Comprehensive Exam - Public Finance Section

1. Suppose a high speed railway across the southern U.S. has been proposed.

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 high speed railway across the southern U.S. 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. Briefly explain the difference between social costs, on budget costs, and off budget costs using examples for this policy.

e. What would tend to determine the economic incidence of the spending for the railway?

f. Concerned about the budget deficit someone has suggested instead putting a tax on new vehicles based on their fuel inefficiency and pollution production and encouraging more virtual commuting. How might this have similar effects? How might it differ?

g. Briefly explain an efficiency related rationale for taxing gasoline to fund this project. (Hint: consider tax incidence and potential distortions to the economy.)

h. What factors would influence the equity of the redistributional effects of a gas tax?

i. Suppose some landowners on the proposed route for the railway oppose the project because it may require use of some of their land. How might you address their claims of inequity?

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

2. The city of Perrochien is contemplating building a dog park. A community group argues that dogs are good for peoples health and that since health is a top priority this is clearly a worthwhile project.

Note this question has 10 parts. If you think carefully each part can be concisely explained in a few sentences using concepts and principles developed by public finance economists.

a. Do you see any problems with the community groups analysis so far?

b. In designing a benefit cost analysis of this project, what are some of the key data or information you would want to gather?

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

d. 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?

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 in the neighborhood that receives the park matter in designing your proposal and evaluating the benefits?

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