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finalf08answers - Econ 130 Final Exam Please write all your...

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Econ. 130 Final Exam December 10, 2008 Please write all your answers in your blue book. Do not use red ink. Part I. Multiple Choice (30 points) Write down the letter of the correct answer to each question below in your blue book. Each is worth 3 points A B C Question 1. 15. 6. The economic incidence of the corporate income tax A. is borne by the shareholders of the corporation – i.e., the owners of capital – through lower profits. B. is borne by the consumers of the corporation’s product through higher prices. C. is borne by the employees of the corporation – i.e., labor – through lower wages. D. may be borne by both capital and labor in both the corporate and non-corporate sectors, as well as consumers, depending on market conditions. 2. 14. 10. To minimize the excess burden of a tax on two unrelated goods, relative tax rates should be A. equal. B. inversely proportional to the relative elasticities of demand. C. proportional to the price of each good. D. inversely proportional to the relative quantity demanded. 3. 13. 7. The best and most consistent way to evaluate and compare alternative projects in a cost benefit analysis is to compare their A. net present value. B. internal rate of return. C. benefit cost ratio. D. cost effectiveness ratio. 4. 12. 9. The excess burden of a commodity tax is due to
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2 A B C Question 5. 11. 8. Given the uncertainty over the true value of the social discount rate, cost-benefit analyses should 6. 10. 1. A public project promises to return a net benefit of $1,000 for ever. If the annual discount rate is 10 percent, the net present value of this project is 7. 9. 2. Consider two projects. The first project pays benefits of $90 today and nothing else. The second project pays nothing today, nothing one year from now, but $100 two years from now. Which project would be preferred if the discount rate were 10%? A. The first project. B. The second project. C. It cannot be determined with the information provided. D. The two are equivalent.
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