In: Economics
please provide brief explanation for the answers
i) TRUE or FALSE. Since education yields private returns, which are
fully captured by the person who makes the investment, the market
will provide the optimal level of education and the government
should not
intervene. ii) TRUE
or FALSE. Public goods can be provided
privately. iii) TRUE or FALSE. There
is a basic trade-off between efficiency and equity because an
efficient outcome may not necessarily be
fair. iv) TRUE or FALSE. The
adverse selection phenomenon of market failure is about the actions
that agents take in response to certain
incentives.
v) TRUE or FALSE. A tax system should be designed to minimize
excess burden.
vi) TRUE or FALSE. Failure to declare economic activity for tax
purposes is a typical case of tax
avoidance.
vii) TRUE or FALSE. Every increase in government spending must
ultimately be financed by an increase in
tax.
viii) TRUE or FALSE. Floating debt is debt in which the principal
amount is repaid by the government after a predetermined period of
time but interest is paid regularly.
ix) TRUE or FALSE. One advantage of Zero base budgeting is that it
integrates planning and decision making hence leading to a
simplification of the entire management system.
x) TRUE or FALSE. Audit control is an important aspect in the
control of public expenditure. xi) TRUE or FALSE.
Transfer expenditure relates to the expenditures against which
there is a corresponding return. xii) TRUE or FALSE. Mineral
royalty tax is an example of an indirect tax. xiii)
TRUE or FALSE. The user fees paid by a patient who seeks medical
attention at a health facility do not have quid pro quo.
xiv) TRUE or FALSE. Privatization and deregulation are
forms of decentralization.
xv) TRUE or FALSE. A decentralized system has the advantage of
fostering intergovernmental competition.
1) false, education yields external returns in addition to the private returns. So investing in education has private as well as external benefits. Adding them both will give you the total benefits or social benefits. Only incorporating the private returns will not give efficient level of investment on education.
2) false, because privately goods are produced for the purpose of profits. Government can provide the public goods because public goods not only have private benefits but some external benefits as well and private firms ignore such benefits and supply inefficient quantity of goods.
3) true, usually increasing efficiency leads to decreasing equity. So there is a basic tradeoff between efficiency and equity.
4) false, adverse selection is the market failure that occurs due to incomplete information rather than incomplete actions for incentive.
5) true, any tax system should have least excess burden to make itself efficient. So tax system should have low excess burden on the supplier or consumers it is placed on.