INSTRUCTOR’S MANUAL:
FISCAL ADMINISTRATION, ANALYSIS AND APPLICATIONS FOR THE
PUBLIC SECTOR
JOHN L. MIKESELL
INDIANA UNIVERSITY
EIGHTH EDITION
1
,This instructor’s manual provides answers to most of the end of chapter questions and
exercises and provides multiple choice examination questions for each chapter. The
examination questions have been tested by application to classes at Indiana University
and all seem to have unintended complications removed. All the questions are intended
to have a single correct answer.
I have benefited from the work of my graduate assistant Melissa Neuman who did the
first cut at calculations and made sure the multiple choice questions made sense.
John L. Mikesell
Bloomington, Indiana
2
,Chapter One
Questions and Exercises
1.
a. Yes. Total project benefits (2,700) exceed total project cost (2,500).
b. No. Residents C, D, and E received less individual benefit than their
assigned costs.
c. No. Residents C, D, and E are harmed.
d. Revise cost shares so that Residents A and B pay more and reduce cost
shares borne by C, D, and E. For example, if A and B paid 741, C paid
278, D paid 324, and E paid 416, all would be receiving greater individual
benefit than their individual cost.
3. Many of the benefits of primary and secondary education are public or social
(external to the recipient of the education). The entity paying for the service is
not able to capture the full benefit of the service.
4. No – the bread is rival and exhaustible.
Examination Questions
1. Which of the following arguments is based on the concept of adverse selection?
a. The U.S. Military needs higher pay to attract the best personnel.
b. Private medical insurance companies seek to exclude those most likely to need
healthcare.
c. Only the national government can successfully conduct macroeconomic
stabilization policies.
d. Mosquito abatement is a public good.
2. Second hand smoke, car exhaust, and manufacturing emissions are all examples of…
a. Externalities.
b. Internal effects.
c. Natural monopolies.
d. Toll goods.
3. Which of the following would be described as a common pool resource?
a. A can of soda
b. An aquifer
c. National defense
3
, d. A movie theatre
4. Which of the following is an application of the principle of moral hazard?
a. People build homes in areas subject to severe flood damage when federally-
subsidized insurance is available.
b. Inappropriate lyrics are available for downloading through the Internet when
regulations are not enforced.
c. Actions by one individual have an impact on innocent bystanders.
d. None of the above.
5. Which pair of goods is subject to exhaustion as defined in the theory of public goods?
a. Private goods and toll goods.
b. Common pool resources and public goods.
c. Toll goods and public goods.
d. Private goods and common pool resources.
6. You are at Memorial Stadium for a football game. Unfortunately, there are many
empty seats because your team isn’t very good and neither is its opponent. As you
watch the game you are eating a hot dog. Which of the following is a correct
statement?
a. Both the hot dog and the game are private goods.
b. Both are public goods.
c. The hot dog is a private good and the game is a common pool resource.
d. The hot dog is a private good and the game is a toll good.
The following two paragraphs come from a New York Times story:
The Wal-Mart work force reflects a growing fear of many employers that the people
who work for them are increasingly at risk for health problems. Many of Wal-Mart’s
employees are obese, the company says, and a result is rapidly raising numbers of
cases of diabetes or heart disease. The prevalence of these diseases among Wal-Mart
employees is increasing much faster than the national average, it says.
“The low-income population generally is not as healthy and does not engage as much
in preventive care,” said Diane Rowland, executive director of the Kaiser
Commission on Medicaid and the Uninsured. A risk that a company like Wal-Mart
faces, especially when it competes with smaller retailers that offer no insurance at all,
Ms. Rowland said, is attracting too many workers who want the job primarily for the
health coverage.
4
FISCAL ADMINISTRATION, ANALYSIS AND APPLICATIONS FOR THE
PUBLIC SECTOR
JOHN L. MIKESELL
INDIANA UNIVERSITY
EIGHTH EDITION
1
,This instructor’s manual provides answers to most of the end of chapter questions and
exercises and provides multiple choice examination questions for each chapter. The
examination questions have been tested by application to classes at Indiana University
and all seem to have unintended complications removed. All the questions are intended
to have a single correct answer.
I have benefited from the work of my graduate assistant Melissa Neuman who did the
first cut at calculations and made sure the multiple choice questions made sense.
John L. Mikesell
Bloomington, Indiana
2
,Chapter One
Questions and Exercises
1.
a. Yes. Total project benefits (2,700) exceed total project cost (2,500).
b. No. Residents C, D, and E received less individual benefit than their
assigned costs.
c. No. Residents C, D, and E are harmed.
d. Revise cost shares so that Residents A and B pay more and reduce cost
shares borne by C, D, and E. For example, if A and B paid 741, C paid
278, D paid 324, and E paid 416, all would be receiving greater individual
benefit than their individual cost.
3. Many of the benefits of primary and secondary education are public or social
(external to the recipient of the education). The entity paying for the service is
not able to capture the full benefit of the service.
4. No – the bread is rival and exhaustible.
Examination Questions
1. Which of the following arguments is based on the concept of adverse selection?
a. The U.S. Military needs higher pay to attract the best personnel.
b. Private medical insurance companies seek to exclude those most likely to need
healthcare.
c. Only the national government can successfully conduct macroeconomic
stabilization policies.
d. Mosquito abatement is a public good.
2. Second hand smoke, car exhaust, and manufacturing emissions are all examples of…
a. Externalities.
b. Internal effects.
c. Natural monopolies.
d. Toll goods.
3. Which of the following would be described as a common pool resource?
a. A can of soda
b. An aquifer
c. National defense
3
, d. A movie theatre
4. Which of the following is an application of the principle of moral hazard?
a. People build homes in areas subject to severe flood damage when federally-
subsidized insurance is available.
b. Inappropriate lyrics are available for downloading through the Internet when
regulations are not enforced.
c. Actions by one individual have an impact on innocent bystanders.
d. None of the above.
5. Which pair of goods is subject to exhaustion as defined in the theory of public goods?
a. Private goods and toll goods.
b. Common pool resources and public goods.
c. Toll goods and public goods.
d. Private goods and common pool resources.
6. You are at Memorial Stadium for a football game. Unfortunately, there are many
empty seats because your team isn’t very good and neither is its opponent. As you
watch the game you are eating a hot dog. Which of the following is a correct
statement?
a. Both the hot dog and the game are private goods.
b. Both are public goods.
c. The hot dog is a private good and the game is a common pool resource.
d. The hot dog is a private good and the game is a toll good.
The following two paragraphs come from a New York Times story:
The Wal-Mart work force reflects a growing fear of many employers that the people
who work for them are increasingly at risk for health problems. Many of Wal-Mart’s
employees are obese, the company says, and a result is rapidly raising numbers of
cases of diabetes or heart disease. The prevalence of these diseases among Wal-Mart
employees is increasing much faster than the national average, it says.
“The low-income population generally is not as healthy and does not engage as much
in preventive care,” said Diane Rowland, executive director of the Kaiser
Commission on Medicaid and the Uninsured. A risk that a company like Wal-Mart
faces, especially when it competes with smaller retailers that offer no insurance at all,
Ms. Rowland said, is attracting too many workers who want the job primarily for the
health coverage.
4
