PADM 5006 Final Exam A Fall 1999

Use separate sheets of paper as needed to answer. Please be sure to put your name on your answer sheets and the number of the question you are answering. When done staple all your answer sheets and your exam together and hand them in.

Please explain your responses.

1.Suppose a citizen proposal argues that carcinogens cause cancer and therefore any project that shuts down carcinogen producing activities will save lives, which are "infinitely valuable" therefore, their project should be undertaken. Also they point out it will raise quality of life associated with the local area so local property values will rise by about $10 million and thus increase tax revenues.

  1. Comment on the maximum you think the city should be willing to spend on this project.
  2. Would it matter if the area where this project was to take place was very poor and had high unemployment?

2. Which of the following would you classify as a public good or private good? Briefly, why?
Public restaurant
Local law enforcement services
Cable TV
Community swimming pool
National weather service predictions on the Internet
Fireworks Show

3. Recently Tartaric Manufacturing Corp. was sue and agreed to pay $1.3 million as punishment for polluting the San Joaquin River and China Island Wildlife Area. Was it necessary or desirable for the government (in this case the DA) to be involved in this issue? (Hint: please relate this issue to the Coase Theorem.) How else could public policy be used to reduce the level of pollution? What are some of the advantages and disadvantages of alternative approaches?

4. In Modesto a general sales tax is used to fund the public library. Assuming food is exempt, what efficiency and equity issues would you want to consider in evaluating this funding source? Specifically be sure to think about distributional issues of both the taxes and the good being financed. Please include definitions of the key terms used in your arguments.

5. What’s the difference between the economic justifications for social insurance programs such as Medicare and Unemployment insurance versus social redistribution programs such as TANF and Food Stamps?