FACULTY OF ECONOMICS
Mid Term Exam, Fall 2012-2013
Date: 12 November 2012Time: 09:00-11:00
Duration: 120 minutesVenue: 403
Course Code:BUS 351
Course Name: Public Finance
Lecturer: Asst. Prof. Dr. Ugur Ergun
Student’s Name:
Student’ Signature:
Instructions to Students:
1-Answer first 7 questions and 3 of last 5 questions
2-Mobile phones are strictly forbidden
3-The exchange of pen, pencil, eraser, calculator etc. is forbidden during the exam
4-The questions of the students will not be answered during the exam
Quest. / Allocated Point / Student´s Point1 / 10
2 / 10
3 / 10
4 / 10
5 / 10
6 / 10
7 / 10
10
10
10
Total
Questions
1- Consider an economy with milks and eggs. Fatih is initially endowed with wF = (0 30) and Mehmet`s endowment is wM = (40 0).
a-Plot the Edgeworth box and mark the allocation representing the initial endowment.
b-Provide general definition of Pareto efficiency and show the Pareto optimal and no-optimal points on the graph.
c-Briefly define the first welfare theorem.
d-Briefly explain the Walras Law.
2-
a-Briefly explain the minimal state. Is it enough to reach market efficiency? Explain.
b-What is Public Finance about?
3- Briefly explain why Public sector expenditure increases over time in the scope of;
a-Development models
b-Wagner´s Law
c-Political Model
d-Baumol´s Model
4- a- Give the definition of public good and explain the properties of public goods with examples.
b- Is it possible to reach efficiency in Public Goods? Why?
5- a- Compare club goods with local public goods.
b- Why does Market fail in efficiently providing club goods?
6-
a-Explain the two types of externalities through graphs and show deadweight loss area.
b- Discuss the government interventions and possible solutions to minimize the inefficiency in the case of externalities.
7- What government can do to minimize negative effects of monopoly?
Answer 3 of following 5 questions
8- Briefly explain the trend of Bosnian Public Revenues and Expenditures over years. What are the main challenges in improving the public revenue and expenditure system in BiH?
9- Briefly explain the recent economic development of BiH public revenues and expenditures. Write down the problems and recommendations.
10-Briefly explain the key features of BiH pension system. Write down the recommendations.
11- Briefly explain the key features of Public Sector Wages and its trend over years. Write down the recommendations for wage bill containment.
12- Briefly analyze the BiH health expenditures. Write down the recommendations.