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Past Exam for ECN 131 - Public Finance with Hosseini at UC Davis (UCD)

Exam Information

Material Type:Mid-Term
Professor:Hosseini
Class:ECN 131 - Public Finance
Subject:Economics
University:University of California - Davis
Term:Winter 2008
Keywords:
  • Target Group
  • Progressive Taxation
  • Different Tax Rates
  • National Savings
  • Combination
  • Product Market
  • Relationship
  • Market Economies
  • Income Effect
  • Substitution
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Sample Document Text

Midterm 2 Solution Key ECN131: Public Finance Winter 2008 Prof. Farshid Mojaver Name:_________ (30 pts) True/False Explain your thinking and the rational for your answer in a few words. (1) There is a trade-off between equity and efficiency in the economic theory and we observe this trade-off in advance market economies. That means higher equity can only be obtained at the cost of lower efficiency, income and lower economic growth. False - Empirically no such trade-off is found in OECD countries (2) Ramsey rule is not optimal because it is not social welfare maximizing. False –When individuals are identical and equity is not an issue any more then individual utility maximization becomes equivalent to social welfare maximization and hence optimal. (3) Ramsey rule suggests that luxury goods (say caviar or private airplane) should be taxed at a higher rate compared to necessity goods (such as food and clothing). False - Ramsey rule sugges...

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