My Document based on Thesis questions concerning the subject of public finance,which covers several parts includes externality analysis,Theory of taxation,Theory of public goods.These questions widen understanding for students on how to correct market failures and externalities using coase theorem,...
MZUMBE UNIVERSITY
ECO 213: PUBLIC SECTOR ECONOMICS
REVIEW QUESTIONS
1. Subject Matter and Overview on Fiscal Functions
a) Define fiscal functions and explain their importance in government operations
b) How does fiscal policy influence the economy, and what are its key tools?
c) Discuss any recent developments or trends in fiscal functions that have emerged
in the past few years
2. Market Failure and the Rationale for Government Intervention
a) What is market failure, and why does it occur?
b) Explain the concept of externalities and give examples of positive and negative
externalities.
c) How can the government address market failures caused by asymmetric
information?
d) Explain the concept of the optimal level of provision for public goods. How is it
determined?
e) In a public choice model, the cost of providing a public good is given by C =
1000 + 50N, where N represents the number of individuals benefiting from the
public good. If there are 200 individuals benefiting from the public good, what is
the total cost of providing it?
f) In a public choice model, the utility function for a voter is given by U = C^0.5,
where C represents the amount of public goods received. If the voter receives 100
units of public goods, what is their utility level?
g) Suppose a community is considering three projects, a hospital, a library and a
swimming pool. The community has three voters Daniel, Lennon and Lynn. The
table below shows their benefit for each project. (a negative sign indicates a net
loss)
Project Daniel Lennon Lynn
Hospital 200 -50 -55
Library -40 150 -30
Pool -120 -60 400
i. How will the society decide about which project should be undertaken?
ii. Calculate the net benefit obtained by the community if each project
project is undertaken
iii. Which project will be undertaken if the projects are voted once at a
time?
iv. If the community use logrolling system, what will be the desirable
outcome?
v. What other ways can the community use to solve public choice
problems?
h) A firm total cost c is given by the following function;
. Where X is the level of output
1
, The firm can sell any number of units of output at a price of 64 shillings. However,
production inflicts damage on the firm’s neighbours. Total damage inflicted depends on
the firm’s output and is given by;
Assume that the firm has the property rights
i. In absence of an agreement with its neighbours, what would its level of
output be?
ii. Using coase theorem explain how negotiations can help solve the
externality problem in ( i) above
iii. iii. Explain the conditions which will make the negotiation process in (ii)
above possible
iv. If the government wishes to control the externality by imposing a tax,
what should the tax be? How much revenue does it collect from such a tax
v. Explain the difficulties of applying Coase theorem in real
life
i) Explain the concept of a Pareto improvement and how it is related to Pareto
optimality.
j) Discuss the conditions that must be satisfied for an allocation to be Pareto
optimal.
k) Consider a society with two individuals, Individual A's utility function is UA = -
10x, and individual B's utility function is U_B = x2. Find the allocation that
maximizes social welfare according to this social welfare function.
3. Government Failure
i. What are the causes of government failure?
ii. What are some examples of government failure?
iii. How can government failure be mitigated?
4. Government Expenditure System
i. Discuss the factors that determine the size and composition of public
expenditure in an economy. How do political, social, and economic factors
influence government spending decisions?
ii. Explain the concept of the public expenditure multiplier and its implications
for fiscal policy. How does the multiplier affect the effectiveness of
government spending in stimulating economic growth?
iii. Discuss the challenges and limitations of public expenditure management in
developing countries. What are the key issues that governments face in
ensuring efficient and effective utilization of public funds?
iv. Compare and contrast capital expenditure and revenue expenditure. Provide
examples of each type and explain their impact on economic development and
sustainability.
2
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller sulemrisho54. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $10.49. You're not tied to anything after your purchase.
