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PBEC7311Ec 2021

Public economics exam paper

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Fortunate Mthembu
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14 views6 pages

PBEC7311Ec 2021

Public economics exam paper

Uploaded by

Fortunate Mthembu
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
You are on page 1/ 6

19; 20; 21 2021

MODULE NAME: MODULE CODE:


PUBLIC ECONOMICS PBEC7311/d/p/w

ASSESSMENT TYPE: EXAMINATION (PAPER ONLY)


TOTAL MARK ALLOCATION: 120 MARKS
TOTAL HOURS: 2 HOURS (+10 minutes reading time)
INSTRUCTIONS:
1. Please adhere to all instructions in the assessment booklet.
2. Independent work is required.
3. Five minutes per hour of the assessment to a maximum of 15 minutes is dedicated to
reading time before the start of the assessment. You may make notes on your question
paper, but not in your answer sheet. Calculators may not be used during reading time.
4. You may not leave the assessment venue during reading time, or during the first hour or
during the last 15 minutes of the assessment.
5. Ensure that your name is on all pieces of paper or books that you will be submitting. Submit
all the pages of this assessment’s question paper as well as your answer script.
6. Answer all the questions on the answer sheets or in answer booklets provided. The phrase
‘END OF PAPER’ will appear after the final set question of this assessment.
7. Remember to work at a steady pace so that you are able to complete the assessment within
the allocated time. Use the mark allocation as a guideline as to how much time to spend on
each section.
Additional instructions:
1. This is a CLOSED BOOK assessment.
2. Calculators are allowed.
3. You are required to answer all of these sections.

© The Independent Institute of Education (Pty) Ltd 2021


Page 1 of 6
19; 20; 21 2021

Question 1 (Marks: 30)


This question contains short questions on Learning Units 1 – 10.

Q.1.1 While the government can influence the course of the economy, it is also extensively (5)
affected by what happens in the economy (Black et al. 2015).

What factors can affect government’s influence during a recession?

Q.1.2 Using examples, define pecuniary externalities. (5)

Q.1.3 How does a perfectly competitive market cause market failure in the context of (5)
macroeconomic instability?

Q.1.4 Outline the various dimensions used to measure access to health care in South Africa. (5)

Q.1.5 Foster care grants are grants paid to the parents or caregivers of children between (5)
the ages of one and 18 years who live with physical and mental disabilities.
Do you agree? Support your answer.

Q.1.6 To improve tax collection, taxes should be collected at the source. (5)
Elaborate on this statement.

Question 2 (Marks: 10)


This question requires students to understand and apply the benchmark model of the economy.

What is market failure and how does the absence of complete information in the market cause
markets to fail?

Question 3 (Marks: 10)


Question 3 covers the learning area on public goods and externalities.

It is important for meritorious goods to be supplied via the national budget.


Do you agree with this statement? Support your choice by defining merit goods and highlight at
least four examples of how these goods become a merit to the society.

© The Independent Institute of Education (Pty) Ltd 2021


Page 2 of 6
19; 20; 21 2021

Question 4 (Marks: 10)


Equity and social welfare are covered in this question.

Q.4.1 Think of South African example where the cardinal or additive welfare function can (5)
be applied in terms of social welfare maximisation, that is: W = Ua + Ub + ……, and
briefly outline such examples.

Q.4.2 Given that the utility function for a consumer a who is an altruist is given by: (5)
Ua = f[Ma, Ub(Mb).
What is the interpretation of this utility function?

Question 5 (Marks: 10)


This question covers the public choice theory.

Read the extract below from Anema (2013:10) and answer the question that follow.

The recommendation by economists and others to solve market failure typically is for government
actions to combat such failure. In theory, governments have several tools to correct market failures
and improve microeconomic efficiency (Winston, 2006). Le Grand (1991) mentions three ways of
government involvement, namely: (1) provision, (2) subsidy or taxation, and (3) regulation. The
government can provide goods or services itself, through owning and operating agencies and by
hiring employees. Government involvement, however, may not always lead to an efficient
functioning; governments can fail as well as markets. Government failure occurs when the
government is not efficient enough in solving the problem of market failure or when the
government should not have intervened at all (Winston, 2006).

Source: Anema, S. 2013. Market failure versus Government failure, Forest and Nature
Conservation Group, August 2013. [Online]. Available at: https://edepot.wur.nl/274765
[Accessed 09 June 2021].

In the context of the above extract, outline the causes of government failure in South Africa using
relevant models.

© The Independent Institute of Education (Pty) Ltd 2021


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19; 20; 21 2021

Question 6 (Marks: 10)


Question 6 requires students to know public expenditure and growth.

South Africa has been experiencing an increase in government spending over the years. Justify
this phenomenon using Peacock and Wiseman’s displacement effect.

Question 7 (Marks: 10)


Question 7 requires students to understand poverty, fiscal incidence, and service delivery in South
Africa.

A subsidy is a benefit given to an individual, business, or institution, usually by the government. It


is usually in the form of a cash payment or a tax reduction. The subsidy is typically given to remove
some type of burden, and it is often considered to be in the overall interest of the public, given to
promote a social good or an economic policy.

Source: Investopedia. What is Subsidy? Updated 27 April 2021. [Online]. Available at:
https://www.investopedia.com/terms/s/subsidy.asp [Accessed 09 June 2021].

Required: Outline the costs and benefits of subsidies to South African consumers.

© The Independent Institute of Education (Pty) Ltd 2021


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19; 20; 21 2021

Question 8 (Marks: 10)


The issue of social security is covered in this question.

Figure 8.1 below shows the effect of income transfer on work effort. Analyse this figure and
answer the question that follows.

Figure 8.1: Impact of income transfer on work effort

Required: Use Figure 8.1 above to outline how income transfers or provision of free public goods
can distort the work effort of individuals who are economically active and subject to income tax.

© The Independent Institute of Education (Pty) Ltd 2021


Page 5 of 6
19; 20; 21 2021

Question 9 (Marks: 20)


Taxation and tax equity, tax efficiency, administrative efficiency and flexibility is covered in this
question.

Q.9.1 Briefly discuss the five sources of finance for public expenditure in South Africa. (10)

Q.9.2 Use a relevant graphical model to analyse the impact of elasticity of demand on
the excess burden and the tax revenue collected by the government. (10)

END OF PAPER

© The Independent Institute of Education (Pty) Ltd 2021


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