Question 1

Cost-benefit analysis is

Accepted Answer

A)  a set of practical procedures for guiding public expenditure decisions. 
B)  used by the private sector to determine whether certain projects should be undertaken. 
C)  difficult when benefits and costs are hard to evaluate. 
D)  mindful of changes over time. 
E)  all of these answer options are correct. 
A)  a set of practical procedures for guiding public expenditure decisions. 
B)  used by the private sector to determine whether certain projects should be undertaken. 
C)  difficult when benefits and costs are hard to evaluate. 
D)  mindful of changes over time. 
E)  all of these answer options are correct. E

Question 2

In cost-benefit analysis,there is no problem created by inflation.

Accepted Answer

A)  True 
B)  False 
C)  Uncertain 
A)  True 
B)  False 
C)  Uncertain B

Question 3

Refer to the figure below.If the supply curve returns to its initial level of Sa,the amount of consumer surplus will return to its original level.

Accepted Answer

A)  True 
B)  False 
C)  Uncertain 
A)  True 
B)  False 
C)  Uncertain A

Question 4

The rate at which future money must be discounted is known as the

Accepted Answer

A)  rate of inflation. 
B)  exposure rate. 
C)  discount rate. 
D)  time rate. 
A)  rate of inflation. 
B)  exposure rate. 
C)  discount rate. 
D)  time rate.

Question 5

The internal rate of return is likely to lead to incorrect decisions.

Accepted Answer

A)  True 
B)  False 
C)  Uncertain 
A)  True 
B)  False 
C)  Uncertain

Question 6

Inflation favors

Accepted Answer

A)  lenders. 
B)  borrowers. 
C)  neither borrowers nor lenders. 
D)  both borrowers and lenders. 
A)  lenders. 
B)  borrowers. 
C)  neither borrowers nor lenders. 
D)  both borrowers and lenders.

Question 7

Some analysts have argued that cost-benefit analysis does not take into account issues involving equity and is nothing more than an efficiency test.Do you agree with this statement?

Accepted Answer

The use of cost analysis can b

Question 8

Government budgets are

Accepted Answer

A)  always adhered to. 
B)  not necessary. 
C)  guides for project analysis. 
D)  easy to create. 
A)  always adhered to. 
B)  not necessary. 
C)  guides for project analysis. 
D)  easy to create.

Question 9

For a government to be efficient,a project should be funded up to

Accepted Answer

A)  MB = 0. 
B)  MB =$\infty$ . 
C)  MC = 0. 
D)  MC =$\infty$ . 
E)  MB = MC. 
A)  MB = 0. 
B)  MB =$\infty$ . 
C)  MC = 0. 
D)  MC =$\infty$ . 
E)  MB = MC.

Question 10

If the interest rate is 5 percent,what is the present value of $5,000 five years from now?

Accepted Answer

PV = 5,000

Question 11

For certain intangibles that cannot be measured,it is best to

Accepted Answer

A)  guess. 
B)  exclude them from cost benefit analysis,and then calculate how large they must be to reverse the decision. 
C)  reevaluate using the Hicks-Kaldor criterion. 
D)  leave it to the private sector to decide on value. 
A)  guess. 
B)  exclude them from cost benefit analysis,and then calculate how large they must be to reverse the decision. 
C)  reevaluate using the Hicks-Kaldor criterion. 
D)  leave it to the private sector to decide on value.

Question 12

Some people prefer more risky projects than less risky projects.But some people prefer less risky projects to those that are more risky.What explains this behavior?

Accepted Answer

This behavior is explained through prefe

Question 13

The term "future value"

Accepted Answer

A)  can be determined by inverting the formula for present value. 
B)  is not used in modern public finance analysis. 
C)  refers to the present value of future money. 
D)  includes the shadow prices of all goods used in a project. 
A)  can be determined by inverting the formula for present value. 
B)  is not used in modern public finance analysis. 
C)  refers to the present value of future money. 
D)  includes the shadow prices of all goods used in a project.

Question 14

One of the steps in cost-benefit analysis is distinguishing time frames.

Accepted Answer

A)  True 
B)  False 
C)  Uncertain 
A)  True 
B)  False 
C)  Uncertain

Question 15

Money values indexed to a given period are known as

Accepted Answer

A)  nominal. 
B)  real. 
C)  inverse. 
D)  random. 
A)  nominal. 
B)  real. 
C)  inverse. 
D)  random.

Question 16

Real dollar amounts are essentially the same as nominal dollars.

Accepted Answer

A)  True 
B)  False 
C)  Uncertain 
A)  True 
B)  False 
C)  Uncertain

Question 17

Costs should always be evaluated before determining benefits.

Accepted Answer

A)  True 
B)  False 
C)  Uncertain 
A)  True 
B)  False 
C)  Uncertain

Question 18

The value of a human life

Accepted Answer

A)  can be estimated by potential future earnings. 
B)  can be subjected to cost-benefit analysis. 
C)  is an intangible that is hard to price. 
D)  all of these answer options are correct. 
A)  can be estimated by potential future earnings. 
B)  can be subjected to cost-benefit analysis. 
C)  is an intangible that is hard to price. 
D)  all of these answer options are correct.

Question 19

Unlike other methods,present value analysis indicates that a project should be undertaken if the NPV is greater than zero regardless the income distribution.

Accepted Answer

A)  True 
B)  False 
C)  Uncertain 
A)  True 
B)  False 
C)  Uncertain

Question 20

Suppose in a certain city the demand for low-cost housing can be characterized by the equation P = 500 - 2Q,where Q is housing measured in square feet.Further,suppose that supply is characterized by the equation: P = 25 + 3Q.Suppose that the government feels that the grant is not enough and,in addition,imposes a price ceiling of $270.What will happen to consumer surplus? What are the drawbacks?

Accepted Answer

Under the price ceiling scheme,new P* =

Exam 8: Cost-Benefit Analysis

Cost-benefit analysis is

In cost-benefit analysis,there is no problem created by inflation.

Refer to the figure below.If the supply curve returns to its initial level of Sa,the amount of consumer surplus will return to its original level.

The rate at which future money must be discounted is known as the

The internal rate of return is likely to lead to incorrect decisions.

Inflation favors

Some analysts have argued that cost-benefit analysis does not take into account issues involving equity and is nothing more than an efficiency test.Do you agree with this statement?

Government budgets are

For a government to be efficient,a project should be funded up to

If the interest rate is 5 percent,what is the present value of $5,000 five years from now?

For certain intangibles that cannot be measured,it is best to

Some people prefer more risky projects than less risky projects.But some people prefer less risky projects to those that are more risky.What explains this behavior?

The term "future value"

One of the steps in cost-benefit analysis is distinguishing time frames.

Money values indexed to a given period are known as

Real dollar amounts are essentially the same as nominal dollars.

Costs should always be evaluated before determining benefits.

The value of a human life

Unlike other methods,present value analysis indicates that a project should be undertaken if the NPV is greater than zero regardless the income distribution.

Introduction

Tools of Positive Analysis

Tools of Normative Analysis

Public Goods

Externalities

Political Economy

Education

The Health Care Market

Government and the Market for Health Care

Social Security

Income Redistribution: Conceptual Issues

Expenditure Programs for the Poor

Taxation and Income Distribution

Taxation and Efficiency

Efficient and Equitable Taxation

The Personal Income Tax

Personal Taxation and Behavior

The Corporation Tax

Deficit Finance

Fundamental Tax Reform: Taxes on Consumption and Wealth

Public Finance in a Federal System

Filters

Refer to the figure below.If the supply curve returns to its initial level of S_a,the amount of consumer surplus will return to its original level.