Public Policy Analysis
Chapter Exam Questions
Course Introduction
Public Policy Analysis explores the systematic evaluation of public sector programs and policies, equipping students with the tools to assess policy problems, formulate alternatives, and predict their potential impacts. The course covers key methodologies including cost-benefit analysis, qualitative and quantitative research, stakeholder analysis, and program evaluation. Students will learn how to apply theoretical frameworks to real-world cases, interpret policy outcomes, and communicate their findings effectively to a range of audiences. Emphasis is placed on ethical considerations, political dynamics, and the practical constraints policy analysts face in government and nonprofit settings.
Recommended Textbook
Public Finance 9th Edition by
Harvey S. Rosen Ted Gayer
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Chapter 1: Introduction
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Q1) Do you think it is correct policy that the federal government is not required to finance all of its expenditures with tax revenues and is allowed to borrow? What are the implications of this policy?
Answer: Answers will vary,but financing out of current spending ensures that there are no deficits at the end of the fiscal year.However,in times of crisis,such as war,this type of financing would limit the government's ability to accomplish its stated goals.
Q2) Local governments rely heavily on property taxes.
A)True
B)False
Answer: True
Q3) Social insurance has become an increasingly large portion of federal taxes because of the "Baby Boomer" generation.
A)True
B)False
Answer: True
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Chapter 2: Tools of Positive Analysis
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Q1) Econometrics is the statistical analysis of economic data.
A)True
B)False
Answer: True
Q2) Why might the consequences of imposing a tax on harmful fast foods not adhere to theory?
Answer: Preferences of people with different desires could be altered in unintended ways.All variables could not be controlled for.
Q3) The Law of Demand states
A)that there is an inverse relationship between price and quantity demanded.
B)that the judicial branch of government sets demand schedules.
C)that laws can have no effect on market economies.
D)none of the above.
Answer: A
Q4) Unobserved influences on a regression are captured in the A)error term.
B)parameters.
C)regression line.
D)regression coefficient.
Answer: A
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Chapter 3: Tools of Normative Analysis
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Q1) Points on the utility possibility frontier are
A)inefficient.
B)points of incomplete preferences.
C)not producible.
D)Pareto.
Answer: D
Q2) Movement from an inefficient allocation to an efficient allocation in the Edgeworth Box will
A)increase the utility of all individuals.
B)increase the utility of at least one individual,but may decrease the level of utility of another person.
C)increase the utility of one individual,but cannot decrease the utility of any individual.
D)decrease the utility of all individuals.
Answer: B
Q3) Marginal cost of a product is the incremental cost of one additional unit of input. A)True
B)False
Answer: True
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Chapter 4: Public Goods
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Q1) Pure private goods are nonrival in consumption.
A)True
B)False
Q2) Market mechanisms are unlikely to provide A)prices.
B)nonrival goods efficiently.
C)supply and demand.
D)none of the above.
Q3) Suppose there is a public good that has market supply characterized by the equation X = (P/3)- (32/3).Suppose further that market demand for this good can be characterized by the equation X = 25 -P.Find the equilibrium quantity of the public good that will be supplied.
Q4) Charging individual prices that are based on consumers' willingness to pay is A)government price supports.
B)will pricing.
C)second tier pricing.
D)price discrimination.
Q5) Use the answer you found when adding market demand curves vertically in Question 18 above to find the market equilibrium quantity if the market supply is constant at 4 units.
6
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Chapter 5: Externalities
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Q1) In Figure 5.4,if the marginal damages line did not originate at 0,
A)it would mean that marginal damages did not exist.
B)there is no way to find MSC.
C)MSC would not originate at the same intercept as MPC.
D)all of the above.
Q2) The private marginal benefit for commodity X is given by 15 - X,where X is the number of units consumed.The private marginal cost of producing X is constant at 10.In the absence of any government intervention,how much X is produced? What is the gain to society involved in moving from the inefficient to the efficient level of production?
Q3) Command-and-control regulations
A)are less flexible than incentive based regulations.
B)come from the private sector.
C)have technology standards a type of control.
D)a & c.
E)a & b.
Q4) A subsidy for pollution not produced can induce producers to pollute at the efficient level.
A)True
B)False
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Chapter 6: Political Economy
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Q1) Government growth has been caused by
A)citizens who want larger government.
B)lots of public lands available in the West.
C)increases in privatization.
D)inflation.
Q2) It is stated that,in democracy,every vote counts.To be a contentious voter in a democracy,one should
A)spend some time learning about the issues.
B)find out about the positions of the candidates.
C)be sure to vote.
D)do all of the above.
Q3) Voter fraud
A)can have a detrimental effect on the political process.
B)is easily detected.
C)is defined as trading votes to pass certain political agenda items.
D)is more likely to occur in dictatorial political frameworks.
Q4) Applying economic principles to the analysis of political decision making is political economy.
A)True
B)False
Page 8
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Chapter 7: Education
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Q1) Between 2003 and 2004 real annual expenditure per pupil in public elementary and secondary schools
A)increased by $102.
B)decreased by $701.
C)did not change.
D)increased by $701.
Q2) Charter schools
A)are public schools.
B)operate under special state government charters.
C)can experiment with a variety of approaches to education.
D)have some independence in making spending and hiring decisions.
E)all of the above.
Q3) Standardized tests do not receive universal acceptance as being helpful in making schools more accountable.Discuss why.
Q4) Vouchers allow students to
A)get free lunches at public schools.
B)go to public schools at reduced rates.
C)receive discounts on school supplies like pens and paper.
D)all of the above
E)none of the above
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Chapter 8: Cost-Benefit Analysis
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Q1) Cost-benefit analysis is a relatively new tool developed and used first by NASA.
A)True
B)False
Q2) The chain-reaction game
A)was cancelled on network TV.
B)counts secondary benefits without counting secondary costs.
C)compounds a bad decision by making more bad decisions,causing unwanted projects to get funded.
D)is double?counting of benefits.
Q3) Inflation favors A)lenders.
B)borrowers.
C)neither borrowers nor lenders.
D)both borrowers and lenders.
Q4) The internal rate of return is likely to lead to incorrect decisions.
A)True
B)False
Q5) Real dollar amounts are essentially the same as nominal dollars. A)True
B)False
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Chapter 9: The Health Care Market
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Q1) We have read that the uninsured and the insured behave differently in regard to medical services.Suppose that the insured have a demand curve that can be written as Q = 100 - P,where Q is the quantity of medical services and P is the price.Suppose further that the uninsured have a demand curve that can be written as Q = 100 - 2P.
(a)At a price of $10 of medical services,how much will each demand?
(b)At a quantity of 50 units,how much will the price be for the insured and uninsured?
Q2) The government can address __________ by providing universal health insurance coverage and charging uniform premiums.
A)expected utility
B)asymmetric information
C)commodity egalitarianism
D)adverse selection
Q3) What effect would a "price cap" have on medical services?
Q4) Health care costs have been increasing dramatically in the US.
A)True
B)False
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Chapter 10: Government and the Market for Health Care
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Q1) HI (Hospital Insurance)is financed by a payroll tax,while SMI (Supplementary Medical Insurance)is financed out of general revenues.
A)True
B)False
Q2) A catastrophic insurance policy is one which
A)has cats causing health crises.
B)insurance policy that has a high deductible.
C)generous coverage for high medical costs.
D)a & c
E)b & c
Q3) In 1980,26 million people in the US were over the age of 65.What is the amount currently?
A)34 million
B)35 million
C)36 million
D)37 million
Q4) The idea of a Health Savings Account (HSA)was enacted in 2003.What do you think are its main strengths?
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Chapter 11: Social Security
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Q1) Social Security was not designed to provide insurance against outliving one's retirement.
A)True
B)False
Q2) An actuarially fair return means
A)returns on investments are indexed to the stock market.
B)returns on investments have to be positive.
C)benefits received,on average,would be equal to the premiums paid.
D)premiums for insurance are generally paid by the government.
Q3) A current worker may save more towards retirement so that he or she will have more to leave his or her children later.This altruistic motive is known as the
A)altruism effect.
B)bequest effect.
C)income effect.
D)savings effect.
Q4) Social Security is used to redistribute income.
A)True
B)False
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Chapter 12: Income Redistribution: Conceptual Issues
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Q1) The _________ of whites in poverty in the U.S.is greater than that of blacks and Hispanics.
A)percentage
B)total number
C)fraction
D)none of the above
Q2) Suppose there are only two people,Mr.Mullinax and Ms.Fleming,who must split a fixed income of $500.For Mr.Mullinax,the marginal utility of income is MU<sub>m</sub><sub> </sub>= 600-2I<sub>m</sub>,while for Ms.Fleming,marginal utility is MU<sub>f</sub> = 600-3I<sub>f</sub> ,where I<sub>m</sub> and I<sub>f </sub>are the amounts of income to Mr.Mullinax and Ms.Fleming,respectively.
(A)What is the optimal distribution of income if the social welfare function is additive?
(B)What is the optimal distribution if society values only the utility of Ms.Fleming? What if the reverse is true? Comment on your answer.
(C)Finally,comment on how your answers change if the marginal utility of income for both Mr.Mullinax and Ms.Fleming is constant such that Mu<sub>m</sub> = 250 = MU<sub>f</sub>.(This one is subtle. )
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Chapter 13: Expenditure Programs for the Poor
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Q1) The Earned Income Tax Credit (EITC)
A)provides more income to those people on welfare.
B)is a tax on low income workers.
C)provides additional tax credits to low income workers.
D)is a tax break for the wealthiest Americans.
Q2) How many elderly people are covered by Medicare?
A)one third
B)one half
C)almost all
D)almost none
Q3) Unemployment taxes are collected from both employees and employers.
A)True
B)False
Q4) Voucher programs for housing
A)provide rent vouchers for existing housing stock.
B)are under utilized with a surplus of housing stock.
C)provide down payment assistance to purchase homes.
D)are known as Section 8.
Q5) What are some of the drawbacks,as you see them,to a program like Workfare?
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Chapter 14: Taxation and Income Distribution
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Q1) From Question 18 above,calculate the economic incidence incurred by producers and the economic incidence incurred by consumers.
Q2) An oligopoly has ______ sellers in the market.
A)0
B)1
C)3
D)many
Q3) General equilibrium refers to
A)examining markets without specific information.
B)finding equilibrium from general information.
C)pricing goods at their shadow price.
D)all of the above.
E)none of the above.
Q4) Partial factor taxes are levied on an input in only some of its uses.
A)True
B)False
Q5) Even with a tax,the price that consumers pay will be higher than what producers receive.
A)True
B)False
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Chapter 15: Taxation and Efficiency
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Q1) Points on the same utility curve are
A)points where the person is indifferent between bundles on the line.
B)points where utility is maximized.
C)never possible.
D)known as "points of light."
Q2) The tax interaction effect is the _________ in excess burden in the labor market stemming from the _______ in real wages caused by a Pigouvian tax.
A)increase;increase
B)reduce;reduction
C)increase;reduction D)reduction;increase
Q3) When a demand curve is vertical,the elasticity of demand is equal to A)0.
B)1.
C)(\(\infty\)).
D)-1.
Q4) All taxes impose an excess burden.
A)True
B)False
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Chapter 16: Efficient and Equitable Taxation
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Q1) Choosing optimal user fees for government produced services is similar to choosing optimal taxes.
A)True
B)False
Q2) "For goods that are unrelated in consumption,efficiency requires that tax rates be inversely proportional to elasticities." This is the definition of
A)the benefits-received principle.
B)the Ramsey Rule.
C)the second best principle.
D)the inverse elasticity rule.
Q3) Tax evasion is
A)an illegal act.
B)prevalent in the United States.
C)failing to pay legally due taxes.
D)all of the above.
Q4) It is easier to under-report income in industries that deal with a lot of cash.
A)True
B)False
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18
Chapter 17: The Personal Income Tax
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Q1) Capital gains are
A)treated exactly like other sources of income.
B)taxed differently than other sources of income.
C)generally not associated with a "lock-in effect."
D)only realized at death.
Q2) How much do you believe that current tax policy is influenced by politics,as opposed to sound and efficient tax policy?
Q3) Flat tax
A)is same tax rate to everyone.
B)is same tax rate to each component of income.
C)allows a tax base with no deductions with a few exemptions and expenses.
D)is true for only a and b.
E)all of the above.
Q4) Suppose there is a simple tax system that says you pay 10% for income up to $10,000,25% for income between $10,000 and $50,000,and 35% for all income above $50,000.Mr.Campbell has income of $72,000.Mrs.Campbell has income of $55,000.
(A)What is Mr.Campbell's individual tax liability? Mrs.Campbell's?
(B)What is their liability if they file a joint return?
(C)Is there a marriage penalty? If so,how much is it?
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Chapter 18: Personal Taxation and Behavior
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Q1) To accurately draw a labor supply curve,there should be a relationship between _______ and __________.
A)the wage rate;utility
B)total expenditures;the wage rate
C)the wage rate;hours worked
D)taxes;utility
Q2) Suppose the labor supply equation is L = (W/3)- (4/3).The wage rate is initially 5.What is the amount of producer surplus here?
Q3) An decrease in the interest rate will cause the intertemporal budget constraint to _______________ through the endowment point.
A)pivot clockwise
B)pivot counter-clockwise
C)shift clockwise
D)shift counter-clockwise
Q4) Sometimes increases in the wage rate will cause individuals to work more hours.It is also the case that this same increase could cause people to work fewer hours.What is happening to cause this variance?
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Chapter 19: The Corporation Tax
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Q1) Which one of these statements concerning the Tax Reform Act of 1986 is false?
A)The Act evened out tax rates on alternative types of investment.
B)The Act increased effective tax rates on equipment.
C)It raised the personal exemption substantially.
D)The Act had a specified time period of effectiveness.
Q2) Your textbook highlights a debate that has been going on for some years.The issue is whether there should be a corporation tax,given that corporations are nothing more than groups of people.Should there be a corporation tax? Why or why not?
Q3) Interest deductibility does not provide an incentive for debt finance.
A)True
B)False
Q4) U.S.multinational corporations are allowed tax _________ for taxes paid to foreign governments.
A)deductions
B)exemptions
C)loans
D)credits
Q5) Why do firms pay dividends? It would appear that they are subject to double taxation,giving more incentive to eliminate them.
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Chapter 20: Deficit Finance
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Q1) When the government borrows in the market,it
A)does not have to pay interest.
B)is not required to pay back the entire principle.
C)can get indefinite extensions on the loan.
D)does all of the above.
E)does none of the above.
Q2) During the period from 1999 - 2008,federal budget deficits
A)were never calculated.
B)fell dramatically.
C)increased as a percentage of GDP.
D)can be regarded as structural.
Q3) Before World War II,the United States did not use deficit financing and paid for all goods and services with cash.
A)True
B)False
Q4) You make a loan to the government of $100.The government promises to pay you back some sum of money in two years.The interest rate will be 4 percent over that period,but inflation will be 4 percent.How much will you require that the government pay you in two years in the absence of any inflation? With inflation?
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Chapter 21: Fundamental Tax Reform: Taxes on Consumption and
Wealth
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Q1) Sale taxes are
A)easy to administer at lower rates.
B)correctives for externalities.
C)substitutes for user fees.
D)all of the above.
Q2) This chapter has spent a lot of time dealing with issues of wealth and consumption.One suggestion has been to have a tax on wealth.What are some of the benefits of this proposal?
Q3) A publisher sells $400,000 worth of books,magazines,and other reading materials in a given year.The publisher earns a profit of $100,000 that year.Her purchase invoices indicate that she bought $100,000 worth of glue,paper,and other materials during the year.Her labor costs were $150,000,and she purchased $45,000 of new equipment that year.Calculate her tax liability under a 12% consumption-type,value-added tax.
Q4) President Obama has proposed making the _____ estate tax rate permanent.
A)13.0%
B)45.0%
C)51.3%
D)55.0%
Page 23
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Chapter 22: Public Finance in a Federal System
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Q1) Grants as a percent of total federal outlays have been increasing since the 1960s.
A)True
B)False
Q2) Local property tax policy generally has a small effect on the property tax base.
A)True
B)False
Q3) The Tiebout model assumes that public services are financed by a proportional property tax.
A)True
B)False
Q4) It is easier to avoid state and local taxes than federal taxes.
A)True
B)False
Q5) The town of Little Bohemia has an estimated elasticity of demand for land of 2.What effect would there be to the quantity demanded from a 10% decrease in the price of land due to a tax increase?
Q6) Some cities have a relatively high residential property tax,while others have a low residential property tax.Give an explanation for this.
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