers are equally productive at producing salmon and baskets. The production of salmon is subject to constant returns to scale, with it taking one hour to produce two bushels of salmon. The production of Anne of Green Gables baskets is subject to increasing returns to scale, it takes two hours for individual working alone to produce a single basket but if the individual works with others at a factory he can produce three baskets each hour. The factory owner provides housing at the factory for his workers, and charges the workers two salmon a day in rent, which is his average cost in providing the housing. People can travel at 30 kilometers per hour, and in the rural area they live 250 meters apart. (a) (3 points) Assume the factory sells its baskets for 2 salmon. Draw the martini glass figure and label the slopes and the height of the top of the glass and the stem.
Page 6/7 (b) (7 points) How many baskets will the factory sell to people living outside the factory?
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Page 7/7 14. (25 points) Please answer essay prompt: There is no minimum length. Remember that shorter is better, you want to have the shortest possible essay that answers the question. You are to answer the question as though you are writing to an ‘A’ student from your ECO20X (where X ∈{ 0, 4, 6 } ) course who did not take ECO333. He or she, being old fashioned, has written you a letter, on paper, with a stamp, saying “I heard you took ECO333, and I have always wondered . . . ” (a) Why do cities exist? Why don’t we all just live on large lots of land in Texas/rural Ontario/etc? We could be self-sufficient and avoid all the hassles of city life. (b) Why is Bay Street a thing? Wouldn’t each of the financial firms be better off being in a smaller city away from each other? They would have less competition, could offer their employees less money due to lower cost of living, and have lower rent. (c) Is rent control a good idea? (d) How do economists define cities? How do they decide where one city ends and another begins? Why do these definitions matter? (e) How will the Toronto-York Spadina Subway Extension change the city of Toronto?

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