Economics 4070.03AF : Public Finance I Economics 4070.03AF : Public Finance I

Midterm Exam

Wednesday, October 16, 1996

11.30 a.m.-12.20 p.m.

Do all 3 questions. All count equally.

1. (a) What are the three sets of conditions that a Pareto optimal allocation must satisfy?

(b) How would these conditions be violated by a tax on the use of hardwood in the manufacture of furniture?

2. Discuss briefly the horizontal equity of the federal goods and services tax, which is a proportional tax on all purchases of goods and services, with a few exemptions, such as food, and children's clothing.

3. What would the incidence be of a unit tax of $80 on a good, if the quantity demanded of the good was

D(P) = 700-3P
and the quantity supplied was
S(p) = p-100
where p is the net-of-tax price received by the sellers of the good, and P is the gross-of-tax price paid by buyers?

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On 08 Aug 2000, 14:01.