No.

1
1. Define the problems of public finance.
2. What are the features of public goods?
3. The price of a bus trip is 1.5$ and the price of a gallon of gas is 3.7$. What is the
relative price of a gallon of gas, in terms of bus trips? What happens when the price of
a bus trip falls to 85 cents.
4. You have 200 $ and wish to buy hamburgers and pizza. Price for 1 hamburger is 2$
and price for 1 pizza is 6 $.
What is your budget constraint function? Plot this function. How many pizza you can buy
if you buy 20 hamburgers?
5. Utility function is given as:
U 2 QM 3 QCD

1/ 2

where U - is utility, QM - quantity of movies, QCD - quantity of CDs.

Plot this utility function for U 100 . Analyze the features of marginal utility and find MRS
(marginal rate of substitution).
6. Bills demand for books (a private good) is Q=50-3P and Teds demand is Q=40-2P.
a) Write down an equation for the social marginal benefit of the consumption of books.
b) Now suppose that books are public good. Write down an equation for the social
marginal benefit of books consumption.
7. Suppose there are five people 1 5, who rank projects R, S, T, V as follows:
1
2
3
4
T
S
S
R
S
T
V
T
V
V
R
S
R
R
T
V

5
R
V
T
S

Will any project be chosen by a majority vote rule? If so, which one? If not, explain, why.
8. Try to trisect (deal out) 210 votes to the 3 alternatives using the simple, absolute and
qualified majority.
A (winner)
B
C
Simple majority
Absolute majority
Qualified majority
9. Table X
Voter A

Voter B

Voter C

Local road network

Library

Public parks

Public parks

Local road network

Library

Library

Public parks

Local road network

Consider Table X. It lists three alternative projects on which the government might spend $1
billion: local road network, library, or public parks. Voters A, B, and C (whose preferences are
shown in the table) must choose one of the projects. The outcome may depend on the order of
voting. For example, if local road network is pitted against library first, and, subsequently, the
winner against public parks, the final choice is:
a. local road network
b. public parks
c. library
d. none of the above; there is a draw.
e. impossible to figure out without additional information.
10. What are externalities? Give examples of negative and positive consumption
externalities.

No. 2

1. What is the goal of studying public finance?

2. Explain the problem of optimal provision of public goods.
3. The price of a bus trip is 1.7$ and the price of a gallon of gas is 1.25$. What is the
relative price of a gallon of gas, in terms of bus trips? What happens when the price of
a bus trip falls to 1.1 $.
4. You have 300 $ and wish to buy books and pizza. Price for 1 book is 5$ and price for
1 pizza is 6 $.
What is your budget constraint function? Plot this function. How many pizza you can buy
if you buy 30 books?
1

5. Utility function is given as U Q Q 2

M
CD
and
budget constraint is 4 QM 3 QCD 120 .
Suppose that U 400 . Do we have optimal solution for this budget constraint? Find
optimal solution of this problem.
6. What is free rider problem?
7. Suppose there are five people 1 5, who rank projects R, S, T, V as follows:
1
2
3
4
T
S
S
R
S
T
V
T
V
V
R
S
R
R
T
V

5
R
V
T
S

Will any project be chosen by a majority vote rule? If so, which one? If not, explain, why.
8.Try to trisect (deal out) 210 votes to the 3 alternatives using the simple, absolute and
qualified majority.
A (winner)
B
C
Simple majority
Absolute majority
Qualified majority
9. Table X
Voter A

Voter B

Voter C

Local road network

Library

Public parks

Public parks

Local road network

Library

Library

Public parks

Local road network

Consider Table X. It lists three alternative projects on which the government might spend $1
billion: local road network, library, or public parks. Voters A, B, and C (whose preferences are
shown in the table) must choose one of the projects. The outcome may depend on the order of
voting. For example, if local road network is pitted against library first, and, subsequently, the
winner against public parks, the final choice is:

a. local road network

b. public parks
c. library
d. none of the above; there is a draw.
e. impossible to figure out without additional information.
10. Why do governments sometimes impose quantity regulations that limit the level of
negative-externality-inducing consumption? Why do governments sometimes impose
price regulations by taxing this consumption?

No.3

1. What are the market failures? Give examples.

2. What is the marginal utility and what its property?
3. The price of a bus trip is 2.1$ and the price of a gallon of gas is 1.6$. What is the
relative price of a gallon of gas, in terms of bus trips? What happens when the price of
a bus trip falls to 95 cents.
4. You have 500 $ and wish to buy notes and pizza. Price for 1 note is 2$ and price for 1
pizza is 5 $.
What is your budget constraint function? Plot this function. How many pizza you can buy
if you buy 20 notes?
5. Demand curve is Q=100-2 P . Calculate the price elasticity of demand at prices of 4$,
8$ and 12$ to show how it changes as you move along this linear demand curve.
6.Explain optimal provision of private and public goods by graphical analysis
7. Suppose there are five people 1 5, who rank projects R, S, T, V as follows:
1
2
3
4
5
T
S
S
R
R
S
T
V
T
V
V
V
R
S
T
R
R
T
V
S
Will any project be chosen by a majority vote rule? If so, which one? If not, explain, why.
8.Try to trisect (deal out) 210 votes to the 3 alternatives using the simple, absolute and
qualified majority.
A (winner)
B
C
Simple majority
Absolute majority
Qualified majority
9. Table X
Voter A

Voter B

Voter C

Local road network

Library

Public parks

Public parks

Local road network

Library

Library

Public parks

Local road network

Consider Table X. It lists three alternative projects on which the government might spend $1
billion: local road network, library, or public parks. Voters A, B, and C (whose preferences are
shown in the table) must choose one of the projects. The outcome may depend on the order of
voting. For example, if local road network is pitted against library first, and, subsequently, the
winner against public parks, the final choice is:
a. local road network
b. public parks
c. library

d. none of the above; there is a draw.

e. impossible to figure out without additional information.
10. Suppose that demand for a product is Q=1400-3P and supply is Q=-300+6P.
Furthermore, suppose that the marginal external damage of this product is 4$ per unit.
How many more units of this product will the free market produce than is social optimal?
Calculate the deadweight loss associated with the externality.

No. 4

1. Why and how might the Government intervene? What are the direct and indirect
interventions?
2. What is the budget constraint? Give example and plot this function.
3. The price of a bus trip is 1.45$ and the price of a gallon of gas is 3.2$. What is the
relative price of a gallon of gas, in terms of bus trips? What happens when the price of
a bus trip falls to 1.3 $.
4. Your utility function is given as:
U QM QCD

1/ 4

where U - is utility, QM - quantity of movies, QCD - quantity of CDs.

What are the properties and plots of marginal utility for movies, if you buy 16 CDs? Analyze
marginal utility function in analytical and discrete ways.
5. Demand curve is Q=1000-2 P 2 . Calculate the price elasticity of demand at prices of 5$,
10$ and 15$ to show how it changes as you move along this linear demand curve.
6. Janes demand for bottle of milk (a private good) is Q=60-2P and Teds demand is Q=503P.
c) Write down an equation for the social marginal benefit of the consumption of bottles
of milk.
d) Now suppose that bottles of milk are public good. Write down an equation for the
social marginal benefit of bottles of milk consumption.
7. Suppose there are five people 1 5, who rank projects R, S, T, V as follows:
1
2
3
4
5
T
S
S
R
R
S
T
V
T
V
V
V
R
S
T
R
R
T
V
S
Will any project be chosen by a majority vote rule? If so, which one? If not, explain, why.
8.Try to trisect (deal out) 210 votes to the 3 alternatives using the simple, absolute and
qualified majority.
A (winner)
B
C
Simple majority
Absolute majority
Qualified majority
9.Table X
Voter A

Voter B

Voter C

Local road network

Library

Public parks

Public parks

Local road network

Library

Library

Public parks

Local road network

Consider Table X. It lists three alternative projects on which the government might spend $1
billion: local road network, library, or public parks. Voters A, B, and C (whose preferences are
shown in the table) must choose one of the projects. The outcome may depend on the order of
voting. For example, if local road network is pitted against library first, and, subsequently, the
winner against public parks, the final choice is:
a. local road network
b. public parks
c. library
d. none of the above; there is a draw.
e. impossible to figure out without additional information
10.What are externalities? Give examples of environmental and health externalities.

No. 5
1. What are the main questions of public finance?
2. Define pure and impure of public goods. Give your own examples.

3. What is constrained utility maximization?

4. The price of a bus trip is 1.8$ and the price of a gallon of gas is 1.5$. What is the
relative price of a gallon of gas, in terms of bus trips? What happens when the price of
a bus trip falls to 65 cents.
5. You have 300 $ and wish to buy notes and pizza. Price for 1 note is 3$ and price for 1
pizza is 5 $.
What is your budget constraint function? Plot this function. How many pizza you can buy
if you buy 10 notes?
6. Utility function is given as:
U 4 QM 2 QCD

1/ 2

where U - is utility, QM - quantity of movies, QCD - quantity of CDs.

Plot this utility function for U 100 and U 400 . Analyze the features of marginal utility
and find MRS (marginal rate of substitution).
7. Suppose there are five people 1 5, who rank projects R, S, T, V as follows:
1
2
3
4
5
T
S
S
R
R
S
T
V
T
V
V
V
R
S
T
R
R
T
V
S
Will any project be chosen by a majority vote rule? If so, which one? If not, explain, why.
8.Try to trisect (deal out) 210 votes to the 3 alternatives using the simple, absolute and
qualified majority.
A (winner)
B
C
Simple majority
Absolute majority
Qualified majority
9.Table X
Voter A

Voter B

Voter C

Local road network

Library

Public parks

Public parks

Local road network

Library

Library

Public parks

Local road network

Consider Table X. It lists three alternative projects on which the government might spend $1
billion: local road network, library, or public parks. Voters A, B, and C (whose preferences are
shown in the table) must choose one of the projects. The outcome may depend on the order of
voting. For example, if local road network is pitted against library first, and, subsequently, the
winner against public parks, the final choice is:
a. local road network
b. public parks

c. library
d. none of the above; there is a draw.
e. impossible to figure out without additional information
10. What are the social and private marginal benefits in externality theory?

No. 6
1. Define the problems of public policy.
2. What are the features of pure and impure public goods?

3. The price of a bus trip is 1.9$ and the price of a gallon of gas is 2.7$. What is the
relative price of a gallon of gas, in terms of bus trips? What happens when the price of
a bus trip falls to 1.8 $.
4. You have 600 $ and wish to buy hamburgers and pizza. Price for 1 hamburger is 3$
and price for 1 pizza is 6 $.
What is your budget constraint function? Plot this function. How many pizza you can buy
if you buy 30 hamburgers?
5. Utility function is given as:
U 5 QM QCD ,
2

where U - is utility, QM - quantity of movies, QCD - quantity of CDs.

Plot this utility function for U 100 and U 400 . Analyze the features of marginal utility
and find MRS (marginal rate of substitution).
6. Peters demand for calculators (a private good) is Q=250-5P and Teds demand is Q=3003P.
e) Write down an equation for the social marginal benefit of the consumption of
calculators.
f) Now suppose that calculators are public good. Write down an equation for the social
marginal benefit of calculators consumption.
7. Suppose there are five people 1 5, who rank projects R, S, T, V as follows:
1
2
3
4
T
S
S
R
S
T
V
T
V
V
R
S
R
R
T
V

5
R
V
T
S

Will any project be chosen by a majority vote rule? If so, which one? If not, explain, why.
8.Try to trisect (deal out) 210 votes to the 3 alternatives using the simple, absolute and
qualified majority.
A (winner)
B
C
Simple majority
Absolute majority
Qualified majority
9.Table X
Voter A

Voter B

Voter C

Local road network

Library

Public parks

Public parks

Local road network

Library

Library

Public parks

Local road network

Consider Table X. It lists three alternative projects on which the government might spend $1
billion: local road network, library, or public parks. Voters A, B, and C (whose preferences are
shown in the table) must choose one of the projects. The outcome may depend on the order of
voting. For example, if local road network is pitted against library first, and, subsequently, the
winner against public parks, the final choice is:
a. local road network
b. public parks
c. library
d. none of the above; there is a draw.
e. impossible to figure out without additional information.
10.What are externalities? Give examples of negative and positive consumption
externalities.

No. 7
1. What is the goal of studying public finance?
2. Explain the problem of optimal provision of public goods.
3. The price of a bus trip is 1.45$ and the price of a gallon of gas is 1.05$. What is the
relative price of a gallon of gas, in terms of bus trips? What happens when the price of
a bus trip falls to 0.95 $.

4. You have 500 $ and wish to buy books and pizza. Price for 1 book is 5$ and price for
1 pizza is 4 $.
What is your budget constraint function? Plot this function. How many pizza you can buy
if you buy 20 books?
1

5. Utility function is given as U Q Q 2

M
CD
and
budget constraint is 3 QM 4 QCD 240 .
Suppose that U 300 . Do we have optimal solution for this budget constraint? Find
optimal solution of this problem.
6. What is free rider problem?
7. Suppose there are five people 1 5, who rank projects R, S, T, V as follows:
1
2
3
4
T
S
S
R
S
T
V
T
V
V
R
S
R
R
T
V

5
R
V
T
S

Will any project be chosen by a majority vote rule? If so, which one? If not, explain, why.
8.Try to trisect (deal out) 210 votes to the 3 alternatives using the simple, absolute and
qualified majority.
A (winner)
B
C
Simple majority
Absolute majority
Qualified majority
9. Table X
Voter A

Voter B

Voter C

Local road network

Library

Public parks

Public parks

Local road network

Library

Library

Public parks

Local road network

Consider Table X. It lists three alternative projects on which the government might spend $1
billion: local road network, library, or public parks. Voters A, B, and C (whose preferences are
shown in the table) must choose one of the projects. The outcome may depend on the order of
voting. For example, if local road network is pitted against library first, and, subsequently, the
winner against public parks, the final choice is:
a. local road network
b. public parks
c. library

d. none of the above; there is a draw.

e. impossible to figure out without additional information.
10. Why do governments sometimes impose quantity regulations that limit the level of
negative-externality-inducing consumption? Why do governments sometimes impose
price regulations by taxing this consumption?

No.8
1. What are the market failures? Give examples.
2. What is the marginal utility and what its property?

3. The price of a bus trip is 2.5$ and the price of a gallon of gas is 1.4$. What is the
relative price of a gallon of gas, in terms of bus trips? What happens when the price of
a bus trip falls to 65 cents.
4. You have 300 $ and wish to buy notes and pizza. Price for 1 note is 3$ and price for 1
pizza is 4 $.
What is your budget constraint function? Plot this function. How many pizza you can buy
if you buy 20 notes?
5. Demand curve is Q=300-10 P . Calculate the price elasticity of demand at prices of
10$, 20$ and 30$ to show how it changes as you move along this linear demand curve.
6.Explain optimal provision of private and public goods by graphical analysis
7. Suppose there are five people 1 5, who rank projects R, S, T, V as follows:
1
2
3
4
5
T
S
S
R
R
S
T
V
T
V
V
V
R
S
T
R
R
T
V
S
Will any project be chosen by a majority vote rule? If so, which one? If not, explain, why.
8.Try to trisect (deal out) 210 votes to the 3 alternatives using the simple, absolute and
qualified majority.
A (winner)
B
C
Simple majority
Absolute majority
Qualified majority
9.Table X
Voter A

Voter B

Voter C

Local road network

Library

Public parks

Public parks

Local road network

Library

Library

Public parks

Local road network

Consider Table X. It lists three alternative projects on which the government might spend $1
billion: local road network, library, or public parks. Voters A, B, and C (whose preferences are
shown in the table) must choose one of the projects. The outcome may depend on the order of
voting. For example, if local road network is pitted against library first, and, subsequently, the
winner against public parks, the final choice is:
a. local road network
b. public parks
c. library
d. none of the above; there is a draw.
e. impossible to figure out without additional information.

10. Suppose that demand for a product is Q=1500-5P and supply is Q=-500+10P.
Furthermore, suppose that the marginal external damage of this product is 4$ per unit.
How many more units of this product will the free market produce than is social optimal?
Calculate the deadweight loss associated with the externality.

No. 9
1. Why and how might the Government intervene? What are the direct and indirect
interventions?
2. What is the budget constraint? Give example and plot this function.

3. The price of a bus trip is 1.35$ and the price of a gallon of gas is 2.1$. What is the
relative price of a gallon of gas, in terms of bus trips? What happens when the price of
a bus trip falls to 1.5 $.
4. Your utility function is given as:
U QM QCD

1/ 3

where U - is utility, QM - quantity of movies, QCD - quantity of CDs.

What are the properties and plots of marginal utility for movies, if you buy 27 CDs? Analyze
marginal utility function in analytical and discrete ways.
5. Demand curve is Q=100-2 P 1 / 3 . Calculate the price elasticity of demand at prices of 8$,
16$ and 24$ to show how it changes as you move along this linear demand curve.
6. Janes demand for bottle of Cola (a private good) is Q=160-4P and Peters demand is
Q=150-5P.
g) Write down an equation for the social marginal benefit of the consumption of bottles
of Cola.
h) Now suppose that bottles of Cola are public good. Write down an equation for the
social marginal benefit of bottles of Cola consumption.
7. Suppose there are five people 1 5, who rank projects R, S, T, V as follows:
1
2
3
4
5
T
S
S
R
R
S
T
V
T
V
V
V
R
S
T
R
R
T
V
S
Will any project be chosen by a majority vote rule? If so, which one? If not, explain, why.
8.Try to trisect (deal out) 210 votes to the 3 alternatives using the simple, absolute and
qualified majority.
A (winner)
B
C
Simple majority
Absolute majority
Qualified majority
9.Table X
Voter A

Voter B

Voter C

Local road network

Library

Public parks

Public parks

Local road network

Library

Library

Public parks

Local road network

Consider Table X. It lists three alternative projects on which the government might spend $1
billion: local road network, library, or public parks. Voters A, B, and C (whose preferences are
shown in the table) must choose one of the projects. The outcome may depend on the order of

voting. For example, if local road network is pitted against library first, and, subsequently, the
winner against public parks, the final choice is:
a. local road network
b. public parks
c. library
d. none of the above; there is a draw.
e. impossible to figure out without additional information
10.What are externalities? Give examples of environmental and health externalities.

No. 10
1. What are the main questions of public finance?
2. Define pure and impure of public goods. Give your own examples.
3. What is constrained utility maximization?

4. The price of a bus trip is 1.3$ and the price of a gallon of gas is 1.1$. What is the
relative price of a gallon of gas, in terms of bus trips? What happens when the price of
a bus trip falls to 85 cents.
5. You have 900 $ and wish to buy notes and pizza. Price for 1 note is 3$ and price for 1
pizza is 5 $.
What is your budget constraint function? Plot this function. How many pizza you can buy
if you buy 100 notes?
6. Utility function is given as:
U 16 QM QCD

1/ 4

where U - is utility, QM - quantity of movies, QCD - quantity of CDs.

Plot this utility function for U 1600 . Analyze the features of marginal utility and find MRS
(marginal rate of substitution).
7. Suppose there are five people 1 5, who rank projects R, S, T, V as follows:
1
2
3
4
5
T
S
S
R
R
S
T
V
T
V
V
V
R
S
T
R
R
T
V
S
Will any project be chosen by a majority vote rule? If so, which one? If not, explain, why.
8.Try to trisect (deal out) 210 votes to the 3 alternatives using the simple, absolute and
qualified majority.
A (winner)
B
C
Simple majority
Absolute majority
Qualified majority
9.Table X
Voter A

Voter B

Voter C

Local road network

Library

Public parks

Public parks

Local road network

Library

Library

Public parks

Local road network

Consider Table X. It lists three alternative projects on which the government might spend $1
billion: local road network, library, or public parks. Voters A, B, and C (whose preferences are
shown in the table) must choose one of the projects. The outcome may depend on the order of
voting. For example, if local road network is pitted against library first, and, subsequently, the
winner against public parks, the final choice is:
a. local road network
b. public parks
c. library

d. none of the above; there is a draw.

e. impossible to figure out without additional information
10.What are the social and private marginal benefits in externality theory?

No. 11
1. Define the problems of public finance.
2. What are the features of public goods?

3. The price of a bus trip is 1.95$ and the price of a gallon of gas is 3.5$. What is the
relative price of a gallon of gas, in terms of bus trips? What happens when the price of
a bus trip falls to 2.3$ .
4. You have 400 $ and wish to buy hamburgers and pizza. Price for 1 hamburger is 4$
and price for 1 pizza is 5 $.
What is your budget constraint function? Plot this function. How many pizza you can buy
if you buy 20 hamburgers?
5. Utility function is given as:
U 4 QM QCD

1/ 2

where U - is utility, QM - quantity of movies, QCD - quantity of CDs.

Plot this utility function for U 100 . Analyze the features of marginal utility and find MRS
(marginal rate of substitution).
6. Kates demand for books (a private good) is Q=150-5P and Teds demand is Q=140-7P.
i) Write down an equation for the social marginal benefit of the consumption of books.
j) Now suppose that books are public good. Write down an equation for the social
marginal benefit of books consumption.
7. Suppose there are five people 1 5, who rank projects R, S, T, V as follows:
1
2
3
4
T
S
S
R
S
T
V
T
V
V
R
S
R
R
T
V

5
R
V
T
S

Will any project be chosen by a majority vote rule? If so, which one? If not, explain, why.
8.Try to trisect (deal out) 210 votes to the 3 alternatives using the simple, absolute and
qualified majority.
A (winner)
B
C
Simple majority
Absolute majority
Qualified majority
9.Table X
Voter A

Voter B

Voter C

Local road network

Library

Public parks

Public parks

Local road network

Library

Library

Public parks

Local road network

Consider Table X. It lists three alternative projects on which the government might spend $1
billion: local road network, library, or public parks. Voters A, B, and C (whose preferences are

shown in the table) must choose one of the projects. The outcome may depend on the order of
voting. For example, if local road network is pitted against library first, and, subsequently, the
winner against public parks, the final choice is:
a. local road network
b. public parks
c. library
d. none of the above; there is a draw.
e. impossible to figure out without additional information.
10.What are externalities? Give examples of negative and positive consumption
externalities.

No. 12
1. What is the goal of studying public finance?
2. Explain the problem of optimal provision of public goods.
3. The price of a bus trip is 1.55$ and the price of a gallon of gas is 1.35$. What is the
relative price of a gallon of gas, in terms of bus trips? What happens when the price of
a bus trip falls to 1.1 $.

4. You have 600 $ and wish to buy books and pizza. Price for 1 book is 3$ and price for
1 pizza is 6 $.
What is your budget constraint function? Plot this function. How many pizza you can buy
if you buy 30 books?
1

5. Utility function is given as U Q Q 2

M
CD
and
budget constraint is 5 QM 3 QCD 150 .
Suppose that U 300 . Do we have optimal solution for this budget constraint? Find
optimal solution of this problem.
6. What is free rider problem?
7. Suppose there are five people 1 5, who rank projects R, S, T, V as follows:
1
2
3
4
T
S
S
R
S
T
V
T
V
V
R
S
R
R
T
V

5
R
V
T
S

Will any project be chosen by a majority vote rule? If so, which one? If not, explain, why.
8.Try to trisect (deal out) 210 votes to the 3 alternatives using the simple, absolute and
qualified majority.
A (winner)
B
C
Simple majority
Absolute majority
Qualified majority
9. Table X
Voter A

Voter B

Voter C

Local road network

Library

Public parks

Public parks

Local road network

Library

Library

Public parks

Local road network

Consider Table X. It lists three alternative projects on which the government might spend $1
billion: local road network, library, or public parks. Voters A, B, and C (whose preferences are
shown in the table) must choose one of the projects. The outcome may depend on the order of
voting. For example, if local road network is pitted against library first, and, subsequently, the
winner against public parks, the final choice is:
a. local road network
b. public parks
c. library

d. none of the above; there is a draw.

e. impossible to figure out without additional information.
10. Why do governments sometimes impose quantity regulations that limit the level of
negative-externality-inducing consumption? Why do governments sometimes impose
price regulations by taxing this consumption?

No.13
1.What are the market failures? Give examples.
2. What is the marginal utility and what its property?

3. The price of a bus trip is 2.9$ and the price of a gallon of gas is 1.8$. What is the
relative price of a gallon of gas, in terms of bus trips? What happens when the price of
a bus trip falls to 1.2$ .
4. You have 800 $ and wish to buy notes and pizza. Price for 1 note is 4$ and price for 1
pizza is 8 $.
What is your budget constraint function? Plot this function. How many pizza you can buy
if you buy 50 notes?
5. Demand curve is Q=400-4 P . Calculate the price elasticity of demand at prices of 9$,
18$ and 27$ to show how it changes as you move along this linear demand curve.
6.Explain optimal provision of private and public goods by graphical analysis
7. Suppose there are five people 1 5, who rank projects R, S, T, V as follows:
1
2
3
4
5
T
S
S
R
R
S
T
V
T
V
V
V
R
S
T
R
R
T
V
S
Will any project be chosen by a majority vote rule? If so, which one? If not, explain, why.
8.Try to trisect (deal out) 210 votes to the 3 alternatives using the simple, absolute and
qualified majority.
A (winner)
B
C
Simple majority
Absolute majority
Qualified majority
9.Table X
Voter A

Voter B

Voter C

Local road network

Library

Public parks

Public parks

Local road network

Library

Library

Public parks

Local road network

Consider Table X. It lists three alternative projects on which the government might spend $1
billion: local road network, library, or public parks. Voters A, B, and C (whose preferences are
shown in the table) must choose one of the projects. The outcome may depend on the order of
voting. For example, if local road network is pitted against library first, and, subsequently, the
winner against public parks, the final choice is:
a. local road network
b. public parks
c. library
d. none of the above; there is a draw.
e. impossible to figure out without additional information.

10. Suppose that demand for a product is Q=1500-5P and supply is Q=-500+4P.
Furthermore, suppose that the marginal external damage of this product is 4$ per unit.
How many more units of this product will the free market produce than is social optimal?
Calculate the deadweight loss associated with the externality.

No. 14
1. Why and how might the Government intervene? What are the direct and indirect
interventions?
2. What is the budget constraint? Give example and plot this function.

3. The price of a bus trip is 1.55$ and the price of a gallon of gas is 3.6$. What is the
relative price of a gallon of gas, in terms of bus trips? What happens when the price of
a bus trip falls to 1.4 $.
4. Your utility function is given as:
U 16 QM QCD

1/ 4

where U - is utility, QM - quantity of movies, QCD - quantity of CDs.

What are the properties and plots of marginal utility for movies, if you buy 16 CDs? Analyze
marginal utility function in analytical and discrete ways.
5. Demand curve is Q=600-2 P 2 . Calculate the price elasticity of demand at prices of 2$, 4$
and 6$ to show how it changes as you move along this linear demand curve.
6. Janes demand for bottle of milk (a private good) is Q=180-2P and Teds demand is Q=1505P.
k) Write down an equation for the social marginal benefit of the consumption of bottles
of milk.
l) Now suppose that bottles of milk are public good. Write down an equation for the
social marginal benefit of bottles of milk consumption.
7. Suppose there are five people 1 5, who rank projects R, S, T, V as follows:
1
2
3
4
5
T
S
S
R
R
S
T
V
T
V
V
V
R
S
T
R
R
T
V
S
Will any project be chosen by a majority vote rule? If so, which one? If not, explain, why.
8.Try to trisect (deal out) 210 votes to the 3 alternatives using the simple, absolute and
qualified majority.
A (winner)
B
C
Simple majority
Absolute majority
Qualified majority
9.Table X
Voter A

Voter B

Voter C

Local road network

Library

Public parks

Public parks

Local road network

Library

Library

Public parks

Local road network

Consider Table X. It lists three alternative projects on which the government might spend $1
billion: local road network, library, or public parks. Voters A, B, and C (whose preferences are
shown in the table) must choose one of the projects. The outcome may depend on the order of

voting. For example, if local road network is pitted against library first, and, subsequently, the
winner against public parks, the final choice is:
a. local road network
b. public parks
c. library
d. none of the above; there is a draw.
e. impossible to figure out without additional information
10.What are externalities? Give examples of environmental and health externalities.

No. 15
1. What are the main questions of public finance?
2. Define pure and impure of public goods. Give your own examples.
3. What is constrained utility maximization?

4. The price of a bus trip is 1.25$ and the price of a gallon of gas is 1.1$. What is the
relative price of a gallon of gas, in terms of bus trips? What happens when the price of
a bus trip falls to 55 cents.
5. You have 900 $ and wish to buy notes and pizza. Price for 1 note is 3$ and price for 1
pizza is 9 $.
What is your budget constraint function? Plot this function. How many pizza you can buy
if you buy 50 notes?
6. Utility function is given as:
U 4 QM QCD

1/ 2

where U - is utility, QM - quantity of movies, QCD - quantity of CDs.

Plot this utility function for U 400 and U 900 . Analyze the features of marginal utility
and find MRS (marginal rate of substitution).
7. Suppose there are five people 1 5, who rank projects R, S, T, V as follows:
1
2
3
4
5
T
S
S
R
R
S
T
V
T
V
V
V
R
S
T
R
R
T
V
S
Will any project be chosen by a majority vote rule? If so, which one? If not, explain, why.
8.Try to trisect (deal out) 210 votes to the 3 alternatives using the simple, absolute and
qualified majority.
A (winner)
B
C
Simple majority
Absolute majority
Qualified majority
9.Table X
Voter A

Voter B

Voter C

Local road network

Library

Public parks

Public parks

Local road network

Library

Library

Public parks

Local road network

Consider Table X. It lists three alternative projects on which the government might spend $1
billion: local road network, library, or public parks. Voters A, B, and C (whose preferences are
shown in the table) must choose one of the projects. The outcome may depend on the order of
voting. For example, if local road network is pitted against library first, and, subsequently, the
winner against public parks, the final choice is:
a. local road network
b. public parks
c. library

d. none of the above; there is a draw.

e. impossible to figure out without additional information
10.What are the social and private marginal benefits in externality theory?