PUBLIC FINANCE习题答案.docx

PUBLIC FINANCE习题答案.docx

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PUBLICFINANCE习题答案

SAMPLEMIDTERMEXAMI

PartIisworth36points.PartIIisworth24points.

PartI.（6pointseach）.Indicatewhethereachofthefollowingstatementsistrue,false,oruncertain,andexplainyouranswer.Yourgradewilldependprimarilyonthequalityofyourexplanation.Ifawordorphraseisunderlined,youranswermustincludeaconcisedefinitionofthewordorphrase.

1.Aconsumption-efficientallocationofresourcesissociallydesirable.

2.Supposethateveryonehasautilityfunctionthatdependsonlyonhisorherincome.Thenthevalueofautilitariansocialwelfarefunctionismaximizedwheneveryonehasthesameafter-taxincome.

3.Underthe1996welfarereform,eachstatereceivesafixedgrantfromthefederalgovernmenttopayforitsincomemaintenancepolicies.However,foreachdollarofitsownmoneythatthestatespendsonwelfare,thefederalgrantisreducedbyadollar.

4.UndertheSocialSecuritysystem,anindividual’sretirementbenefitsaredirectlyproportionaltotheamountofpayrolltaxesthatheorshehaspaidintothesystem.

5.FormerPresidentClintononceproposedthatindividualsbetweentheagesof55and64beallowedtobuyintotheMedicaresystemiftheysochoose.Thisisagoodexampleofhowsocialinsurancecansolvetheadverseselectionproblem.

6.Politicaleconomymodelsofbureaucraticbehaviorassumethatabureaucrat’sgoalistomaximizethewelfareofthecitizens.

PartII.Youranswerstothefollowingquestionsshouldtakeadvantageoftherelevanteconomictools.

7.（10points）Severalmonthsago,thenewspaperUSATodaypublishedanarticlethatwascriticalofthelargeamountofmoneythatthegovernmentspendstosubsidizetheenergyindustry.Inresponse,aspokesmanfortheindustryobserved,“Someoftheallegedsubsidiesdon’tevengototheindustry.Forexample,thegovernmentprovidesmoneytolow-incomefamiliestohelppayheatingbills.”Evaluatethisresponsecarefully.Youranswershouldincludeanappropriategraphicalmodel.

8.（14points）StanleyandWendybothoperatefactoriesalongalake.StanleyproducesanoutputX.Intheprocess,hepollutesthelake,whichincreasesthecostsofproductionforWendy.AssumethatthetotaldamagestoWendyincreaseinproportiontotheamountofXthatStanleyproduces.

a.Drawasketchthatdepictsthissituation.

b.ShowtheamountthatStanleyproduces,andshowthesociallyefficientamountforStanleytoproduce.

c.Onthediagram,showthePigouviantaxthatwillinduceStanleytoproducetheefficientamount,andtheamountofrevenuescollectedbythetax.

SAMPLEMIDTERMEXAMI:

SUGGESTEDANSWERS

PartI.（6pointseach）

1.False.Anallocationofcommoditiesissaidtobeconsumption-efficientwhentheonlywaytomakeoneconsumerbetteroffistomakeanotherworseoff,givenfixedquantitiesofthevariouscommodities.Wecannotknowwhethersuchanallocationissociallydesirablewithoutexplicitethicaljudgmentsrelatingtoequity.

2.False.Autilitariansocialwelfarefunctionsaysthatsocialwelfareisafunctionoftheutilitiesofeveryoneinsociety.Evenifallthatutilitydependsonisincome（sothatincentiveissuesarenotrelevant）,additionalassumptionsareneededtogettheresult.Theseincludeidenticalutilityfunctionsanddiminishingmarginalutilityofincome.

3.False.Eachstategetsagrantfromthefederalgovernment,butthegrantisnotreducedbytheamountthatthestatespendsonwelfare.

4.False.Theschedulethatrelatesbenefitsreceivedtopayrolltaxespaidisprogressive.Asalifetimetaxesincrease,benefitsincreaselessthaninproportion.

5.False.Adverseselectionoccurswhenthepeoplewhoaremostlikelytobenefitfromagiveninsurancepolicyarealsotheoneswhoaremostlikelytopurchaseit.UndertheClintonplan,enrollmentisoptionalinthisagegroup.Thosewhoaremostliketobesickaretheoneswhowouldbemostlikelytoparticipate,sotheprogramdoesnotsolvetheadverseselectionproblem.

6.False.Whileitisnotclearexactlywhatobjectivebureaucratshave,politicalmodelsgenerallyassumethatbureaucratsaretryingtomaximizetheirownutility,whichisrelatedtothesizeoftheagencytheyadminister.

PartII.

7.（10points）Justasisthecaseforatax,itdoesnotmatterwhichsideofthemarketasubsidyisappliedto.Thebeneficiarydependsontheelasticitiesofthedemandandsupplycurves.Thiscanbeillustratedeitherwithasupply-demanddiagramoraformulawhichshowsthattheequilibriumoutcomeisindependentofwhetherthesubsidyisreceivedbyproducersorconsumers.

8.（14points）ThisisessentiallythemodelofFigure5.4inthetext,exceptthatthemarginaldamagecurveishorizontal（becausetheproblemstipulatesthatthetotaldamageisdirectlyproportionaltotheamountofoutput）.

SAMPLEFINALEXAMI

Themaximumnumberofpointsis110.Pleaseanswereveryquestion.Youranswersshouldmakeuseofthetoolsofeconomicsandthematerialpresentedinthiscourse,includingdiagramsand/orformulaewhereappropriate.

Youareadvisedtoincludeaminimumofirrelevantmaterialinyouranswers.Pointswillbesubtractedforallincorrectstatementsyoumake.

PartI.（40points）

Indicatewhethereachofthefollowingstatementsistrue,false,oruncertain,andexplainyouranswer.Yourgradewilldependprimarilyonthequalityofyourexplanation.Ifawordorphraseisunderlined,youranswermustincludeaconcisedefinitionofthewordorphrase.

1.“Ipromisetolowerincometaxrates.AndIwon’thavetocutspending,becausethelowerrateswillinducesomucheconomicactivitythattaxrevenuewillrise.”Thispromisewouldbemorecrediblecomingfromacandidateforgovernorofastatethanfromacandidateforpresidentofthecountry.

2.Overtime,healthcarecostsintheUnitedStateshavebeenincreasing.Thisisdueprimarilytothefactthatthepopulationhasbeenaging.

3.SupposethatapublicgoodisprovidedinaPareto-efficientamount.Itispossiblethatdifferentmembersofsocietywillplacedifferentvaluesonthelastunitofthepublicgoodthattheyconsume.

4.Rent-seekingmodelsofgovernmentbehaviorassumethatthegoalofpolicymakersistomaximizeasocialwelfarefunction.

5.Inapay-as-you-gosocialsecuritysystem,thedependencyratioequalsthereplacementratio.

6.UndertheHall-Rabushkaflattax,eachindividualcompletesataxreturnthatincludeshisorherwagesandcapitalincome,nodeductionsareallowed,andtotalincomeistaxedataconstantrate.

7.Considerataxsystemthatisneutralwithrespecttomaritaldecisions.Ingeneral,suchasystemwillleadtoasituationinwhichtwofamilieswithequaltotalfamilyincomeswillpaydifferentamountsoftax.

8.Undercurrentlaw,corporationsmaydeductpaymentsofinteresttotheirbondholders.DisallowingthisdeductionwouldbringthetaxbaseintocloseralignmentwiththeHaig-Simonsdefinitionofincome.

PartII.

9.（12points）WhatistheTieboutmodel?

Whatarethekeyassumptionsbehindthemodel?

Aretheyrealistic?

10.（6points）InRussia,thepricesofcommoditiessuchasfoodandclothingaresetinafreemarket,buthousingisheavilysubsidizedbylocalgovernments.AtwobedroomapartmentinMoscow,forexample,mightrentfor$1.50permonth.（Utilitiesandotherfeesincreasethecosttoabout$35.）“Becauseofsubsidizedrents,sometenantsliveinlargerapartmentsthantheyneedandmightnototherwiseafford.”Explainhowthissituationrelatestotheconceptofexcessburden,andillustratewithadiagram.

11.（6points）In1997,HouseRepublicansproposedthatcapitalgainsbeindexedforinflation.Newsweek’sWallStreeteditorstatedthatthiswasunfairtowageearners:

“Inflationpushesupsalaries,too.Butwouldpaychecksgetthesamegeneroustreatment?

Nope.Noinflationindexing.”[Sloan,1997,page59].ComposealettertoNewsweekinwhichyoucommentonthisstatement.

12.（9points）Accordingtoconventionalwelfareeconomics,underwhatconditionsisagovernmentinterventionintheeconomyappropriate?

（Thereisnoneedtoexplaintheconditions;justlistthem.Bespecific;don’tsimplyanswer“marketfailure.”）InoneofthebudgetsthathesubmittedtoCongress,formerPresidentClintonproposedamulti-milliondollarprogramtosubsidizetrainingtoday-careworkers.Considereachcriterionyoulistedaboveandindicatewhetherornotitprovidesarationaleforthisgovernmentintervention.

13.（9points）Inthecurrentdebateoverthepublicpolicytowardthetobaccoindustry,somepoliticiansseemparticularlyinterestedinpunishingtheindustryforitsbadbehavior,andotherpoliticiansareprimarilyinterestedindeterringsmoking.Considerthefollowingtwopolicyoptions:

1）alargelump-sumtaxthatmustbepaidbythetobaccocompanies;2）alargeunittaxoncigarettes.Whichtaxismoresuitableforachievingeachobjective?

Explaincarefully.

14.（9points）“ItisundesirableforaneconomytobetotherightofthepeakoftheLafferCurve,becausethepeakdepictsthesociallyoptimaltaxrate.”Commentonthisstatement.

15.（7points）TheHopeScholarshipcreditisataxcreditof$1,500perstudentforqualifiedexpensesassociatedwitheachofthefirsttwoyearsofhighereducation.ThecreditisphasedoutlinearlyforAGIsbetween$80,000and$100,000.（Thus,whenAGIexceeds$100,000thefamilyisineligibleforthecredit.）Considerafamilyinthe28percenttaxbracketthathastwochildrenwhoqualify（i.e.,thefamilyiseligiblefora$3,000taxcredit）.Whatisthefamily’seffectivemarginaltaxratebetween$80,000and$100,000?

16.（12points）Inarecentop-edpieceinanundergraduatenewspaper,astudentonce