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

1. Traffic circles, also called roundabouts, tend to reduce traffic speed, but keep traffic flowing, and eliminate left turns. Its estimated they reduce fatalities at intersections by 89%, but at larger intersections they can cost more to install than a traffic light. It has been proposed that more roundabouts be used in Stanislaus county.

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

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

b. 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.

c. Some people argue the traffic circles could be more aesthetic if the inner area is filled with attractive plants. Does this fit a public finance argument for further government intervention? Why or Why not?

d. Smoother traffic flow may also decrease air and noise pollution. Does this imply further reason for government intervention? Why or why not?

e. What are some alternatives you might consider for funding such a project, and why?

f. Are there any advantages or disadvantages from an efficiency perspective to a vehicle-licensing fee?

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

h. Some argue vehicle-licensing fees particularly hurt the poor. Why might this be true? Why might it not be true?

i. How might you reduce the impact of these taxes on the poor? Are there any likely drawbacks to your plan?

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