ECON 5050 Practice Exam 1 (W&W chapters 1,2,3,10,11,12,13,14 & ERP chapters 4,5,6)


PADM 5006 Practice Final Exam Fall 1999

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 proposal for a project before the city indicates the project is "infinitely valuable" because it will generate about $2 million in revenue every year forever. Also they point out it will raise local property values by about $20 million and thus increase tax revenues.

  1. Comment on the maximum you think the city should be willing to spend on this project.
  2. Would it matter if the area where this project was to take place was very poor and had high unemployment?

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

  • Public telephone
  • Food stamps
  • Radio broadcast
  • National Defense
  • Pizza
  • Cable TV
  • Highway
  • National park
  • Clothing
  • Health Care

3. Many people are concerned about air quality in the San Joaquin Valley. Why might it be desirable for the government to be involved in this issue? (Hint: please relate this issue to the Coase Theorem.) How could public policy be used to reduce the level of pollution? What are some of the advantages and disadvantages of alternative approaches?

4. Suppose someone suggests: "Empirical data indicates that the quantity purchased of home fax machines tends to increase with personal income. Therefore we should tax home fax machines since this will be a progressive tax." Discuss this idea. Please include definitions of the key terms used in your arguments.

5. Whats 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?