海曼财政学课后答案

1、CHAPTER2Efficiency5Markets,andGovernmentInstructionaObjectivesThemainobjectiveofthischapteristodeveloptheconceptofefficiencyandshowstudentshowitisusedtoevaluateeconomicperformanee.Tobeginthediscussion,itisnecessarytodrawthedistinctionbetweenpositiveandnormativeeconomics.Bothoftheseapproachesareusedi

2、nthechapter.Anadditionalinstructionalobjectiveisthereforetodemonstratetheusefulnessofeachtypeofanalysis.Theconceptofefficiencyiscarefullylinkedtoresourceallocationandeconomictransactions.Thechapteralsointroducesthestudenttomarginalanalysisofresourceallocation.Thedistinctionbetweentotalsocialcostandb

3、enefit,andmarginalsocialcostandbenefitisdrawnforstudents.Graphicanalysisisthenusedtoderivethemarginalconditionsforefficiency.TheobjectiveistoshowstudentsthatmaximizationofnetsocialbenefitrequiresthatallactivitiesbeundertakenineachtimeperioduptothepointatwhichMSB=MSC.Theanalysisisthenusedtoevaluatere

4、sourceallocationincompetitivemarketsoperatingunderconditionsofperfectcompetitionwithnoexternalities.Thisisfollowedbyexamplesshowinghowmonopolypowerandgovernmentinterventioncanresultinlossesinefficiencyinmarkets.Theobjectivehereistoshowhowwelfaretrianglescanbeusedtomeasurelossesinwell-beingwheneffici

5、encyisnotachieved.Theequity-efficiencytradeoffisalsointroducedinthechapter.Theutilitypossibilitycurveisusedtoshowstudentshowcitizensoftenrationallyopposemovementstoefficientresourceusewhencompensationforlossesinwell-beingisnotactuallypaid.Positiveanalysisoftheequity-efficiencytradeoffisalsoprovided,

6、therebyclosingthechapterwithanillustrationofhowthepositiveapproachisusefultonormativeanalysis.ChangesinThisEditionThischapterhasbeenupdatedwhereneeded.Otherwise,therehavebeennochangesinthiscoretheorychapter.Anewproblemwasaddedtotheendofthechapter.ChapteroutlinePositiveandNormativeEconomicsNormativeE

7、valuationofResourceUse:TheEfficiencyCriterionMarginalConditionsforEfficiencyMarkets,Prices,andEfficiencyConditionsWhenDoesMarketInteractionFailtoAchieveEfficiencyMonopolisticPowerHowTaxesCanCauseLossesinEfficiencyinCompetitiveMarketsPublicPolicyPerspective:TheTaxSystemandtheBirthRateAnExampleofPosit

8、iveEconomicAnalysisHowGovernmentSubsidiesCanCauseLossesinEfficiencyMarketFailure:APreviewoftheBasisforGovernmentActivityEquityversusEfficiencyTheTradeoffbetweenEfficiencyandEquity:AGraphicAnalysisTheTradeoffbetweenEquityandEfficiencyinaSystemofCompetitiveMarketsPositiveAnalysisTradeoffBetweenEquitya

9、ndEfficiencyInternationalView:AgriculturalSubsidies,InternationalTradeRestrictions,andGlobalEfficiencyMajorPointsandLectureSuggestions1. Instructorsmaywishtoemphasizethedifferencebetweenthenormativeandpositiveapproaches.Thenormativeapproachisbasedonunderlyingvaluesthatembodyanindividualisticethic.Th

10、epositiveapproachissimplyascientificmethodusedtoformulatehypothesessubjecttoempiricalverification.Ipointouttomystudentsthatthenormativeapproachinpublicfinancesetsupbenchmarksagainstwhichtheimpactofgovernmentregulations,expenditures,andtaxescanbeevaluated.2. Therearetwoaspectsofefficiencythatareusefu

11、ltoemphasizeinlectures:a. Efficiency,asthetermiscommonlyusedbythelayperson,simplymeansavoidanceofwasteinachievinganyusefulobjective.Studentsaremostlikelyalreadyfamiliarwiththisaspectofefficiency.b. Thesecondaspectofefficiencydealswithexchange.Evenwhenproductionisaccomplishedwithoutwaste,additionalne

12、tgainsareusuallypossiblethroughmutuallyagreeableexchanges.Indiscussingthesecondaspectofefficiency,withwhichstudentsarelessfamiliar,youcanpointoutthatfreedomtotradeisanimportantaspectofefficiency.Constraintsonmutuallyagreeabletradetherebypreventattainmentofefficiencywhennothirdpartiesareaffectedbytho

13、setransactions.3. Thederivationofthemarginalconditionsforefficiencyprovidesagoodopportunitytoreviewmarginalanalysisforstudents.Makesuretoconfineyourdiscussiontoaparticulargood.Theexampleinthetextusesbread.Ifindthatstudentsarequitereceptivetothenotionthatnetsocialgainsaremaximizedwheneachpossiblegood

14、orserviceismadeavailableuptothepointatwhichMSB=MSC.TheinclusionofthetotalsocialbenefitandtotalsocialcostcurvesinFigure2.1inthetexthelpsstudentsseehowadditionalproductionofgoodsisinefficientbeyondthepointatwhichMSB=MSC,eventhoughTSBTSCforadditionaloutput.4. Noticehowthemarginalnetbenefitisdefinedasth

15、edifferencebetweenthemarginalsocialbenefitandthemarginalsocialcostofanygivenquantityofagood.5. Afterderivingtheefficiencyconditions,Iliketoreinforcethetheorybyimmediatelyshowingstudentshowthemarginalconditionsaresatisfiedunderidealconditionsinperfectlycompetitivemarkets.Indoingso,Iintroducetheconcep

16、tsofmarginalprivatebenefitandmarginalprivatecost.IshowhowP=MPB=MPCincompetitivemarkets.Finally,IsetthestageforfutureanalysisinChapter3bypointingoutthat,providednothirdparties(otherthanbuyersandsellers)areaffectedbymarketexchanges,P=MSB=MSC.Becausetheseconditionsareusedthroughoutthetext,itisimportant

17、forstudentstounderstandthederivation.Ifindthatstudentshavelittledifficultywiththeexposition.Ifyougetthesignificanceofthesepointsacrossearlyinthecourse,itiseasytoshowhowtaxesandsubsidiespreventpricesfromsimultaneouslyreflectingmarginalsocialcostsandbenefits.Thenumericalexampleinthetexthasbeenhelpfult

18、omystudents.NotethatIusethesamenumberswhendiscussingcompetitivemarketsforbread.6. Theobviousnextstepistoprovideyourstudentswithexamplesofcasesforwhichmarketsdonotachieveefficiency.Theexerciseofmonopolypowerisagoodexampleofhowlackofcompetitioninmarketscancauselossesinefficiency.Thisexamplecanthenbesu

19、pplementedwithanalysisoftheeffectsoftaxesandsubsidiesonprivatechoicesinmarkets.TheexampleoftargetpricesforagricultureintheUnitedStatesshowshowsubsidiestoagricultureresultinmorethantheefficientamountofresourcesallocatedtoagriculturaluses.Youmightwishtosupplementtheseexampleswithsomeofyourown.Inanycas

20、e,themaininstructionalobjectiveistoshowstudentshowlossesinwell-beingresultingfrominefficientoutputlevelscanbemeasuredastriangularareasinthegraphs.ThePublicPolicyPerspectiveshowsstudentshowthepersonalexemptionintheU.S.incometaxcanbeviewedasasubsidytoraisingchildren.7. Ibelievethatitisimportanttoempha

21、sizetheequity-efficiencytradeoffearlyinthecourse.Thisprovidesanopportunitytoshowhowthepositiveapproachcanbeusedtopredictthenetgainsandlossestocitizens.Theutilitypossibilitycurveisagoodtooltoillustratepoliticalconflict.Firstmakesurethatstudentsseethesimilaritybetweentheutilitypossibilitycurveandthepr

22、oductionpossibilitycurve.Inparticular,pointoutthatthemaximumpossiblelevelofwell-beingofanyoneperson,giventhewell-beingofothers,dependsonresourcesavailableandtechnology.Thecurvealsoshowshowthereisnooneuniqueefficientallocationofresources.Itcanbeusedtoshowhowtheefficientoutcomesofcompetitiveinteractio

23、ncanresultinadistributionofwell-beingforwhichmanypersonsliveinpoverty.8. Iliketousetheutilitypossibilitycurvetoshowhowchangesinresourceallocationcanresultinbothgainersandlosersevenwhenthereismovementfrominefficienttoefficientresourceuse.Unlesscompensationisactuallypaid,thelosersacttopreventtheresour

24、cechangethatmakesthemworseoff.ANOTEONTHEAPPENDIXTOCHAPTER2TheappendixtoChapter2setsupatwo-dimensionalmodelofefficientresource.Thisappendixcaneasilybeskippedbecausethebasicnotionsaredevelopedintuitivelywithinthechapter.If,however,youhavegoodstudents,youcanassigntheappendixandderivetheconditionsinclas

25、s.ThestandardwelfaremodelisdevelopedintheappendixandEdgeworth-Bowleyboxesareusedtoderivetheefficiencyconditions.OutlineoftheAppendixtoChapter2AModelofEfficientResourceUseProductionandTechnologyProductiveEfficiencyTheProductionPossibilityCurveTastesandUtilityAttainmentofEfficiencyAnInterpretationofEf

26、ficiencyConditionsRankingEfficientOutcomes:SocialWelfareFunctionsEfficiencyandEconomicInstitutionsPureMarketEconomyandProductiveEfficiencyAPureMarketEconomyandParetoEfficiencyIncomeDistributionAlternativeEconomicInstitutionsandEfficiencyMarketImperfectionsTrue/FalseQuestions1. Thenormativeapproachto

27、publicfinanceprescribescertainactionstoachievepredeterminedcriteria.(T)2. Positiveeconomicanalysisisbasedonunderlyingvaluejudgments.(F)3. “Thegovernmentshouldabolishtariffstoachieveefficiencyisanormativestatement.(T)4. Itispossibleforefficiencynottobeattainedevenifallproductioniscarriedonwithoutwast

28、e.(T)5. Efficiencyisattainedwhenresourcesareusedeachyearinsuchawaythatnofurthernetgainispossible.(T)6. Theefficientannualoutputofanygivengoodisattainedifthatgoodismadeavailableinamountsuptothepointatwhichthetotalsocialbenefitofthegoodequalsthetotalsocialcost.(F)7. Ifthemarginalsocialbenefitofsmokede

29、tectorsexceedsitsmarginalsocialcost,thenadditionalnetgainsarepossiblefromanincreasedannualsmokedetectorproduction.(T)8. Monopolypowercauseslossesinefficiencybecausethemarginalsocialbenefitofoutputexceedsitsmarginalsocialcostatthemonopolyoutput.(T)9. Governmentregulationsthatrequireairlinestoserverou

30、tesforwhichthemaximumpricethatpassengersarewillingtopayforatripfallshortoftheminimumpricethatsellersarewillingtoacceptarelikelytocauselossesinefficiency.(T)10. Pointslyingbelowautilitypossibilitycurveareefficient.(F)11. Governmentprogramscanachieveefficiencywhenthegainstogainersfromthosepoliciesexce

31、edthelossestothosewhobearthecosts.(T)12. Ifthemarginalsocialcostofbeerproductionexceedsitsmarginalsocialbenefit,thenmorethantheefficientaboutofbeerisbeingproduced.(T)13. Efficientoutcomesareoftenviewedasinequitable.(T)14. Ifitisnotpossibletomakesomeonebetteroffwithoutharminganother,thenresourcealloc

32、ationisefficient.(T)15. Compensationcriteriaareusedtoarguethatchangesinresourceallocationshouldbemadeifthegainstosomegroupsoutweighthelossestoothers,eventhoughcompensationforlossesisnotactuallymade.(T)16. Allpointsonautilitypossibilitycurveareefficientbutdifferintermsofthedistributionofwell-being.(T

33、)MULTIPLE3H0ICEQUESTI0NS1. Positiveeconomics:a. makesrecommendationsdesignedtoachievecertaingoals.b. establishescause-and-effectrelationshipsbetweeneconomicvariables.c. isbasedonvaluejudgments.d. canneverbeusedtomakepredict!ons.2. Iftheefficientoutputofagoodisproducedeachweek,thenthe:a. marginalsoci

34、albenefitofthegoodequalsitsmarginalsocialcosteachweek.b. marginalsocialbenefitofthegoodisatamaximum.c. totalsocialbenefitofthegoodisatamaximum.d. totalsocialbenefitofthegoodequalsitstotalsocialcost.3. Ifthemarginalsocialbenefitofagoodexceedsthemarginalsocialcostatthecurrentmonthlyoutput,then:a. itwi

35、llbepossibletomakebuyersofthegoodbetteroffwithoutharmingsellersofthegood.b. itwillbepossibletomakesellersofthegoodbetteroffwithoutharmingbuyersofthegood.c. either(a)or(b)d. areductioninmonthlyoutputwillberequiredforefficiency.4. Themarginalsocialcostofbreadexceedsthemarginalsocialbenefitatthecurrent

36、weeklyoutput.Therefore,a.themarginalnetbenefitofbreadispositive.b. theoutputofbreadisefficient.c. areductioninweeklyoutputofbreadisnecessarytoachieveefficiency.d. anincreaseinweeklyoutputofbreadisnecessarytoachieveefficiency.5. Thetotalsocialbenefitofautomobilesequalsthetotalsocialcostatcurrentannua

37、loutput.Thenitfollowsthat:a. theannualoutputofautomobilesisefficient.b. theannualoutputofautomobilesexceedstheefficientamount.c. lessthantheefficientannualoutputofautomobilesisproduced.d. itisnotpossibletomakebuyersofautomobilesbetteroffwithoutharmingsellers.e. both(a)and(d)6. Eggsaresoldinaperfectl

38、ycompetitivemarket.Nopersonsotherthanthebuyersandsellersofeggsareaffectedinanywaywheneggsaretradedinthemarket.Thenitfollowsthat:a. thepriceofeggsequalsthemarginalsocialcostofeggs.b. thepriceofeggsequalsthemarginalsocialbenefitofeggs.c. thepriceofeggsexceedsthemarginalsocialbenefitofeggs.d. both(a)an

39、d(b)7. Diamondsaresoldbyamonopolyfirmthatmaximizesprofits.Thenitfollowsthat:a. themarginalsocialbenefitofdiamondsexceedsitsmarginalsocialcost.b. themarginalsocialcostofdiamondsexceedsitsmarginalsocialbenefit.c. thepriceofdiamondsequalsitsmarginalsocialcost.d. thepriceofdiamondsexceedsitsmarginalsoci

40、albenefit.e. both(c)and(d)8. Pointsonautilitypossibilitycurverepresent:a. agivendistributionofwell-beingbetweentwopersons.b. anefficientallocationofresources.c. themaximumwell-beingofanyoneperson,giventheresourcesavailableandthewell-beingofanotherperson.d. alloftheabove9. Ifefficiencyhasbeenattained

41、,a. itwillbepossibletomakeanyonepersonbetteroffwithoutharminganother.b. itwillnotbepossibletomakeanyonepersonbetteroffwithoutharminganother.c. perfectcompetitionmustexist.d. theopportunitycostofanychangeinresourceusemustbezero.10. Amovefromaninefficientresourceallocationtoanefficientone:a. willalway

42、sbeunanimouslyapproved,evenifgainersdonotcompensatelosers.b. willbeunanimouslyopposed.c. willbeunanimouslyapprovedifgainerscompensatelosers.d. canneverresultinlosers.11. Whichofthefollowingisanormativestatementa. Wheninterestratesrise,thequantityofloanablefundsdemandedfornewmortgageswilldecline.b. T

43、oachieveefficiency,governmentsshouldpreventmonopolyinmarkets.c. Unemploymentincreasesduringarecession.d. Whengovernmentsincreaseincometaxrates,peopleworkless.12. Normativeeconomics:a. isnotbasedonunderlyingvaluejudgments.b. makesrecommendationstoachieveefficientoutcomes.c. establishescause-and-effec

44、treIationshipsbetweeneconomicvariables.d. makesif.thentypestatementsandchecksthemagainstthefacts.13. Theextrabenefitononemoreunitofagoodorserviceisits:a.marginalcost.b. marginalbenefit.c. totalbenefit.d. totalcost.14. Iftheefficientoutputofcomputersisachievedthisyear,thenmarketpriceofcomputersisequa

45、lto:a.b.C.d.e.themarginalsocialbenefitofcomputers.themarginalsocialcostofcomputers.thetotalsocialcostofcomputers.thetotalsocialbenefitofcomputers.both(a)and(b)15. Supposetheefficientoutputcurrentlyprevailsinthemarketforicecream.Ataxonicecreamconsumptionwill:a. allowefficiencytocontinuetoprevailinthe

46、market.b. resultinmorethantheefficientoutputinthemarket.c. resultinlessthantheefficientoutputinthemarket.d. causethemarginalsocialcostoficecreamtoexceeditsmarginalsocialbenefitatthemarketequilibriumoutput.Essayquestions1. Thewineindustryiscurrentlycomposedofmanyfirms,andwineissoldinaperfectlycompeti

47、tivemarket.Thewineindustryproducestheefficientannualoutputofwine,whichis100,000bottlesperyear.Themarketequilibriumpriceis$5perbottle.a. Drawthemarketdemandandsupplyofwineandlabelthecurvestoshowwhythemarketoutputistheefficientoutput.b. Supposethatthewineindustryisconsolidatedintoonelargemonopolyfirm.

48、Asaresultofthemonopolizationoftheindustry,thepriceofwineincreaseto$7perbottle,andtheannualquantitydemandedfallsto75,000bottles.Explainwhythisoutputisnotefficientandshowthelossinnetbenefitsresultingfrommonopolizationoftheindustry.2. Explainwhypointsonautilitypossibilitycurverepresentefficientallocationsofresources.WhymusttheutilitypossibilitycurvebedownwardslopingDrawautilitypossibilitycurveandshowhowitispossibletoachieveefficiencybymovingfromapointwithin