AL-Azhar University

Faculty of Economics & administrative sciences

Mid Exam of Public Finance [Econ2035]

March 2016

Q1: True OR False1. Allocating the optimal quantity of resources to the production of good X

versus good Y called productive efficiency.2. A tax imposed by the government causes a decrease in quantity below

the optimal quantity.3. Imposing taxes is a purpose to redistribute income.4. The more progressive the tax system the greater its reduction in

inequality, but the greater its efficiency loss to the economy.5. Regressive tax is to apply a high tax rate on high income households.6. The optimal scale of performing a project by the government occurs

where MSB equals to MSC.7. In labor market, when the supply curve is inelastic the producer bear the

tax burden.8. The less elastic the demand and supply curves the smaller the efficiency

loss from imposed taxes.9. According to Ramsey inverse elasticity rule, sitting higher tax rate on

inelastic goods and lower tax rate on elastic goods.10. The benefit that could have been enjoyed by using the resources to

produce other goods and services known as opportunity cost. 1 2 3 4 5 6 7 8 9 10

Q2: define the following idioms:

1. Free market :

2. Positive economy:

3. Marginal cost:

4. Present value:

5. Elasticity demand

Q3: Determine the following from the graph:

1. The efficiency loss area; write its equation:

2. The tax revenue area; write its equation:

3. The tax burden area; write its equation:

With best wishes of success