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September 7, 2016 ENERGY ECONOMICS M.Sc. in Energy Engineering Duration: 2 hours and 30 minutes During the test students are not allowed to use class notes or textbooks or to leave the classroom Mark the exam folder with your Name, Last Name and Politecnico di Milano Id. Number At the end of the test hand over only the exam folder Name Last Name Id. Number Instructions and grading system Read the questions carefully and provide answers to all the points raised in each question. It is important to use a correct and appropriate terminology for all economic and technical terms. Remember to define all variables and parameters used in your answers. A full score will be awarded only if the answer is correct and complete. A partial score will be awarded only if the partial response, albeit incomplete, does not contain any errors. 2 ⇒ Question 1 (2 points) – Academic year 2015/16 only (1) One possible way to allocate resources is by making people wait in line. Explain why this leads to a deadweight loss. ⇒ Question 1 (2 points) – Academic year 2014/15 and earlier (1) Write the hypotheses which, if verified, identify a market as perfectly competitive. 3 ⇒ Question 2 (4 points) Consider a setting where a single firm produces electricity for the entire market. Assume that marginal costs of production (in €/kWh) are constant and that the firm behaves as a monopolist. The government is debating the introduction of a carbon tax equal to 20 € per kWh produced. (2a) Assume that market demand is linear: p(y) = 100 – 5y, where p is price and y is quantity. Estimate the change in output and the change in price with respect to pre-tax levels (in numerical values). Illustrate your answer on a price vs. quantity graph. (2b) Assume that market demand has constant elasticity to price, with…