Midterm Revision

Public Finance
 Q1: Choose the correct answer:
1. …………is the field of economics that studies
the alternative means of financing government
expenditures.
a) Public finance
b)Governments
c) Political institutions
d)Taxes
2-………..are organizations formed to
exercise authority over the actions of people
who live together in a society
a)Public finance
b)Governments
c)Political institutions
d)Public goods
3-………..constitute the rules that evolve in a
community for determining how government
expenditures are financed.
a)Public finance
b)Governments
c)Political institutions
d)Public goods
4- Public finance is important to
achieve……….
a)Inequitable distribution of income
b)Increasing the gap between urban and rural
sectors
c)Promotion deflation
d)sustainable high economic growth rate
5- Promotion of export means ………………
a)The government imposing less subsides on
exports.
b)The government collects revenues and spends
for the construction.
c)The government uses the revenues to reduce
inequality.
d)The government imposing less tax on the
export oriented goods
6- The government uses the revenues and
expenditures in order to……………
a) Increase inequality
b) overcome form inflation and deflation
c) Increase the gap between agricultural and industrial
sectors.
d) Bring decrease in both aggregate demand and
aggregate supply.
7……….means specific parts of the national
economy, in which decisions are made by public
choice.
a) public sector
b)Private sector
c) Pure public goods
d)Public Finance
8-The trade-off between government goods and private goods
can be illustrated with……….

a) Public goods demand curve

b) Public goods demand curve

c) familiar production-possibility curve

d) Private goods demand curve

9-…………result from the inefficiency in
allocation of resources.
a)Microeconomic failures
b)Macroeconomic failure
c)Income inequality
d)Stabilization failures
10-The most well-known tools to measure
income inequality are…………….
a)Demand curve
b)MSC coefficient
c)Lorenz curve and Gini coefficient
d)familiar production-possibility curve
11-Gini = 1 means …………..
a) Absolute inequality---if A= 0
b) Absolute inequality---if B= 1
c) Absolute inequality---if A= 1
d) Absolute equality---if B= 0
12-Gini = 0 means …………..
a) Absolute inequality---if A= 1
b) Absolute inequality---if B= 1
c) Absolute equality---if A= 0
d) Absolute equality---if B= 0
13-If Gini for Brazil = 0.98 it means that
……….
a)Brazil has income inequality
b)Brazil needs redistribution for income
c)Lorenze curve is diagonal
d)All above
14- If Gini for Egypt = 0.08 it means that ……….
a) Egypt has income equality
b) Egypt has income inequality
c) Egypt needs redistribution for income
d) Lorenze curve is diagonal
15-Gini is a dimensionless number that may have values within
the interval of ……
a) ˂0;2˃
b) ˂1;3˃
c) ˂0;1˃
d) ˂0;0.19˃
16-………is indicated by instability in the economic system
that usually suffers from cyclical inflation.
a) Microeconomic failure
b) Macroeconomic failure
c) Income inequality
d) Inefficiency allocation of resources
17-It is inefficient to price goods that are …….
a) Rival in consumption
b) Non- rival in consumption
c) Divisibility
d) Exclusion
18-The marginal cost of consumption for good
with non-rival benefits is ………..
a)Positive
b)Negative
c)Increasing
d)Zero
19-The marginal cost of production for good
with non-rival benefits is ………..
a)Positive
b)Negative
c)constant
d)Zero
20-…….. means that every consumer
consumes the same amount.
a)Full indivisibility
b)Full divisibility
c)Rival in consumption
d)Exclusion from consumption
21-The relationship between total
consumption of public good and the
consumption of particular users can be
defined as follows…………
n
a)Yki = i=1 X k
σ
b)Yki = σni=1 X ki
c)Ykn = σni=1 X ki
d)Yg = X g1 + X gi + ⋯ + X gn
22-The relationship between total
consumption of private good and the
consumption of particular users can be
defined as follows…………
a)Yk = σni=1 X ki
b)Ykn = σ1i=1 X kr
c)Yg = Xg1 + Xgi + ⋯ + Xgn
d)Ygi = X gi1 + X gii + ⋯ + X gin
23-The benefits of national defense services
are……
a)non-rival
b)Exclusion
c)Divisibility
d)Competition
24-……………that is individually consumed and
subject to low-cost exclusion from benefits for
those who do not pay for the right to receive such
benefits.
a) Pure private goods
b) Price-excludable public goods
c) Congestible public goods
d)Pure public goods
25……….are goods can be individually consumed and are subject
to exclusion, but their production or consumption is likely to
generate externalities.
a) Pure private goods
b) Price-excludable public goods
c) Congestible public goods
d) Pure public goods
26………..Are non-rival in consumption only up to a certain point,
the goods become at least partially rival in consumption.
a) Pure private goods
b) Price-excludable public goods
c) Congestible public goods
d) Pure public goods
27……….a goods are collectively consumed benefits that
are not subject to crowding and are subject to high-cost
exclusion.
a) Pure private goods
b) Price-excludable public goods
c) Congestible public goods
d) Pure public goods
28……….. are price – excludable goods.
a) public hospitals
b) Clothes
c) Roads
d) National defense
29……………..are pure public goods.
a) public hospitals
b) Clothes
c) Roads
d) National defense
30…………are Congestible public goods.
a) Private hospitals
b) Fishes
c) Public parks
d) National defense
31……………..are pure private goods.
a) Private hospitals
b) Clothes
c) Security
d) National defense
32-The demand curve for a pure public good is obtained
by…………
a) D= σ 𝑃
b) D= σ 𝑄𝐷
c) D= σ 𝑄𝑠
d) D= σ 𝑀𝐵𝑖
33-The demand curve for a pure private good
is obtained by…………
a)D= σ 𝑃
b)D= σ 𝑄𝐷
c)D= σ 𝑄𝑠
d)D= σ 𝑀𝐵𝑖
34-Efficient output of a pure public good occurs
when………
a) Sum of marginal social benefit is equated with
marginal social cost.
b)Price is equated to quantities
c) 𝑀𝑆𝐵 = σ 𝑄𝑑 = 𝑃
d) a , c together
 Question 2: Mark True or False:-
1. Government constitutes the rules and generally accepted
procedures that evolve in a community for determining what
government does and how government outlays are financed. f
2. Private goods and services are those items, such as food and
clothing that are usually made available for sale in markets. t
3. The trade-off between government and private goods and
services can be illustrated with the familiar demand curve. f
4. The public sector coexists without the private sector, the state
strongly influences the private sector through various restrictive
measures (One of its control tools is public finance). f
5. An increase in the amount of government goods and services
provided per year requires an increasing in the amount of
private goods available per year. f
• 6- When individuals demand more environmental
protection services. To make these services available,
governments might raise taxes paid by firms that pollute the
air or water. t
• 7- The reason for developing public funding is to soften the
drawbacks resulting from economic decisions made by
individual entities. t
• 8- The state uses several tools to perform the stabilization
function (Microeconomic failure) -- The basic classification is
a division into monetary and fiscal tools. f
• 9- The causes of market failure (income inequality) relate to
reaching fairness in society through the distribution of
wealth and income. t
• 10- Public finance is the field of economics that studies the
alternative means of financing market expenditures. f
11-The government allocates the budget for infrastructural
development in rural areas and direct economic benefits to the
rural people. t
12-The government promotes the export providing subsidies to
the export oriented goods. t
13-During deflation government reduces the indirect taxes and
genera expenditures but increases direct taxes and capital
expenditure. f
14-Public finance is important to achieve sustainable high
economic growth rate. t
15-In case of absolute equality, the Lorenz curve is diagonal
(and the Gini coefficient equals 1. f
• 16- The formula for Gini coefficient is as follows:
G=B/(A+B) t
• 17- G is a dimensionless number that may have
values within the interval of ˂0;1˃, where zero
means absolute equality and G = 1 means absolute
inequality. t
• 18- Microeconomic failure is indicated by instability
in the economic system that usually suffers from
cyclical inflation, a high rate of unemployment. f
• 19- The institutions and organizations of the public
sector funded by public funds. t
• 20- The most well-known tools to measure income
inequality are the Lorenz curve, and marginal benefit
coefficient. f
21-Public Goods are Goods with benefits that can be
withheld from those who do not pay.f
22-The marginal cost of allowing additional people to
consume a given amount of a good with non-rival benefits
is positive. f
23-The benefits of national defense services are non-
rival.t
24-Full indivisibility means that every consumer
consumes the same amount, whereas total consumption
does not equal the sum of their partial consumptions. t
25-In Full Indivisibility Goods The relationship between
total consumption and the consumption of particular users
can be defined as follows: 𝒀𝒈 = 𝑿𝒈𝟏 + 𝑿𝒈𝒊 + ⋯ + 𝑿𝒈𝒏 t
26-Goods that are rival in consumption are called private
goods. t
27-In Full Indivisibility Goods The relationship between total
consumption and the consumption of particular users can be
𝒏 𝒌𝒊
defined as follows: 𝒀𝒌 = σ𝒊=𝟏 𝑿 f
28-It is feasible to exclude those who refuse to pay for cleaner
air from enjoying the benefits of a given amount of air quality
improvement. f
29-The marginal cost of producing additional units of the
public good will be positive. t
30-The marginal costs of accommodating an additional
consumer will be zero for a given quantity of a pure public
good. t
31- Pure public goods, which are indivisible in
consumption, are in fact externalities. t
32-An additional user of a congested road increases the
benefits to existing users by slowing down traffic. f
33-Pure private goods might be sold in markets either by
private firms or government.t
34-Public hospital is an example of price-excludable
public good. t
35-The production or consumption of price-excludable
public goods can be subsidized to account for the positive
externality associated with their sale. t
36-Clothes, house are examples of Pure public goods. f
37- Examples on Privately supplied Congestible public
goods include clubs, theaters, and sporting events. t
38- Congestible public goods are goods collectively
consumed benefits and are not subject to crowding. f
39-Pure private goods distributed free of direct charge by
governments. f
40-The demand curve for a pure private good is obtained
by summing the individual marginal benefits at each
quantity. f
41-The market demand curve for the Pure private good is
labeled D= σ 𝑀𝐵 f
42-A point on any public good individual demand curves
represents the maximum amount that the consumer would
pay to get each unit of the corresponding quantity of the
public good. t
43-Efficient Output for a pure Public Good occurs when
MSB = σ Qd = MSC f
44-Public parks are an example of Government-supplied
congestible public goods. t
45-Congestible public goods, in some cases, are also
price-excludable public goods. t