Economics 463                           Final Exam - Summer Session II 1995

Answer each of the following questions in the space provided.  Remember that your answer will be
graded based more upon your explanation and intuitive understanding of the relevant material than on
recall of institutional or technical details.

1)  True, false, or uncertain.  Explain your reasoning.  Unanimity rule will lead to an efficient
provision of a public good.


2)  True, false or uncertain.  Explain your reasoning.  Pigouvian taxes and Pigouvian subsidies are
equally effective methods of inducing sources of externalities to "internalize" the external costs.  


3)  True, false or uncertain.  Explain your reasoning.  Suppliers of widgets should not be concerned
about the imposition of a tax on demanders of widgets.

4)   True, false or uncertain.  Explain your reasoning.  The excess burden of a tax depends upon the
change it causes in the relative prices of goods. 

5)   True, false or uncertain.  Explain your reasoning.   An increase in the tax on interest income will
reduce savings.

6)   True, false or uncertain.  Explain your reasoning.  Reducing the tax rate on capital gains is
advocated by some as a means of inducing greater investment.

7)   True, false or uncertain.  Explain your reasoning.  The U. S. Constitution and Constitutional
history have no bearing on the modern system of taxation.

8) True, false or uncertain.  Explain your reasoning.  The Clarke tax, and other truth-telling
mechanisms, are effective ways of making public choices among competing policy or program
proposals.