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EC 11 				Summer 2015		         Homework 1
M. LeClair
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Please answer both questions.  To receive full credit, you must completely label all graphs.  GOOD LUCK!

1.	The economist’s solution to Global Warming is the imposition of a carbon tax on energy, particularly petroleum and coal, which both produce higher emissions than a substitute, natural gas.  Illustrate how each of the following would impact the price and quantity of petroleum sold, using supply and demand graphs (draw a separate graph for each):

A.	The imposition of the carbon tax on producers of petroleum as described above.
B.	A price ceiling on petroleum (at the well-head) to undo part of the current price increase. 
	C.	A fall in population, coupled with new technology that allows more 			petroleum to be extracted from wells
	D.	A significant rise in the price of natural gas, coupled with the entry of new 		producers of petroleum

2.	Jane is a dairy/corn farmer, with 100 acres of hilly land that is suitable for grazing (and the resulting production of milk), and 100 acres of flat land upon which she plants corn.  Recently, Jane has been re-evaluating the resources she devotes to the two products, since there has been a significant run-up in the price of corn, and producing more of this commodity might be profitable.

a.	Draw a PPC for the trade-off between corn and milk production, and show what happens if Jane decides to produce more corn and less milk.
b.	Returning to the original situation, illustrate how the PPC is affected if Jane leaves 50 acres fallow (unused) for the season to restore the soil.
c.	Once again, returning to the original situation, show how the impact upon the PPC if Jane utilizes a new hybrid corn that is more productive.
		-Show she can now produce both more milk and more corn
d.	From the original PPC, show what happens is Jane sells ½ her land.