Chap031 - CHAPTER 31 Public Choice Theory and the Economics of Taxation A Short-Answer Essays and Problems 1 What are the basic differences between

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CHAPTER 31 Public Choice Theory and the Economics of Taxation A. Short-Answer, Essays, and Problems 1. What are the basic differences between public choice theory and the economics of taxation? 2. Why may majority voting produce economically inefficient outcomes? Give a numerical example that leads to the rejection of a public good. 3. Answer the next four questions on the basis of the following table which shows the rankings of the public goods by three voters: A, B, and C. Public good Voter A Voter B Voter C More police protection 1 2 3 More fire protection 3 1 2 More schools 2 3 1 (a) What will be the choice between more police protection and more fire protection? (b) What will be the choice between more schools and more police protection? (c) What will be the choice between more fire protection and more schools? (d) What do the rankings in the table indicate about choices made under majority rule? 4. Answer the next four questions on the basis of the following table which shows the rankings of the public goods by three voters: A, B, and C. Public good Voter A Voter B Voter C New park 1 2 3 New bridge 3 1 2 New school 2 3 1 (a) What will be the choice between a new park and a new bridge? (b) What will be the choice between a new school and a new park? (c) What will be the choice between a new bridge and a new school? (d) What do the rankings in the table indicate about choices made under majority rule? 5. Explain two ways inefficiencies associated with majority voting may get resolved. 243
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Chapter 31 6. Explain the paradox of voting that is illustrated in the table below in choices between the same expenditure on three different public goods. The numbers under each name indicate the voting preferences (first, second, or third choice) of each of the three citizens in the society. Public good Hickory Dickory Dock Hospital 1 2 3 Roads 3 1 2 Police 2 3 1 7. What is the median-voter model and what are two implications from it? 8. Three people on a city council have three different spending proposals for snow removal. Mitchell wants to spend $2 million to purchase more trucks and equipment. Williams wants to spend $1 million and purchase half the equipment. Symmes doesn’t want to purchase any new equipment, but prefers to spend $200,000 for additional stocks of de-icing chemicals. What does the median-voter model suggest will happen in this case? Explain the likely outcome. 9. What are five sources of government failure? New 10. Explain the difference between the special interest effect and rent-seeking behavior. 11. Give three different examples of rent-seeking behavior. 12. Why would private business be considered more efficient than public agencies? 13. What are the problems encountered in any strict application of benefits-received and ability-to-pay principles of taxation? 14. Explain and evaluate this statement:
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This note was uploaded on 03/18/2012 for the course ITEC 3290 taught by Professor Dunn during the Spring '12 term at East Carolina University .

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Chap031 - CHAPTER 31 Public Choice Theory and the Economics of Taxation A Short-Answer Essays and Problems 1 What are the basic differences between

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