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Eae 201 Economics Of Public Expediture Question Paper

Eae 201 Economics Of Public Expediture

Course:Bachelor Of Economics

Institution: Kenyatta University question papers

Exam Year:2010

KENYATTA UNIVERSITY
UNIVERSITY EXAMINATION 2010/2011
FIRST SEMESTER EXAMINATION FOR THE DEGREE OF BACHELOR OF
ECONOMICS
EAE 201: ECONOMICS OF PUBLIC EXPENDITURE
Instructions: Answer Question One and Any Other Two Questions

Question one[compulsory]

(a) Explain the meaning of the following concepts

(i) Externality
(ii) Public good
(iii) Median voter
(iv) Free rider problem
(v) Federalism

(b) Consider community consiting of 20 households who depend on a common well for its supply of water. Clean up and chemical treatment is required to ensure safety of water from the well.The maginal benefits to each household from clean up and treatment is given by the equation MBx=100-4x. If the marginal clean up and treatment cost is 100+20x (x represent the number of clean ups per year)

(i)Determine the social optimal number of clean ups and chemical treatments per year.

(ii) Compute the net social welfare benefit to each household if the households share the cost of clean ups and traetment.

Question Two

(a) Describe the functions of government.
(b) With reference to the public expenditure growth theories explain the sources of public
expenditure growth in developing countries.

Question Three

(a) With use of relevant diagrams explain how externalities leads to alocative
inefficiency.
(b) Explain the corrective mechanisms for externalities.

Question Four

(a) Using your country examples, explain the sources of market failure.
(b) Explain the advantages of marginal cost pricing.

Question Five

(a) What are the advantages of federalism over centralism
(b) The government of Kenya is considering construction of a hospital in a very remote
area. Using benefit incidence analysis, explain the effects of such expenditure in
terms of income distribution and poverty eradication in the country.

Eae 201 Economics Of Public Expediture Question Paper

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