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

  1. Numerous accidents have occurred on 132. To reduce these it has been proposed that the road be widened and that on and off access be limited to ramps.

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.

  1. In designing a benefit cost analysis of this proposal what are some of the key data or information you would want to gather?
  2. 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.
  3. Suppose some business owners on 132, who will not be near any new access ramps, vehemently oppose the project. How might you address their claims of inequity?
  4. Increased travel may also increase air and noise pollution. Does this imply further government intervention? Why or why not?
  5. What are some alternatives you would consider for funding such a project, and why?
  6. Are there any advantages or disadvantages from an efficiency perspective to a road user fee?
  7. Suppose a tax on gasoline is used. What would be the likely incidence of such a tax?
  8. Some argue these taxes (user fees and gasoline taxes) particularly hurt the poor. Why might this be true? Why might it not be true?
  9. How might you reduce the impact of these taxes on the poor? Are there any likely drawbacks to your plan?
  10. Does it make more sense for these policies to be handled at the federal, state, or local level? Why?