 |  Principles of Microeconomics, 1st Canadian Edition Robert H. Frank,
Cornell University
Ben S. Bernanke,
Princeton University
Lars Osberg,
Dalhousie University
Melvin Cross,
Dalhousie University
Brian MacLean,
Laurentian University
Public Goods and Taxation
Sample Exam Questions| 1. | Explain whether the following statements are true or false. Illustrate where indicated. Note: there are no marks for stating true or false; the marks are awarded for the explanation and the illustration only.
A McDonald's hamburger is an example of a pure collective good. Sales tax revenues will be greater if the good being taxed has a demand that is price inelastic. Illustrate.
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| | 2. | The table below shows several income levels and three different amounts of tax that could be paid on that income. For each of the taxation methods 1 through 3, state whether the tax is progressive, regressive or proportional.
Taxation
Method | Income Bracket | | | $25,000 | $50,000 | $75,000 | $100,000 | | 1 | $5,000 | $5,000 | $5,000 | $5,000 | | 2 | $5,000 | $10,000 | $15,000 | $20,000 | | 3 | $2,500 | $6,000 | $11,250 | $20,000 |
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| | 3. | You and your roommate would like to hire a cleaning service to clean your apartment each week. The value of the cleaning is $35 to you and $100 to your roommate. Regardless of who pays for the service, the entire apartment gets cleaned.
What is the most the cleaning service can charge per week and still be assured of being hired by one of you? Suppose the competitive fee for the cleaning service is $80 per week. The owner of the apartment complex proposes that each of you pay 50% of the weekly fee. Will you and your roommate agree to the proposal?
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