2011

Total endowment ?

40 Food
"I
consume .in#iooflil 40 clothing
m: 30510C
B : 10430C

Um 2minlf.sc )
Ure mine ,c )

at
q op pi o
40 Barnaby

€0
#

-
• .
o,
30

" " "" "

UB
-_
10 Um> 20
•••
a
"

7.
-

1- oh
O 10 to 3J 40
Malcolm
FOOD
c)
UB

I
:"
d) i
) w- min ( UB, Um )
ii ) UB= UM → ①
40 UB 42 Um -140 ②
-

- -
→
iii )
UB -
-
-

YZUB -140
"
i ::::..m
"

; iv ) SWF at the
optimal point
,

lion I d
UM is
26.07g
W=
.

O 20 40 80
 Income
at Ansi E is the
optimum bundle

(
↳
\
241MW with B hours spent tweeting
and 124 B) hours
working
-

lslopel ( t) w At 6 MRS w
-
= e -

E or
slope of indifference curve =

budget constrain
-

!
B 24 Leisure
 b) Now there are no taxes for him : Casely
Income
-

^
24W

t
In this case
"
Trump

:(
"

244 E) W actually
'
works more
( B B ) and earns A ' A
-

- -

7%4%9%4 shedding
* "

ii
' '

,
*,
tweeting
'
.

l
y
l

"
-
'
A > Leisure
B B '

24
Alternatively ,
Donald could also : Casey
Income
-

^
In this case
24W
. :
, Trump works

it
'
(B
'
less -
B) and earns A -

A
more income , spending
'
tf
tweeting
244-
w B -
B less time

Ah
"
'
I
.
A → Leisure
B B
' 24
 case 3 :
# n come
24W

§
In this is
Trump
'
- .
case ,

244 E)w
-
not affected and earns
more income as well while
,

!
mount of
99.71in ,8w%?fg .

Al ..
. . . . . .

$
"
I 7 leisure
'
B -
B
24
-

A tax cut will affect

Trump 's choice of working on the
depending
of
magnitude the substitution effect compared to the income effect .

case 1 : SE SIE (work more ) x case 2 : I E > SE so work less

case 3 ? SE = IE ( stay the same

)
lot
¥ that earning
president very possibleis
→
Donald
Trump ,
a and
"
him
the
optimal wage is already earned
by If that
" .

the case :
him to
•

Any further increase in wage rate may induce

work less and take more leisure because leisure is more
attractive to him .

In this situation the income effect substitution

outweighs
•

effect which is also the situation of

,
a backward bending
supply curve , at high income levels -
 ④ t
Q
⑤ NB :
-

25 PW
-

2810W

a) ④ not liablehe will lose $116 pw if he install

,
soundproofing
④ instead gain $119 PW in reduction of damages Hence .

④ will not install but ⑤ might pay 116k$ E 119 For ⑨

and both will be better off
to install
soundproofing .

( because the NB with soundproofing

> NB w/o
soundproofing )
b) NC : $4 PW
④ pay the N C . .

,
and his net gain is only $115 after N C .
. but ④ needs
at least $116 to install
soundproofing but ⑤ only WTP up
,
TO $115 ,
hence ,

no
soundproofing will be installed .

C) ⑤ will move because the $155 pw is less than

paying
( 116-141 ) f $ f ( 119441 )
I
Daunting
min 157 S $ E 160 T T
purchase . max . Damages
with
ign ..

soundproofing
soundproofing
"
to purchase the
right
"
from ④ to install soundproofing at the
original
location .
2017g

a) NIB > 12-51-0

me 35
-
-

C- ( MB) > Elmo)

12-5=35
45=12
*
5-
3g
b) Mc
-
-
P - 313 )
-
$9
"
( IBID
c)
M€35 0=-2

t.is!
/: yiL#a:s om:nanism.w:. :asim
( MB is lower than
12
expected )
MBtme- MC
ID 10-5=35

45=10
9 Emission tax 5- 2.5

) )

"
.
I IMBGME ) MB ( exp )
S
2.53 12
 I

* B= G. IE
B G I E
- -

, ,
-

tzEz -

E3 E3 -

Ey Ey

a) 0=519.20-0×100 -

0.5/250-100) 0.6/350-250 )
-

-
O 8 . E
4
-

384.2=-0.84 Above $350 , payments

by cents 1$
reduce 80
Ey -
480.25
earned
f
'

Total income at
.

which grant reduces to : 350 t 480.25

zero
=
$830 25 .

830.25
Extra 55-35 hours worked 64-65 hours of leisure
-155
.
. .
 income time endowment
by
I
1800

t
I
(15×120)
All work
l

830.25 EO !
-⑦
I
- - - -
- - - - - - - - - - - -

734.2 I
⑥
- - - - - - - -
- .
. - - - - - -
'
- -
,

694.2 -
- - - - - - - - - -
-

l
i
I
I i

si:
,
l

1 l l l l
, l

l l l l

l
l l

! ,
l l l

l l l l
l l
l
l l
l
l
l s
l l '
7
64-2576.2496 67183.3
.
113.3120
④ Initial grant ④ -1=0.5 leisure

250 100 =
$150 reduced
to be
⑧
-

No claw back rule :

you earn too by $0 51$ earned
.

YI -
-
G.7- hours of work Incomes
(1-0.5)×150
120-67=113.3 hrof =
$75
( slope 1=15 leisure 1 slope 1=(1-0.5)×15
amount YOU
( really earned s
7. 5
250
of work
-15=16.67 hours
103.3 hours of leisure
④ ⑧
E. 0.6 When Bso
350-250=5110040 be
reduced
by $0.61 steamed
from a
)
TI > $830.25
Income >
(1-0.6)×100 lslope 1=(1-0.8)×15
=
$40
I slope 1=(1-0.6)×15 =3
830.25
=
6
350 Tg
= 55.35hm of
23.33 hours of work work
Tgs
96.67 hours of leisure
= 64.65 hrs of
leisure

¥¥"÷÷:::::i:
c) B= G -
E. E

D= 519.2 -
0.86

I slope 1=(1-0.8)×15--3

* Depends on where your indifference curve is located at .

 NB
✓ -13
✓ -13
-
5
NB 3
-

votes to reach mutually benefit outcome

Logrolling trading
.
-

a) Under majority rule neither bill will pass Both will be voted
,
.

down
by votes of 2 I Not efficient because carbon pricing bill
-

had a total benefit to society of t 3 If is allowed

both issues will pass
.

logrolling
enhancing but NOT ,
It is
efficiency
!
.

efficient because the total benefit to society immigration bill by

is
negative -12 ,
so
technically ,
it shouldn't have passed .

ckxenoph & Pauline trade votes Nick -7 Im

,

Pauline J carbon

b) side
payments
=
trade of dollars rather than votes and the
amount would be large enough to coverthe
other voter's losses .

In this case : Nick would be I should

willing to pay Pauline pay
.

Pauline at $1 million for herto be indifferent to voting for the bill .

•
Pauline W TP Nick at least $3 mil for the same
reason .

c) LNP comes out behind on both projects . In

logrolling a
majority of
,
of voters coalition to vote for
form that serve their
can a
projects
interests but whose costs are borne
mainly by the minority Although
.
,

the benefits of to the

projects majority exceed the costs this is not true ,

for society as a whole Eventhough logrolling can improve results from simple
.

majority voting ,
it can also make things worse .
2011

a) MBUXP) mclexp ) -

10-5=45

55=10
Sts z
t
b) P> mo
p-
-

414
=
$8
4

CIBIP Muthu )

21€14
c)

,m
- me is
Mllexp)
higher than

jµuauy
Dwlfrom
tax
expected
10 a .
- - - -
- - - -.
so
Mcelwee ) - MB

£5 45-12=10 s -

g
/ : mechanism 55=8
.----q
' i
5=1.6

"

'
;÷s .
I i
! MB 5=1.5
I p
1.5 1. 6 2 10 S
 DWLfrom
tax :{ ( O g) ( on )
.
mB( 1.51--8.5
0.025
Mclane (2) 510
=

DWI from
quantity
=
{ (0.47/2)
=
0.4
r
's Taxi's preferred .

d) MB (exp)= mclexp )
i) 10-5=45
55=10
5×1=2
p*= $8
ii ) 8=-2 MB time ) - 8 -
S
MB is lower than expected 8-5=45
CIBIP

;÷:X
i€¥q:wm
Me 4S 55=8
10
5=1.6
-

p > 6.4

8 #
Mbaye ( 27=6

:
.
mean
l l
l

0.4
l =

'
t !
-
i MB leap )
1. 6 2 10 S "
Nponmfemed
 B -
G .
t E

B. =
G -
T,E ,
-

Tz Ez
-

£3 E3
a) 0
519.20 ( 250400 )
O X $100 0.5 Ez
=

0.6
- -
-

0.653=444.2
C-
3=740.33
Total income at
which grant reduces
to
= 2504740.33
zero

=
990.33

b) W -
$20
Time endowment =
120 hours
 Income Time endowment
I
2400

\
-

I
MET ) l

,
"

990.33
④ I
- -

l
. -

#④
- - - - - - - -

l
694.20 . - . - - - l
g
- - -
- - - -

I
619.20 - - - - - - t - - - -
s -
I . - - . - - - -
-

yTAO
.

i
%. - i - - - e -

l l l
l l l
,
l
l l l
l ! I

0
70.5 107.5 1151210 leisure
④ Initial grant
⑨ 8=0.50

⑧ Earn $100 w/o benefits 250-100=8150 reduced by

earned
being reduced dollar $0.51
= 5hm worked Income > ( t -
o . 5) 150

$75
/
=

181071=20 × lslopel
-
-
Li -
o .
5) 20

115hm of leisure =
to
250
-20=12.5 hrs of work
=
107.5hm of leisure
⑨ 4=0.6

Benefits
reduced
to o
at $990.33

I slope1--4-0.6720
=
8

990.33
-20=49.5 hrs of work
=
70.48hm Of leisure
 Apple

24

I
"

--.._.ICz
10
#
- - - - -
- - -

I JC
,

12 14 16 24
a) $6 Oranges
24 Apples ( oranges
=

if spend on all

b) SG-1
10 Apples maximum
=

$0.60
c) Equivalent =
vertical distance between initial budget line
variation c. black) and the line if this
budget was a

lump-sum tax ( blue ) .

EV 24-16=8 X 0.25

/fe%nue= 5*0.35=511.75
-

$2
-

EB $2 $1.75 $0.25
-
-
-
=
 Overall
utility
✓ 7
✓ 7
-

g
TB 4 I

A) None will pass under rule Not efficient

majority
because issue A 8 B has total benefits of -14 and Tl
.

so both should have passed

respectively and the
,
whole community will be better off if both issues
passed .

b) If
logrolling is allowed both issues will pass Society
,
.

is now better off since both tve benefit projects are passed ,
It is efficient because the total
hence it is
efficiency enhancing -

benefit to society when booth Issues are in place is puttin

c) sidepayments : . Voter I will

pay voter 2 $1 billion for voter 2
-
to be indifferent in voting for issue A .

•
voter 2 will pay voter I $3 billion for voter 1

to be indifferent in voting for issue B .

d) same answer as 2017 paper .

2014
-

Total endowment :

400 Food 400 Clothing

Alice
-

3007100C
Up -
F -13C

Brian
-

1004300C

VB=2( min ( F. C ) )

at
opi Alice
age
400 # age
Brian

-
i¥f:÷
-

Initial
Up = 600

.tn#aUB--.I
zoos
- eel

x ×
uA=hp
"

::
X

#am
'

Alice 100 200 300 400 a. "o .

FOOD
 UB
c)

€1
d)
min ( VA , UB )

|
800
) w
-

;
-

ii) max SWF when

UB
-
• )
ji;
UA =

,
VB = -
0.5 VA -1800

"
:S:÷ :S :S
.

i UBS 533.33 = VA
!
1600 UA
533.33
iv
) SWF maximized
at W
533.33
-
-
a) T
① D= 5 -
0.02517
200 -

t
O 025ps Qp 5
-
-
.

ps 200
.
-

40 Qp
⑦ D= 5 -
0.025180)
80 - - - - - - s

Q 3
y D=

3 4 .

b) Total expenditures 80×3=8240

,
c ) QD -

- 5- 0.025 ( 40)
= 4 visits
"
d) OUT of pocket
-
- Insurance
-
40×4
cost =
40×4 company
=
$160
=
$160

Ital expenditure
80×4=5/320
=
under insurance
y
 -

-
leisure : 62.5

Income Time endowment

a)

¥÷¥÷÷i
i÷÷÷::÷: !÷
I
6×100=600 A ,
MTR = 100 !
Benefits
I Earn $225 → reduced
$225
by
! Before welfare
assistance : 37.5hm
,
worked
1
,
with welfare assistance :

a.

:
[ ! B t so might as

110
'

well not work

62.5 Kisumu
and beat
point c
-
=
b) Income Time endowment
I
600 A l

l
l
l

240 - - - - . . I

!
too
.

Go
leisure
Now Emma moves to NSW :
,

① Initial
grant of $120

② MTR :
0.50 $240
$-6540 hours of work

( slope 1=11 - t) w es hours of leisure

=L , -0.516

=3
B =
G -

E. E

0=120 -

0.55

E -
$240
( for benefits to reduce -100
)
c) The highest J C
corresponds to the with in
. .

program
NSW with 501 .
marginal tax rate
,
the middle I. C .

To the
program with loot .
marginal tax rate and

the lowest I. c to no Hours worked fall to

.

program .

Zero with 1001 .

m . T R
.
while hours worked fall some
, ,
but not all the to with 50 b
way Zero m T R
'
-

, .
.

( There is insufficient evidence to predict how hours

many
exactly Emma will under each situation in NSW
work
)
But in general the lower M T R strengthens
-

. . -
. work
,
incentive .
 utility

€*
a)

-
Paul
-
John
-

Ringo

• • ④ Paul !

-
•

l l l
A B C choices
b) Double peaked preference: If
-
as avoter moves away from
his her most preferred outcome utility
goes down but then goes up
or
,

again In this case , Paul is double

.
-

peaked
c) Yes If the first election
.
is between A and B: -

AVSB_
Paul : A

John : B

Ringo : A

.
: A wins → Run
against C
-
A vs C

Paul : C

John ? C

Ringo :
A

C wins
'

. .

B
Ff first election is
against c : -

B Vs C
-

Paul : C

John ; B

Ringo : B

→ A A vs B
B wins Run
against
-

-
.

Hence , the Paul : A

ability to control the order
A- the confess John :
B
Voting agenda
-
-

great power .
( Agenda manipulation ) Ringo ? A

÷ A wins