PADM 5006 Final Exam Fall 2002

Use separate sheets of paper as needed to answer. Please be sure to put your name on your answer sheets and the number of the question you are answering. When done staple all your answer sheets and your exam together and hand them in.

Please explain your responses.

1.Suppose a citizen group proposes a community fitness center. They point out that this will promote health, quality of life, and life expectancies. Since lives are “infinitely valuable” they argue this project should clearly be undertaken. They plan to charge $1 per visit as a usage fee which they project with cover maintenance and staffing. They also point out the fitness center will raise local property values by about $20 million and thus increase tax revenues.

a) Comment on the maximum you think the city should be willing to spend on this project.

b) Would it matter if the area where this project was to take place was very poor and had high unemployment?

c) Once you have the information you would use in a benefit cost analysis how would you handle benefits and costs that occur in different periods of time?

2. Which of the following would you classify as a public good or private good? Briefly, why?

a) New Movie Premiere

b) Sequoia National Park

c) Lindt Swiss chocolate truffles

d) National Defense

e) Santa Clause in the Mall

f) Public restaurant

g) CBS NFL Football broadcast

h) Public housing vouchers

i) Highway

j) Police Services

3. In California “no burn" days can de declared by a by the state Air Resources Board (ARB) or an “Air Pollution Control District" (APCD) or a similarly defined district. On these days agricultural burning is prohibited usually based on predictions about the air quality. Government has not always been involved in this issue. Why might it be desirable for the government to be involved? (Hint: please relate this issue to the Coase Theorem.) How could public policy be used to reduce the level of particulate matter? What are some of the advantages and disadvantages of alternative approaches? Is there an implication in terms of what level of government is appropriate for different activities?

4. Suppose a citizen proposes an additional half percent sales tax to fund road improvements. Discuss this idea from and equity and efficiency perspective. Please include definitions of the key terms used in your arguments.

5. What’s the difference between the economic justifications for social insurance programs such as Medicare and Unemployment insurance versus social redistribution programs such as TANF and Food Stamps?