1. (a) These three conditions are listed in the appendix to chapter 3 of Stiglitz. He calls them : exchange efficiency, production efficiency and product-mix efficiency. I think I called the third set of conditions ``overall efficiency''.

But much more important than the names are the conditions themselves.

Basically what are sufficient ( and necessary ) for full marks on this part are : MRS's equal across all consumers ; MRTS's between any two inputs the same for all firms ; MRT equals MRS of each consumer. That terminology isn't necessary : slopes of indifference curves, slopes of isoquants, and the slope of the production possibility frontier are fine.

(b) This violates two out of three types of efficiency condition. It does not violate the ``exchange efficiency'' condition, since all people still face the same commodity prices. But it means the MRTS between hardwood and any other input is different in the furniture industry than in other industries. And it raises the price of furniture above its cost, meaning the MRS between furniture and other goods does not equal the MRT.

So basically 1/3 marks for each of the two violations and 1/3 marks for recognizing one set of conditions is not violated.

2. Among the possible horizontal inequities : betwen people with different tastes for food relative to other goods and services ; between people with different number of children ; between people who have differential access to the border ; between people with different tastes for leisure versus goods.

A passing grade required mention of some specific features of the GST ; merely defining ``horizontal equity'' ( correctly ) was worth about 4 marks out of 11.

Pointing out the horizontal equity due to the food and clothing exemptions in the GST ( coherently ) was worth a passing grade [ the exemptions were mentioned in the question ], but full marks required more ( such as mention of some other horizontal inequity, or a convincing argument that the tax was relatively horizontally equitable ).

3. The answers are : price in the absence of a tax is $200 ; after the tax buyers pay $220 and sellers get $140.

Why? In either case, quantity supplied equals quantity demanded. In the absence of tax, this condition implies 700-3p = p-100, or 4p = 800. With the tax, P = p+80, so that 700-3(p+80) = p-100, so that 4p = 800-240 = 560, or p = 140, implying P = 220.

Full marks for getting those three prices, or indicating in some fashion that buyers bear about 1/4 of the tax, and sellers about 3/4.

In class, I derived the general result for linear supply and demand functions using the notation Q^s = A+Bp, Q^d = a-bp, getting the result that buyers bear a share B/(B+b) of the tax. That formula works here, and if done correctly should get full marks.

If done graphically, full marks if done accurately, with the result indicated fairly clearly.

But a sketch of the graph, with no real relevance to the numbers in the question, gets no ( or few ) marks.