Revision public finance

Chapter one
Individuals and Government

1. Why are we Studying Public Finance?

2. What is Public Finance?
3. Individuals, Society, Government
4. Allocation of Resources between Government and Private Use
5. Products Possibility Curve, Showing Alternative Combination of Government Goods &
Services and Private Goods & Services
6. Mixed Economy Markets and pure private Economy
7. Circular Flow in the Mixed Economy
8. Market Failure and Function of Government: How Much Government is Enough?
 Chapter 2
Efficiency, Markets, and Governments

• 1- Discuss the difference between positive and normative economics.

• 2- Define the efficiency criterion and show how the marginal conditions for efficiency can be
used to identify the efficient output of a good or service.
• 3- Explain how a system of perfectly competitive markets can achieve efficiency.
• 4- Show how the exercise of monopoly power can prevent markets from achieving efficient levels
of output.
• 5- How Taxes and Government Subsidies can Cause Losses in Efficiency in Competitive Markets
• 6- Market Failure: A Preview of the Basis for Government Activity
• 7- Efficiency versus Equity
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 Chapter 3
Externalities and governments policy
1- Externalities: A Classification and Some Examples
2- Externalities and Efficiency
3- Negative Externalities
4- Positive Externalities
5- Internalization of Externalities
6- Corrective Taxes: A method of Internalizing Negative Externalities
7- Corrective Subsidies: A Means of Internalizing Positive Externalities
 Chapter 4
public goods
1. Definition of public goods
2. The Characteristics of Public and Private Goods
3. Provision of Public Goods: Markets and Government
4. Demand for a Pure Public Good
5. A Cooperative Method of Efficiently Supplying Pure Public Goods: Voluntary
Contributions and Cost Sharing
6. The Lindhal Equilibrium
7. Analyze The Free-Rider Problem
Marginal cost of consuming a pure public good
 Chapter 5
public choice and the political process
1- The Supply of Public Goods Through Political Institutions: The Concept of Political Equilibrium
2- Political Equilibrium
3- Elections and Voting
4- To Vote or Not to Vote
5- Determinant of Political Equilibrium
6- A Model of Political Equilibrium Under Majority Rule
7- Single-Peaked and Multiple-Peaked Preferences
8- The Political Process
9- Political Parties and Political Equilibrium
10- The Median Voter, Political Parties, and Political Equilibrium Under Majority Rule
11- Voting on More Than One Issue at a Time: Logrolling
12- Logrolling and Efficiency
13- Bureaucracy and the Supply of Public Output
Existence of single-Peaked Preferences
 Chapter 10
introduction to government finance
• 1- Government Finance
• 2- Principles of Taxation
• 3- Tax Base
• 4- Tax Rate Structure
• A. Proportional Tax Rate Structure
• b. Progressive Tax Rate Structure
• C. Regressive Tax Rate Structure
 Choose the correct answer

• 1- A voter’s most-preferred political outcome will be that for which the:

a. marginal benefit of a pure public good is equal to the voter’s tax share per unit.
b. total benefit per unit of a pure public good is equal to the voter’s tax share per unit.
c. difference between the marginal benefit of a pure public good and the voter’s tax share per unit is
maximized.
d. marginal benefit of a pure public good is equal to zero, no matter what the voter’s tax share per
unit.
 • 2- Implicit logrolling results when:
a. any two issues are paired on a ballot.
b. two voters succeed in pairing two issues on a ballot that can pass together but would fail indi-
vidually.
c. voters agree to trade votes on an issue.
d. the pairing of two issues on a ballot allows the achievement of efficiency.
• 3- The demand curve for a pure public good is:
a. a horizontal line.
b. obtained by adding the quantities individual consumers would purchase at each possible
price.
c. obtained by adding the marginal benefit obtained by each consumer at each possible quantity.
d. the marginal cost curve for the pure public good.
• 4- Taxes are likely to affect:
• a. market equilibrium.
• b. political equilibrium.
• c. the distribution of income.
• d. all of the above
• 5- The marginal tax rate will eventually exceed the average tax rate for a:
• a. proportional tax.
• b. regressive tax.
• c. progressive tax.
• d. flat-rate tax.
• 6- Taxes:
• a. are voluntary payments to governments.
• b. are unlikely to affect market supply and demand.
• c. never affect efficiency in the allocation of resources.
• d. are compulsory payments associated with certain activities.
 t/f
1. The median voter is the one whose most-preferred political outcome is the median of the most-preferred
outcome of all those voting. t
2. If all voters have single-peaked preferences, a political equilibrium will not be possible under majority
rule. f
3. In a Lindahl equilibrium, each consumer of a pure public good consumes the same quantity and pays a
tax share per unit of the good equal to his or her marginal benefit. t
4. If the marginal social cost of a pure public good exceeds its marginal social benefit, additional units of
the good can still be financed by voluntary contributions f
5. The marginal tax rate for a payroll tax is 7 percent on all wages up to $60,000 per year. The marginal tax
rate for wages in excess of $60,000 per year is zero. The payroll tax is therefore a regressive tax. t
6. The marginal tax rate will eventually exceed the average tax rate if the tax rate structure is propor-
tional. f