(Questions keyed to old text: Rosen and Gayer)
Study Questions III--Final Examination
Questions from Rosen and Gayer:
Page 321: 1, 10, 11, 12.
Page 342: 1, 2, 9.
Page 376: 6, 8abd.
Page 405: 1, 2, 4, 5, 7.
Page 428: 1, 4, 5, 8.
Page 450: 2, 7.
Page 495: 7.
1. Briefly define and compare the following taxes: estate taxes, inheritance taxes, and gift taxes. How are the gift and estate tax related in the United States?
2. Show the possible (theoretical) impacts of income taxation on work effort. Summarize the results of empirical studies of the question.
3. What advantages would a comprehensive expenditure tax have over more narrow consumption taxes such as sales or value added taxes? What would be the disadvantages?
4. What is comprehensive income? Why would a comprehensive income tax eliminate the need for a separate tax on corporate income?
5. Discuss the current tax treatment of capital gains under the personal income tax.
6. In what sense does the corporate income tax subject corporate profits to double taxation?
7. Explain why the corporate income tax may reduce the return on all investment including that in the noncorporate sector? Why does a corporate income tax crease an excess burden?
8. Why are most taxes likely to cause losses in efficiency? Explain and show.
9 The incidence of the sales tax over a person's lifetime is close to proportional. Explain.
10. What is the difference between an expenditure tax and a sales tax? What is the difference between an expenditure tax and an income tax?
11 Compare a value added tax with a general sales tax.
12. In what ways does the administration of a property tax differ
from the income and sales taxes.
13. How does the ability-to-pay philosophy of taxation differ from the benefit principle? What problems are encountered in implementing both these tax philosophies?
14. What is the difference between horizontal and vertical equity? Give examples.
15. Show how a gasoline tax of 10 cents per gallon collected from sellers affects the market equilibrium for gasoline in the short-run? Show the excess burden.
16. Compare (in terms of regressivity or progressivity) a general sales tax which includes food in its base with one that exempts food.
Study Questions II-Second Exam
The exam will cover chapters 7-13 in the text..
Questions in Rosen and Gayer
Page 146: 1, and 2.
Page 171: 2, 6, and 8.
Page 199: 2, 3, and 5.
Page 220: 1, 2, 3, and 4.
Page 249: 2, 3, and 5.
Page 268: 3, 4, and 5.
Page 273: 1, 3, and 5.
1. Explain why economists have criticized past welfare programs for providing adverse work incentives relative to a negative income tax program.
2. Most means-tested aid given to Americans who are poor has been provided in the form of "in-kind" assistance, especially medical care, food, and housing. What do some economists find objectionable about such program? Why do these programs receive more political support than cash transfers?
3. Explain why, in many cases, in-kind transfers to the poor are likely to be equivalent to cash transfers in their effects.
4. Explain why a negative income tax plan might be more expensive than the current system of assistance to the poor.
5. What are the fundamental difference between fully funded and pay-as-you-go, tax-financed retirement systems? How can the Social Security system continue to pay pension benefits even if its trust fund is nearly depleted?
6. What are some of the problems involved in measuring the value of human life? Explain why saying that each life is priceless is likely to result in more than the efficient amount of investment in life-saving programs.
7. What factors must be considered when choosing a discount rate to be used in benefit-cost analysis?
8. Why are costs often more easy to measure in benefit-cost analysis than benefits? What are some situations where the measurement of costs present problems?
9. College graduates earn considerably more than non-college graduates. Why are not all of this increase in earnings attributable to the student's education?
10. Explain the principal-agent problem in the following situations:
a. Real estate agent-home seller.
b. Travel agent-traveler.
c. Doctor-patient.
11. Explain both possible moral hazard and adverse selection problems in the following situations:
a. Fire insurance.
b. Life insurance.
Study Questions I-First Exam
Questions from Rosen and Gayer:
Page 14: 1, 2, 6, & 7.
Page 50 1 and 3
Page 69: 1, 2, 4, 8, & 12.
Page 105: 1, 2, 4, 5, 6, & 9.
Page 130: 1, 2, 6, 9, & 10
1. Under what conditions are externalities likely to be internalized without the necessity of government intervention?
2. Why are fixed limits on pollution emissions for each firm likely to be an inefficient means of reducing pollution compared to a Pigouvian tax?
3. Would the sales of pollution rights or certificates be an efficient means of allocating a given amount of pollution? Explain.
4. What are the essential differences between pure public goods and pure private goods?
5. Compare the conditions necessary for efficiency for a pure public good with a private good.
6. Explain free rider behavior in the following contexts:
a. Service as a leader in a club or other organization.
b. Contribution to the support of public broadcasting.
c. The decision to receive an inoculation for a contagious disease.
7. How does a person decide to vote on any issue that proposes to change the amount of public goods supplied by government?
8. Why does not a political equilibrium lead to efficiency in the way that equilibrium in private goods markets does?
9. Why is a voter in the "middle of the pack" likely to be satisfied with the outcome of political decisions?
10. The supply of paper is given by the following equation: Qs = 5,000P and the demand for paper is given by: Qd = 400,000 - 1,000P. The Q's are in tons. There is pollution associated with the production of paper causing marginal external damages of $20 per ton.
a. Find the competitive price and quantity of paper
b. Determine the efficient level of paper production.
c. Devise a corrective (Pigouvian) tax to that would achieve efficiency under competition.