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,eventhoughTSB>TSCforadditionaloutput.4. Noticehowthemarginalnetbenefitisdefined

15、asthedifferencebetweenthemarginalsocialbenefitandthemarginalsocialcostofanygivenquantityofagood.5. Afterderivingtheefficiencyconditions,Iliketoreinforcethetheorybyimmediatelyshowingstudentshowthemarginalconditionsaresatisfiedunderidealconditionsinperfectlycompetitivemarkets.Indoingso,Iintroducetheco

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

17、tantforstudentstounderstandthederivation.Ifindthatstudentshavelittledifficultywiththeexposition.Ifyougetthesignificanceofthesepointsacrossearlyinthecourse,itiseasytoshowhowtaxesandsubsidiespreventpricesfromsimultaneouslyreflectingmarginalsocialcostsandbenefits.Thenumericalexampleinthetexthasbeenhelp

18、fultomystudents.NotethatIusethesamenumberswhendiscussingcompetitivemarketsforbread.6. Theobviousnextstepistoprovideyourstudentswithexamplesofcasesforwhichmarketsdonotachieveefficiency.Theexerciseofmonopolypowerisagoodexampleofhowlackofcompetitioninmarketscancauselossesinefficiency.Thisexamplecanthen

19、besupplementedwithanalysisoftheeffectsoftaxesandsubsidiesonprivatechoicesinmarkets.TheexampleoftargetpricesforagricultureintheUnitedStatesshowshowsubsidiestoagricultureresultinmorethantheefficientamountofresourcesallocatedtoagriculturaluses.Youmightwishtosupplementtheseexampleswithsomeofyourown.Inan

20、ycase,themaininstructionalobjectiveistoshowstudentshowlossesinwell-beingresultingfrominefficientoutputlevelscanbemeasuredastriangularareasinthegraphs.ThePublicPolicyPerspectiveshowsstudentshowthepersonalexemptionintheU.S.incometaxcanbeviewedasasubsidytoraisingchildren.7. Ibelievethatitisimportanttoe

21、mphasizetheequity-efficiencytradeoffearlyinthecourse.Thisprovidesanopportunitytoshowhowthepositiveapproachcanbeusedtopredictthenetgainsandlossestocitizens.Theutilitypossibilitycurveisagoodtooltoillustratepoliticalconflict.Firstmakesurethatstudentsseethesimilaritybetweentheutilitypossibilitycurveandt

22、heproductionpossibilitycurve.Inparticular,pointoutthatthemaximumpossiblelevelofwell-beingofanyoneperson,giventhewell-beingofothers,dependsonresourcesavailableandtechnology.Thecurvealsoshowshowthereisnooneuniqueefficientallocationofresources.Itcanbeusedtoshowhowtheefficientoutcomesofcompetitiveintera

23、ctioncanresultinadistributionofwell-beingforwhichmanypersonsliveinpoverty.8. Iliketousetheutilitypossibilitycurvetoshowhowchangesinresourceallocationcanresultinbothgainersandlosersevenwhenthereismovementfrominefficienttoefficientresourceuse.Unlesscompensationisactuallypaid,thelosersacttopreventthere

24、sourcechangethatmakesthemworseoff.ANOTEONTHEAPPENDIXTOCHAPTER2TheappendixtoChapter2setsupatwo-dimensionalmodelofefficientresource.Thisappendixcaneasilybeskippedbecausethebasicnotionsaredevelopedintuitivelywithinthechapter.If,however,youhavegoodstudents,youcanassigntheappendixandderivetheconditionsin

25、class.ThestandardwelfaremodelisdevelopedintheappendixandEdgeworth-Bowleyboxesareusedtoderivetheefficiencyconditions.OutlineoftheAppendixtoChapter2AModelofEfficientResourceUseProductionandTechnologyProductiveEfficiencyTheProductionPossibilityCurveTastesandUtilityAttainmentofEfficiencyAnInterpretation

26、ofEfficiencyConditionsRankingEfficientOutcomes:SocialWelfareFunctionsEfficiencyandEconomicInstitutionsPureMarketEconomyandProductiveEfficiencyAPureMarketEconomyandParetoEfficiencyIncomeDistributionAlternativeEconomicInstitutionsandEfficiencyMarketImperfectionsTrue/FalseQuestions1. Thenormativeapproa

27、chtopublicfinanceprescribescertainactionstoachievepredeterminedcriteria.(T)2. Positiveeconomicanalysisisbasedonunderlyingvaluejudgments.(F)3. “Thegovernmentshouldabolishtariffstoachieveefficiencyisanormativestatement.(T)4. Itispossibleforefficiencynottobeattainedevenifallproductioniscarriedonwithout

28、waste.(T)5. Efficiencyisattainedwhenresourcesareusedeachyearinsuchawaythatnofurthernetgainispossible.(T)6. Theefficientannualoutputofanygivengoodisattainedifthatgoodismadeavailableinamountsuptothepointatwhichthetotalsocialbenefitofthegoodequalsthetotalsocialcost.(F)7. Ifthemarginalsocialbenefitofsmo

29、kedetectorsexceedsitsmarginalsocialcost,thenadditionalnetgainsarepossiblefromanincreasedannualsmokedetectorproduction.(T)8. Monopolypowercauseslossesinefficiencybecausethemarginalsocialbenefitofoutputexceedsitsmarginalsocialcostatthemonopolyoutput.(T)9. Governmentregulationsthatrequireairlinestoserv

30、eroutesforwhichthemaximumpricethatpassengersarewillingtopayforatripfallshortoftheminimumpricethatsellersarewillingtoacceptarelikelytocauselossesinefficiency.(T)10. Pointslyingbelowautilitypossibilitycurveareefficient.(F)11. Governmentprogramscanachieveefficiencywhenthegainstogainersfromthosepolicies

31、exceedthelossestothosewhobearthecosts.(T)12. Ifthemarginalsocialcostofbeerproductionexceedsitsmarginalsocialbenefit,thenmorethantheefficientaboutofbeerisbeingproduced.(T)13. Efficientoutcomesareoftenviewedasinequitable.(T)14. Ifitisnotpossibletomakesomeonebetteroffwithoutharminganother,thenresourcea

32、llocationisefficient.(T)15. Compensationcriteriaareusedtoarguethatchangesinresourceallocationshouldbemadeifthegainstosomegroupsoutweighthelossestoothers,eventhoughcompensationforlossesisnotactuallymade.(T)16. Allpointsonautilitypossibilitycurveareefficientbutdifferintermsofthedistributionofwell-bein

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

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

35、itwillbepossibletomakebuyersofthegoodbetteroffwithoutharmingsellersofthegood.b. itwillbepossibletomakesellersofthegoodbetteroffwithoutharmingbuyersofthegood.c. either(a)or(b)d. areductioninmonthlyoutputwillberequiredforefficiency.4. Themarginalsocialcostofbreadexceedsthemarginalsocialbenefitatthecur

36、rentweeklyoutput.Therefore,a.themarginalnetbenefitofbreadispositive.b. theoutputofbreadisefficient.c. areductioninweeklyoutputofbreadisnecessarytoachieveefficiency.d. anincreaseinweeklyoutputofbreadisnecessarytoachieveefficiency.5. Thetotalsocialbenefitofautomobilesequalsthetotalsocialcostatcurrenta

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

38、ectlycompetitivemarket.Nopersonsotherthanthebuyersandsellersofeggsareaffectedinanywaywheneggsaretradedinthemarket.Thenitfollowsthat:a. thepriceofeggsequalsthemarginalsocialcostofeggs.b. thepriceofeggsequalsthemarginalsocialbenefitofeggs.c. thepriceofeggsexceedsthemarginalsocialbenefitofeggs.d. both(

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

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

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

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

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

44、ffectreIationshipsbetweeneconomicvariables.d. makes"if.then"typestatementsandchecksthemagainstthefacts.13. Theextrabenefitononemoreunitofagoodorserviceisits:a.marginalcost.b. marginalbenefit.c. totalbenefit.d. totalcost.14. Iftheefficientoutputofcomputersisachievedthisyear,thenmarketpriceo

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

46、uetoprevailinthemarket.b. resultinmorethantheefficientoutputinthemarket.c. resultinlessthantheefficientoutputinthemarket.d. causethemarginalsocialcostoficecreamtoexceeditsmarginalsocialbenefitatthemarketequilibriumoutput.Essayquestions1. Thewineindustryiscurrentlycomposedofmanyfirms,andwineissoldina

47、perfectlycompetitivemarket.Thewineindustryproducestheefficientannualoutputofwine,whichis100,000bottlesperyear.Themarketequilibriumpriceis$5perbottle.a. Drawthemarketdemandandsupplyofwineandlabelthecurvestoshowwhythemarketoutputistheefficientoutput.b. Supposethatthewineindustryisconsolidatedintoonela

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