Comprehensive Exam - Public Finance Section

Choose one of the following 3 scenarios and answer all of the parts a-j for that scenario.

1. Project Gutenberg is an all volunteer effort to create and distribute eBooks for free that are readable on as many formats (PC, iPad, Kindle, Sony Reader, iPhone, Android or other portable device) as possible, within copyright limitations. Currently they have over 33,000 free ebooks available. For example some of their most popular downloadable books are by Sir Arthur Conan Doyle, Charles Dickens, Mark Twain, William Shakespeare, and Jane Austen. They are registered as a 501(c)(3) charity with the IRS and so donations are tax deductible.

Note this question has 10 parts intended to guide you in analyzing some aspects of this project. If you think carefully each part can usually be concisely explained in a few sentences using concepts and principles developed by public finance economists.

a. In designing a benefit cost analysis of Project Gutenberg what are some of the key data or information you would want to gather and why? Feel free to use a list with some notes on reasoning for this part.

b. 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?

c. Briefly explain a public finance related economic rationale for this project.

d. How might public policy be used to encourage this project?

e. Briefly explain the difference between social costs, on budget costs, and off budget costs using examples for this project.

f. What are some of the alternatives for funding this project?

g. To get some of the benefits from this project people need some access to the internet. Suppose a tax on phone services is used to increase internet access. What would be the likely incidence of such a tax?

h. Suppose property taxes are used to increase internet access. What would be the likely incidence of such a tax?

i. Would the socioeconomic characteristics of the people that already receive internet access versus those whose access is likely to increase matter in evaluating the benefits of increased internet access?

j. Does it make more sense for policy related to this project to be handled at the federal, state, or local level? Why?

OR

2. The state government of California may stop reimbursing local governments for the costs of giving all California voters the option to vote by mail. This would make it optional for local governments to provide this service.

Note this question has 10 parts intended to guide you in analyzing some aspects of this project. If you think carefully each part can usually be concisely explained in a few sentences using concepts and principles developed by public finance economists.

a. In designing a benefit cost analysis of providing the option to vote by mail what are some of the key data or information you would want to gather and why? Feel free to use a list with some notes on reasoning for this part.

b. 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?

c. How might you weigh the value of peoples time?

d. Briefly explain a public finance rationale for government intervention.

e. Does it matter that some benefits or costs may be on-budget or off-budget items? Be sure to give an example of each to illustrate your explanation.

f. What are some alternatives you might consider for funding this project, and why?

g. Suppose a general sales tax is used. What would be the likely incidence of such a tax?

h. Suppose property taxes are used. What would be the likely incidence of such a tax?

i. Would the socioeconomic characteristics of the people that tend to vote by mail matter in evaluating the benefits?

j. Does it make more sense for this project to be handled at the federal, state, or local level? Why?

OR

3. According to President Obama buildings use about 40% of the energy we consume and cause about 40% of our carbon pollution. In the U.S. older homes and buildings on average use twice as much energy as newer homes and buildings. He has asked Congress to provide new temporary incentives for Americans to make energy-efficiency retrofit investments in their homes. According to Obama unemployment in the construction industry hit 21% this year so this policy could help fight unemployment and help the environment. (http://www.whitehouse.gov/blog/issues/Energy-%2526-Environment)

Note this question has 10 parts intended to guide you in analyzing the proposed policy. If you think carefully each part can be concisely explained in a few sentences.

a. In designing a benefit cost analysis of the proposed incentives for energy-efficiency retrofit investments what are some of the key data or information you would want to gather?

b. 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?

c. Briefly explain an externality related economic rationale for this policy.

d. How might you prioritize incentives for alternative energy-efficiency retrofit investments?

e. Briefly explain the difference between social costs, on budget costs, and off budget costs using examples for this policy.

f. What would tend to determine the economic incidence of the benefits of this policy?

g. What factors would influence whether there are multiplier effects from a policy such as this?

h. Concerned about the budget deficit someone has suggested instead putting a tax on heating oil and natural gas. How might this have similar effects? How might it differ?

i. What factors would influence the equity of the redistribution effects of a tax on heating oil and natural gas?

j. Does it make more sense for this project to be handled at the federal, state, or local level? Why?