exam 2 public finance Questions & Answers Correct!!

A Pure public good is - ANSWERS-one that is nontrivial in consumption -one whose benefits are not subject to exclusion (Both B and C) The nonrival property of pure public goods implies that the: - ANSWERSbenefits enjoyed by existing customers are unaffected as more consumers enjoy a given quantity of the good The property of nonexclusion for pure public goods means that the benefits of the good : - ANSWERScannot be withheld from consumers even if they refuse to pay Cable TV programming is an example of a: - ANSWERSprice-excludable public good A highway is an example of a: - ANSWERScongestable public good The efficient output of a pure public good is achieved at the point at which: - ANSWERSthe sum of the marginal benefits of all consumers equals the marginal social cost of producing the good The free-rider problem: - ANSWERSbecomes more serious as the number of persons involved in voluntarily financing a pure public good increases Which of the following is true in a Lindahl equilibrium for cooperative supply of a pure public good? - ANSWERS-the sum of the tax shares per unit paid by each consumer is equal to the marginal social cost of the good -the sum of the tax shares per unit paid by each consumer is equal to the marginal social benefit of the good. (both A and B) When someone donates money to charity, his utility level increases from the recipients welfare. This is called - ANSWERSaltruism when someone donates money to charity, his utility level increases from his giving action. this is called - ANSWERSwarm glow Which of the following will alleviate free rider problems? - ANSWERS-all of the above A small community currently taxes residents to provide monthly community concerts. Voter A currently pays a tax per concert equal to $50 per month. This voter receives a marginal benefit of $75 at the current number of concerts provided. Voter A: - ANSWERSwould be made better off if the number of monthly concerts were increased A proposal to build new roads in a small town is up for a vote. Voter B estimates that's marginal benefit of roads at the proposed new level would be $80 per year. This voter will vote against the proposal: - ANSWERSIf her tax share exceeds $80 The median voter is the one whose most-preferred political outcome is the median of the most- preferred outcome of all those voting - ANSWERSTrue A voter's most-preferred political outcome will be that for which the: - ANSWERSmarginal benefit of a pure public good is equal to the voter's tax share per unit If all voters have single-peaked preferences for a pure public good, then the political equilibrium under majority rule: - ANSWERS-A political equilibrium exists -the political equilibrium is the median voter's most-preferred outcome (Both B and C) Arrow's Impossibility Theorem states that in some cases: - ANSWERSpolitical equilibrium for a public choice may not be transitive under majority rule When a political party is maximizing votes, what position will it take in the issue of expenditure of public school? - ANSWERSthe middle following the median voter If bureaucrat seek to maximize the size of their budgets, they will: - ANSWERS-seek to fund levels of services for which TSBTSC -seek to fund levels of services for which MSCMSB (Both B and C) Logrolling results when: - ANSWERStwo voters succeed in pairing two issues on a ballot that can pass together, but would fail individually. Voter A will normally vote in favor of one security guard per week because his marginal benefit is $125 and his tax share is $100 per week. Voter A receives zero marginal benefit from one concert a week and would vote against it. Voter B receives $125 marginal benefit from one concert per week but no marginal benefit from one security guard. One concert per week also will fail to gain a majority when put to the vote. Assuming that both Voter A and Voter B will pay $100 per week in tax for each concert and each security guard, - ANSWERSpairing the issues on one ballot will result in both Voter A and Voter B voting against the combined issue. The marginal tax rate for a payroll tax is 7 percent on all wages up to $60,000 per year. The marginal tax rate for wages in excess of $60,000 per year is zero. The payroll tax is therefore - ANSWERSRegressive tax