Damietta University

Faculty of Commerce
Department of Economics
1st Semester Final Exam 2020/ 2021
English Section Level: Third year
Public Finance & Taxation System MODEL A Course Code: ECON301
Date / / 2021 Total Marks: 70
Time: 120 Minutes Total Pages: 3
Answer the following questions (MCQ)
1. Market mechanisms are unlikely to provide
a. prices b. nonrival goods efficiently
c. supply and demand d. none of the above
2. Commodity egalitarianism refers to commodities that
a. are important for most consumers b. are too dangerous for most consumers
c. should be made available to all consumers d. are good ideas but never produced
3. Charging individual
a. government price supports b. will pricing
c. second tier pricing d. price discrimination
4. A ________ is a person who wants to enjoy the benefits of a public good without contributing
his or her marginal benefit to the cost of financing the amount made.
a. price maker b. politician c. free rider d. price optimizer
5. Which of the following is a public good?
a. public defense b. public television c. a library
d. schools e. all of the above
6. The Value Added Tax (VAT) is
a. not often used in the United States. b. a percentage tax.
c. added at each stage to production. d. all of the above.
7. A tax on consumption for those who are non-savers
a. is equivalent to a tax on income. b. causes income gains to increase dramatically.
c. would be preferred to a tax on wealth.
d. makes it difficult to tell what the result for the non-savers would be.
8. Who pays a consumption tax?
a. people who purchase goods b. firms who purchase goods
c. the elderly when they purchase goods d. all of the above
9. When government borrowing decreases private investment by raising the market interest rate,
this is known as
a. b. crowding out.
c. positive economics. d. the Ramsey Rule.
10. When the government borrows in the market, it
a. does not have to pay interest. b. is not required to pay back the entire principle.
c. can get indefinite extensions on the loan. d. does all of the above.
e. does none of the above.
11. Marginal damages are hard to measure because
a. they can be generated from multiple sources. b. they are hard to graph.
c. they happen over time. d. no one cares about them.
12. Congestion pricing
a. is never efficient. b. keeps nasal passages clear.
c. is a tax. d. all of the above.
13. Pollution rights may be traded if
a. polluters try to hide pollution. b. administrators are uncertain about Pigouvian taxes.
c. there is no market for pollution. d. pollution is harmless.
14. Marginal benefits are downward sloping when
a. there are no total benefits. b. the slope of the marginal benefits curve is negative.
c. total benefits are increasing at a decreasing rate. d. marginal costs are upward sloping.
15. A Pigouvian subsidy
a. cannot exist with externalities. b. is the same thing as a Pigouvian tax.
 MODEL A

c. is measured in terms of Pigouvian dollars.

d. moves production to the socially optimal level of output.
16. As a general rule, zero pollution is not socially desirable because
a. there would be no production.
b. the Environmental Protection Agency (EPA) needs to have something to do.
c. no pollution would lead to global warming. d. all of the above.
17. Externalities require government intervention when
a. violence will result between disputing parties. b. there are only a few sellers in the market.
c. property rights are not clearly established.
d. the government imposes sales taxes. e. all of the above.
18. Which method helps in obtaining the socially optimal level of output?
a. Pigouvian taxes b. regulation
c. property rights and bargaining d. all of the above
19. Marginal damages
a. must always be considered in social marginal costs.
b. must not be considered in social marginal costs.
c. must sometimes be considered in social marginal costs.
d. have nothing to do with social marginal costs.
20. A cap-and-trade policy
a. has a set number of permits. b. allows polluters to trade permits.
c. caps the total level of pollution allowed. d. all of the above.
21. Command-and-control regulations
a. are less flexible than incentive-based regulations. b. come from the private sector.
c. have technology standards a type of control. d. a & c. e. a & b.
22. Flat tax
a. is same tax rate to everyone. b. is same tax rate to each component of income.
c. allows a tax base with no deductions with a few exemptions and expenses.
d. is true for only a and b. e. all of the above.
23. Average cost pricing is found
a. when supply equals demand. b. when AC = MR.
c. when P = 0. d. where AC = AR.
24. A linear income tax schedule is known as
a. a flat income tax. b. a regressive tax. c. a Haig-Simons tax. d. a user fee.
25. Tax avoidance is
a. illegal in the United States.
b. changing your behavior so as to reduce your tax liability.
c. the same as tax evasion. d. a minor source of concern in the United States.
26. A tax wedge causes
a. consumer prices to equal producer prices. b. producer prices to rise above consumer prices.
c. consumer prices to separate from producer prices. d. all prices to fall.
27. Which of the following should be expected if the tax for a certain good increase?
a. price of the good increases. b. the composition of the commodity bundle is distorted.
c. the budget line pivots out. d. only a and b.
28. The tax interaction effect is the _________ in excess burden in the labor market stemming
from the _______ in real wages caused by a Pigouvian tax.
a. increase; increase b. reduce; reduction
c. increase; reduction d. reduction; increase
29
price is
a. a unit tax b. a compensated tax c. an income tax d. a price-distorting tax.
30. Which of the following would be an example of a lump-sum tax?
a. a compensated tax b. a retail sales tax c. a head tax d. an admission fee.

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 MODEL A

31. Which of the following is a unit excise tax?

a. a tax of 15% b. an admissions fee of $5.00 on each ticket purchased
c. an ad valorem tax of $3.00 d. an income tax of $3.00
32. The economic incidence of a unit tax is
a. generally borne by the buyers. b. generally borne by sellers.
c. generally borne by the government. d. independent of the statutory incidence for the tax.
33. Excess burden is largest with
a. lump-sum taxes. b. unit taxes. c. no taxes. d. all of the above.
34. The Double Dividend Effect requires
a. double credit on airline miles. b. two different taxes.
c. no taxes on stock dividends. d. Pigouvian taxes.
35. The portion of a government's indebtedness owed to foreigners is
a. external debt. b. internal debt. c. not recoverable. d. net debt.
36. Which one of the following statements is true?
a. A budget surplus will reduce national saving. b. A budget deficit decreases national saving.
c. A budget deficit will decrease interest rates. d. A budget deficit increases national savings.
Questions from 37 to : 50 If you assured that the answer is true select and shade the A answer,
False select and shade B, Uncertain select and shade C
37. The burden of debt is borne by future generations.
a. True b. False c. Uncertain
38. A subsidy for pollution not produced can induce producers to pollute at the efficient level.
a. True b. False c. Uncertain
39. Pollution rights can be traded and are always efficient.
a. True b. False c. Uncertain
40. Market-oriented solutions to externalities rarely work.
a. True b. False c. Uncertain
41. College education is an example of a positive externality.
a. True b. False c. Uncertain
42. An emissions fee is preferable to a cap-and-trade when MSB are elastic and costs are
uncertain.
a. True b. False c. Uncertain
43. Incentive-based regulations provide polluters no incentive to reduce pollution and are thus not
used often.
a. True b. False c. Uncertain
44. Changing tax regimes can sometimes be difficult and lead to inequities.
a. True b. False c. Uncertain
45. Natural monopolies have U-shaped cost curves.
a. True b. False c. Uncertain
46. If a tax is efficient, it will necessarily be equitable.
a. True b. False c. Uncertain
47. A lump sum tax can create an excess burden.
a. True b. False c. Uncertain
48. Taxing in labor markets creates more excess burden than taxing in commodity markets.
a. True b. False c. Uncertain
49. Taxes that create an excess burden are bad.
a. True b. False c. Uncertain
50. Most goods that are nonexcludable are pure public goods.
a. True b. False c. Uncertain
Last Page
Best wishes
Dr. Ibrahim Elatroush

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