CÂU HỎI LÝ THUYẾT TÀI CHÍNH CÔNG
CÂU HỎI LÝ THUYẾT TÀI CHÍNH CÔNG
CÂU HỎI LÝ THUYẾT TÀI CHÍNH CÔNG
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effectiveness of one treatment compared with another to the problem faced by economists in
determining the impact of economic policies.
+ The problem that medical researchers face in determining the effectiveness of one treatment
compared to another is that it is easy to test different treatments for the same disease, and which
treatment is better can be tested over a short period of time. As for the problem that economists
face when determining the impact of economic policies, it takes a long time and is risky to test
over an economic cycle.
Question 5. In the 1970s, researchers at the RAND Corporation conducted a social experiment to
study the relationship between health insurance coverage (purchase) and health care utilization. In the
experiment, a group of people were encouraged to exchange their regular insurance policies for new
RAND policies that had different coinsurance rates (i.e., new policies under which different rates of
health care costs would be paid by the insurance company). In 1993, the Clinton administration used
the results of the RAND experiment to predict how health care utilization might increase if coverage
were expanded. What problems might arise if the results of social research were used to predict the
impact of nationwide coverage?
In 1993, the Clinton administration used the results of the Rand experiment to predict how health
care utilization might increase if insurance coverage were widely implemented. The problem that
could arise if the results of social research were used to predict the impact of nationwide coverage
is that the RAND New Deal social experiment was only applied to a small group of people. If the
results of the social experiment were applied widely, the actual results of each region would not
follow the same trend as the experimental results. Because each region has different socioeconomic
conditions and living standards, or the experimental group may not be representative of the whole
multiracial and geographically diverse society like the United States.
Question 6. Each student chooses a case study using an empirical method (Social Test, Interview &
Econometrics or a combination of methods) to evaluate public finance policies (spending, tax/fee
collection and borrowing…)
Social test:
For example, design an online or paper survey of people's opinions on public spending policies in
their area. The survey might ask about their satisfaction with the current use of public funds and
their views on future spending, while considering different government priorities.
Interview:
For example, interviews could be conducted with a number of public finance officials to gain a
more detailed understanding of the public budgeting process and how they evaluate the
effectiveness of expenditures. Questions could be asked about tax collection mechanisms, priority
issues in the budget, and barriers that need to be overcome to achieve the government's objectives.
Econometrics:
For example, economic and social data can be used to assess the impact of government spending,
taxes/fees or borrowing on the economy and on people's welfare. For example, you can compare
the rate of economic growth after a government implements a new borrowing policy with previous
years or find out the impact of raising taxes to the highest possible level on reducing consumption
from people.
Combination of methods:
For example, you might design a survey to collect public opinions on a policy and then use
econometric methods to analyze the results. Or, you might use interviews to cross-reference
information with economic and social data to assess the feasibility of public finance policies.
CHAPTER 3: PUBLIC GOODS
DISCUSSION QUESTIONS
Question 1: Consider the characteristics of public goods. What are the characteristics of
loudspeakers and highways?
Public goods have two characteristics:
+ Non-rivalry: An individual can consume a good without reducing the availability or benefits of
that good to other consumers.
+ Non-excludability: Cannot prevent others from consuming or receiving the benefits of the
goods.
Radio: Only those who have a radio device can listen to the radio, so the radio is a non-pure
public good, with non-rival characteristics, because one individual often consumes the good
without reducing the presence or benefits of listening to the radio for other listeners.
Highways are not pure public goods because they are goods of common consumption, used
by many people and not contested.
Question 2: Distinguish between pure public goods, limited public goods and priceable public goods.
There is competition.
Can be excluded
These are products or services These are products or services
produced or provided by produced or provided by state
Non-rival
Non-exclusive government agencies, but are agencies, which can be priced
limited in quantity or scope of based on cost or market price.
For example, railways, roads, use. For example, vaccines, For example, gasoline,
electricity, water, etc. Pure public antidotes, etc. These goods are electricity, water, etc. These
commercial and sold on the goods are commercial, sold on
goods are non-commercial,
the market and make a profit,
cannot be sold and do not market, but there are limitations
but the price is regulated by
generate profit. in production and distribution.
state agencies or adjusted to
ensure fairness and
compliance with legal
regulations.
Question 3: Are radio waves and highways public goods? Is watching the international fireworks
display in Da Nang a public good? Why do people still pay to watch fireworks?
Radio waves and highways are public goods because they have characteristics that benefit an
individual or group, everyone can use them without reducing the presence of Radio waves and
highways for others. And they do not have to pay, cost to use it. Moreover, they cannot prevent
others from using its benefits.
Watching fireworks in Da Nang is considered a public good, in which the shooter is only limited
to a certain number of times without having to pay a fee, so there are still people who pay to
watch fireworks because they want to reach their ultimate satisfaction.
Question 4. Please classify the following goods and services: Public goods? Private goods? Why? a.
Wastelands; b. Prisons; c. Medical school education; d. Public TV programs; e. Internet website
providing information about airline schedules; f. Urban water supply.
Public goods: Wastelands, prisons, medical school education (pure), public television programs
(pure), Internet web sites providing information about airline schedules.
Private Goods: Urban Water Supply.
Question 5. What are non-excludable goods? There is a view that the private sector produces few non-
excludable goods. Please comment on this issue.
Non-excludable goods are goods or services that cannot be prevented from being consumed by a
consumer without paying for them or participating in the production process. This means that
once one person has used or consumed the good, another person can also use or consume the
good without reducing the utility of the first user.
It is true that the private sector produces fewer non-excludable goods. The reason is that private
enterprises mainly want to make profits for themselves, if they produce non-excludable goods, it
will lead to the phenomenon of "free riding", meaning that some people use the common public
benefit but do not contribute to the cost with others, leading to a decrease in the company's
revenue and affecting other consumers. Therefore, private enterprises produce fewer non-
excludable goods than public or international enterprises.
However, this view has some limitations. Some products are not excludable but are produced by
private enterprises. Examples include open source software products, music and videos shared on
the Internet. In addition, there are also private enterprises that produce highly excludable products
(such as cars) but contribute to reducing environmental pollution or improving people's quality of
life.
Therefore, it cannot be affirmed that the private sector produces few non-excludable goods is
completely right or wrong, this depends on each specific case.
Examples of nonexcludable goods might include air in public spaces, parks, online materials, and
public media channels.
Question 6. What are the measures for the government to influence the provision and use of public
goods?
1. Promote the participation of the non-state sector in the provision of public goods
By transferring the provision of public goods to the private sector, the state can use competition
between service providers to obtain the most efficient service provider. Therefore, promoting
competition in service provision between the public and private sectors is a goal that many
countries are aiming for in order to improve the quality of service provision. Using the market to
provide competitive services will reduce costs and improve service quality, share the burden of the
state and move towards building a cooperative relationship between the state and the market.
Thus, in promoting competition, the state's activities are not simply regulating but also
encouraging and creating market incentives. The government creates a level playing field for all
entities capable of providing public services to create healthy competition between service
providers and consumers of public services who have the right to freely choose service providers.
Competition has forced service providers to constantly innovate and that benefits both the people,
the state and service providers.
2. Improve the quality of public goods provision in state services
An important issue that needs to be noted first in order to improve the quality of services in the
public sector is the human factor. Many countries have focused on many measures to improve the
professional capacity of civil servants through improving personnel work and encouraging the
participation of civil servants and management activities, enhancing the rights and personal
responsibilities of the recruitment and promotion methods based on the qualities that the state
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uses, which has made the civil service apparatus have a high-quality staff force. In addition to
improving the professional capacity of the civil servants directly implementing the provision of
public goods, special attention should be paid to improving the ethical quality of customer service.
Experience from many countries shows that a civil servant who is conscious in his work and has a
dedicated attitude towards serving customers will have a significantly increased work efficiency.
3. Strengthen community participation in policy making and ensure public service quality
This participation process is manifested in many different ways, from self-consultation,
information exchange, to direct citizen participation, proactively proposing initiatives or giving
suggestions and policies. Especially in places where the provision of goods is ineffective, people
can inform the authorities at all levels about this issue and pressure them to improve. Therefore,
public agencies are forced to be more responsible in listening to the voices of the people and
responding promptly and fully to those requests. This feedback mechanism helps two-way
information to be shared and shared. Through this, people and service providers have the
opportunity to evaluate and exchange opinions to improve the quality of services.
Question 7. What is your view on charging for the use of purely public goods?
There is a view that charging for the use of pure public goods is a way to finance the production
and supply of public goods effectively and ensure the sustainability of public goods projects. This
charging can also be a way to control the use of public goods, especially in cases where resources
are overused or not protected. On the contrary, the consequence of charging will be to discourage
individuals from using those public goods and lead to those goods not being fully exploited,
reducing social welfare. Therefore, charging for use is still not advisable, the cost of paying for
public goods must be based on the community awareness and generosity of users.
Question 8. The city government plans to build a pedestrian street. The benefits given to convince
residents to agree to this project are: (1) more people will walk, (2) less traffic jams, and (3) 15 jobs
will be created. Do you agree with this opinion?
Question 9. Explain why the provision and use of public goods can be subject to free-riding? There is
an opinion that: “The State does better than the private sector in providing public goods”. Do you
agree with that opinion? Why?
Free riding or “free riders” occurs because public goods are non-rival and non-excludable, so
everyone can use them. These people enjoy the benefits of public goods without participating in
the costs necessary to provide the goods or bearing the costs less than the benefits they receive.
Also because their use of public goods is not hindered by anyone and the cost to consumers is
usually zero, this situation arises.
I agree with the above opinion because the goal of the private sector is to seek profit, create added
value for the organization, and providing public goods to make profit is very difficult. If public
goods are provided by the private sector, they do not have enough tools and sanctions to force
users to pay. For that reason, the private sector is often not interested in the fields of operation in
the public sector, whose products are often provided to society as public goods, although the laws
of those countries still recognize and encourage private sector enterprises to have the right to
invest and provide. Therefore, the public sector must play the role of providing public goods and
collecting contributions through taxes.
Question 10. People in Da Nang city usually contribute to build 120km of road in 1 year. After the
city government spent its own money to build 100km of road each year, people reduced their
contribution to 30km. What happened? Explain?
Question 11. Give an example of free riding in your locality. What has the local government done to
address this problem?
An example of a non-paying beneficiary at the local level would be people who use parks, sports
facilities and other public amenities for no or very low fees, and who do not contribute to the
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construction of public facilities. This results in overuse and causes local governments to spend
more on maintenance, cleaning and upkeep of these facilities.
To address this problem, local governments can impose measures such as charging fees to enter
these areas, increasing the price of admission to parks and sports facilities, or creating restrictions
on the use of public facilities. In addition, governments can also invest in education and advocacy
campaigns to increase public awareness of the importance of paying fees to maintain public
facilities.
Question 12. The government has proposed that private enterprises manage a part of the national
highway through some provinces, be allowed to collect tolls and use that money to repair and
maintain the road. Do you think privatization in highway management is a reasonable idea?
The proposal to privatize the management of part of the national highways can be considered a
reasonable idea for the following reasons:
+ Reduce financial pressure on the state budget: Managing and maintaining a large number of
national highways will cost the state budget a lot of money. Therefore, sharing some of these costs
with private enterprises can reduce financial pressure on the state budget.
+ Improve the quality and efficiency of management, create conditions for the private sector: Private
enterprises have experience in managing and operating infrastructure. Hiring private companies to
manage and maintain national highways can improve the quality and efficiency of their management.
+ Increase competitiveness and investment capacity: Allowing private enterprises to manage national
highways can create competition among them, increase investment capacity and promote economic
development.
+ Reduce the phenomenon of “free riders”: Road users will have to pay a surcharge to fund road
maintenance, reducing the situation of beneficiaries not contributing.
Question 13. List the types of pure public goods and impure public goods. In your opinion, which
public goods can be transferred to the private sector for efficient provision? Explain.
+ Pure public goods:
Defense goods, national security protection.
Public services such as recreation, education, public health, roads, public transportation, fire
protection, disaster prevention, and public administrative services.
+ Non-pure public goods:
Goods produced from natural resources such as electricity, water, gas, petrol...
Public services are provided under contract such as: hospitals, schools, garbage collection,
environmental sanitation, quality testing...
CHAPTER 4: EXTERNALITIES AND GOVERNMENT EXTERNAL POLICIES
Question 1. Can an action create both positive and negative externalities? Explain?
An action can create both positive and negative externalities because it affects many different
subjects, and many of those subjects have different purposes, so for one subject it is positive
but for another it can be a negative externality. For example: building a factory to produce
electricity can help meet the increasing demand for energy, but it causes environmental
pollution and affects human health. Or for example, Mr. A uses pesticides to kill insects,
creating a positive externality of killing insects, but the pesticides fly to Mr. B's field and seep
into the water, leading to the fish pond of person B raising fish, which is negatively affected.
Question 2. What measures does the Government use to influence positive externalities? Negative
externalities?
+ Negative externalities:
Taxation - Pigouvian tax: is a tax levied on each unit of output of the firm causing negative
externalities, so that it is exactly equal to the marginal external cost at the socially optimal
output level. It is difficult to determine the tax rate, then switch to indirect taxation. (Excise
tax)
Subsidies: In the condition that the number of people causing negative externalities is fixed,
subsidies can be given to reduce the level of negative externalities. Apply restrictions
(sedentarization).
Creating a market (for environmental pollution): auctioning pollution permits, also known as
discharge permits.
Set regulations and sanctions: each polluting company will be required to only pollute at a
certain level, called the emission standard, or else it will be forced to close.
+ Positive externalities:
Subsidies: Subsidies can create a tax burden
Sponsor and encourage businesses and organizations to create positive externalities
For example, governments have often subsidized positive externalities by providing certain public
services at prices below the marginal cost of providing them. For example, many municipal waste
collection companies collect municipal waste, but residents pay a sanitation fee that is lower than
the actual cost of operating the waste collection system. The difference is covered by the
government – a form of subsidy to reduce the accumulation of waste that causes public
unsightliness. However, when governments intend to subsidize positive externalities, there are a
few points to keep in mind: In one way or another, subsidies create additional burdens for
taxpayers. Therefore, providing subsidies creates a redistribution from taxpayers to recipients.
Therefore, both efficiency and social equity impacts need to be considered.
Question 3. Can the government grant property rights to internalize the externality? Compare this
solution with direct government intervention.
There will probably always be “free riders.”
The government grants ownership rights but those individuals and businesses do not have
strong enough sanctions.
Question 4. Give examples of negative and positive externalities in public projects. Describe the
externalities of a specific project and how to measure externalities. Evaluate the effectiveness of a
specific public policy through learned theories, described through graphs.
*Examples of negative and positive externalities in public projects:
+ Negative externalities:
Impact on the environment, such as exploitation of natural resources, ecological destruction
and environmental pollution.
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Impacts on local communities, such as reducing farmers' land area or causing noise and dust
to people living near roads.
+ Positive externalities:
Improve traffic conditions, making travel between the two cities more convenient, reducing
traffic jams and traffic accidents.
Create opportunities for local businesses to grow, such as freight transport and tourism-
related services.
Question 5. For each of the following cases, which case can the Coase Theorem be applied? Why and
why not?
a. A group of college students in a dormitory share a communal kitchen. Some students never
clean up after they cook. Not applicable, because the CP cannot grant a license to the students to
use the kitchen because the students are just tenants, and may not stay long-term.
b. In the Vermont lake area, high-speed motorboats cause discomfort to swimmers and boaters.
Applicable, because CP can transfer ownership of this lake area to a resident for management,
limiting negative factors.
c. In Washington State, many farmers burn their fields to clear stubble for the upcoming planting
season. Residents in nearby cities complain about pollution.
Not applicable, as there is nothing to assign ownership to.
Measures: make regulations, conventions, and rules
d. Internet users generally incur zero costs to transmit information. The result is congestion and user
frustration due to delays. Applicable, because the government assigns ownership of the internet
connection to individual households.
CHAPTER 6: TAXES
DISCUSSION QUESTIONS
Question 1. Analyze the nominal tax burden and the real tax burden in the following cases:
taxes in Vietnam.
In taxes in Vietnam, they are often divided into two types: nominal tax burden and actual tax
burden.
1. Nominal tax burden
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Is the amount calculated based on the tax rate prescribed by law for each unit or individual
with tax payment obligation.
This is the amount determined before the tax payment is made.
For example, a value-added tax (VAT) at a rate of 10%, where the nominal tax burden is 10%
of the value of the product or service.
2. Actual tax burden
The actual amount payable after deducting tax reductions, tax exemptions, tax credits or
other supports.
This is the actual amount payable after recalculation.
For example: Personal income tax (PIT) for civil servants and public employees with specific
deductions, after deductions, the actual tax rate will be obtained.
Question 2. Give an example to prove: Discriminatory tax on a type of goods and services
services have an effect on non-taxable goods and services. Is this effect positive or negative in the
sense of Pareto efficiency?
An example of differential taxation of a single good or service could be taxation of
cryptocurrencies such as Bitcoin or other digital currencies. In this case, taxing only
cryptocurrency transactions would affect the attractiveness of these transactions compared to
other means of payment such as cash or credit cards.
The impact of differential taxation on cryptocurrency transactions could be positive if the income
from these transactions is used to reinvest or develop new technology in the cryptocurrency sector.
However, this unfair and biased taxation could also cause a negative Pareto effect because it would
cause cryptocurrency users to switch to other means of payment to avoid taxation. This would
reduce the popularity of cryptocurrency and affect the revenue of companies in this sector.
Question 3. In which cases does the state tax increase not affect the economy?
affect supply output? Use graph to prove? Should the government then continue to increase taxes to
increase budget revenue? Why?
Case: is when the demand of the product is not met by the change in price. This means that
consumers will buy the product at a higher price without caring about the increased cost due to
the tax increase. At this time, the government should not increase taxes to collect revenue because
increasing taxes can lead to a decrease in supply and thus reduce the total tax revenue of the
government.
Question 4. Explain how individual behavior is influenced by characteristics.
following of the tax law:
a- Charitable donations are deductible from taxable income.
This feature of the tax law may lead to individual behavior of supporting and participating in
charitable activities to minimize the amount of tax payable. People who are inclined to minimize
the amount of tax payable may use financial donations to charitable activities as a way to
minimize their taxable income.
b- Beer is subject to special consumption tax
This tax may result in reduced beer consumption by some individuals, particularly those with
lower incomes. Consumers may switch to other beverages or reduce the amount of beer they
consume to avoid the significant tax cost. However, higher income consumers may not be
significantly impacted by the tax cost and will continue to consume beer as usual.
c- Interest on borrowed capital is taxable
This tax law feature may lead to careful consideration before borrowing money to avoid higher
taxes. Those planning to borrow money can use tax-related information to calculate the amount
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of tax expense and its impact on the debt they will repay. They may consider reducing the amount
of the loan or looking for other solutions such as increasing their income to deal with this tax
expense.
Question 5. Propose a tax/subsidy policy for a type of externality in Vietnam.
The type of externality referred to is environmental pollution from industrial production activities.
1. Tax Policy: For domestic and foreign enterprises that cause environmental pollution in
Vietnam, we propose to impose an environmental tax. The tax will be calculated based on the
amount of emissions, waste, water and soil pollution, and will be calculated as a percentage
of the value of the product. Enterprises can save on tax costs by investing in greener
technologies and reducing pollution.
2. Subsidy Policy: We propose financial support for domestic enterprises developing
environmental treatment technologies and renewable solutions. Subsidies may include both
capital investment and tax reduction. Enterprises that already have modern environmental
treatment technologies will be exempted from environmental taxes.
In summary, our proposed tax/subsidy policy will encourage domestic and international
enterprises to invest in greener technologies to reduce environmental pollution externalities in
Vietnam. At the same time, this policy also helps protect the environment and health of
Vietnamese people.
Question 6. One reason for imposing a tax on alcohol consumption is that people who drink alcohol
create negative impacts on the rest of society - for example through
disorderly behavior or drunk driving. If this reasoning is correct, without government taxes, would
people tend to consume too much, too little, or the right amount of alcohol?
The above rationale for imposing a tax on alcohol consumption is correct and well-founded.
Without government taxes, people could consume too much alcohol without worrying about the
price or the negative consequences of excessive drinking. However, this depends on the individual
and the specific situation. For those who love alcohol, imposing a tax will only increase the price
of alcohol and affect their personal budget, but will not necessarily make them consume less. On
the other hand, those who do not care about the price of alcohol or are unaware of the negative
effects of excessive drinking may consume too much alcohol, leading to unfortunate consequences
for themselves and society.
Question 7. What is a good tax system?
1. Fairness: The tax system should be designed to distribute the burden heavily towards those with
higher incomes, while minimizing the tax burden on those with lower incomes.
2. Efficiency: The tax system should be designed so that the taxes collected are sufficient to meet
government objectives, but not too burdensome for citizens and businesses.
3. Simplicity: The tax system should be simple and clear, easy to understand and easy to implement to
avoid inconvenience and cost to taxpayers.
4. Encouraging economic activity: The tax system should be designed to encourage economic activity
and encourage investment, as well as maintain economic competitiveness and growth.
5. Flexibility: The tax system should be flexible enough to adapt to changes in the economy and other
public policies.
6. Transparency: The tax system must be designed based on a clear strategic direction for a relatively
long period of time regarding the collection rate, clearly showing the policy of encouraging or
restricting certain sectors and fields and must be specified.
7. International practice and competitiveness: International practice reflects the degree of
correspondence with the tax systems of other countries in the world. International competitiveness is
reflected by the comparative tax advantage in attracting international resources compared to other
countries.
Question 8. Why is it said that studying the additional burden in the overall equilibrium makes the
tax picture less “ugly”? Give some examples.
Question 9. One of the characteristics of special goods and services is that their demand is less
sensitive to price. Does Ramsey's rule suggest that we should tax these special goods and services
high or low? Explain why?
Ramsey's rule suggests that goods with lower price elasticity should be taxed more. This applies to
both physical goods and services.
However, in the case of special goods and services, setting tax rates based on price sensitivity is
not the best option. Since the demand for these services is less price sensitive, high taxes will not
reduce the demand for them, but will only make them pay more. This will adversely affect people's
comfort and may reduce the demand for these services.
Question 10. Considering the local environment, indicate the scope of tax impact in
the following cases:
a. The Ministry of Finance decided to increase the price of imported A95 gasoline by 2,000
VND/liter. Suppose the market
International gasoline market, no import quotas applied.
b. The Ministry of Labor requires businesses to increase the rate of health insurance contributions
for employees.
from 2% to 5%.
c. The government decided to increase taxes on resort villas in the area.
The impact of the tax increase on imported A95 gasoline will be concentrated on consumers in
the domestic market. Those who use imported A95 gasoline will have to pay more to buy gasoline,
which may lead to a switch to other fuels or a decrease in the consumption of imported A95
gasoline.
Health insurance taxes are calculated based on a percentage of an employee's income, so the scope
of the tax will affect both employees and businesses. Employees will have to pay more for health
insurance from the income they receive, while businesses will have to pay more for health
insurance for their employees.
Increasing taxes on vacation homes only affects those who own and use these homes. These people
will have to pay more in taxes to use and own these homes, which may lead to some people no
longer being able to afford to own or maintain their vacation homes.
Question 4: What are public goods? How many types of public goods are there, and give examples?
Explain in your own words which of the following goods are public goods (if they are public goods,
are they pure or impure public goods): (a) Lo Te - Rach Soi Expressway; (b) Vung Tau Lighthouse;
(c) Viettel ADSL line to people's homes; (d) Tickets to Suoi Tien tourist area; (e) Current Covid-19
vaccination in Vietnam; (f) Reading news online.
Public goods are: goods that have two properties: non-rivalry and non-excludability.
There are two types of public goods:
+ Pure public goods: Are goods that consumers can use for free and do not affect the use of
others. They have both non-rivalry and non-excludability properties. For example: street lights,
sky, public buildings,...
+ Impure public goods: Are goods whose use by one person can reduce the ability of another
person to use. However, these goods cannot be excluded. (Only one of the two goods above).
Example: Highways..
Pure public goods: (a) Lo Te - Rach Soi Expressway (b) Lighthouse in Vung Tau
Impure public goods: e, f
Question 5: What are externalities? (a) Give 3 examples of positive externalities and 3 examples of
negative externalities; (b) Are there any cases where an action causes both positive and negative
externalities? Give an example to illustrate (c) To produce at socially optimal efficiency, how should a
producer produce when there are positive or negative externalities or both occurring in the production
process?
Answer: - When the activities of one entity (individual or business) directly affect the interests of
another entity in a way that does not go through market prices, economists call that impact an
externality.
(a) Positive externality: - Teachers who have been vaccinated against the flu will reduce the
probability of students getting the flu.
Building and operating an airport would benefit local businesses, as trade and mobility would
increase.
The government invests in building more highways, making travel faster.
(b) An action that can cause positive externalities can also cause negative externalities because the
action affects many subjects with different purposes, it may be a positive externality for one
subject but negative for another. For example, the production of new phones with advanced
technology may have a positive externality of improving user experience because of better
functionality, but also a negative externality of creating a large amount of electronic waste,
polluting the environment and affecting human health.
(c) Increase the use of positive externalities and minimize negative externalities.
Question 6: The production or consumption process creates externalities. This is one of the reasons
why the government must intervene in the economy. Please give examples and comment on the above
issue.
Answer: An example of a negative externality in the production and consumption process is air
pollution caused by factories that produce toxic emissions, which have negative impacts on human
health and the living environment. Meanwhile, a positive externality could be the creation of
renewable energy, reducing emissions and waste.
This requires government intervention to impose environmental and occupational safety
regulations and standards, as well as environmental taxes to encourage companies and individuals
to use environmentally friendly methods and technologies. Governments can also play a role in
regulating business activities by monitoring production and consumption activities, penalizing
businesses that violate regulations, and providing incentives for those who use environmentally
friendly products.
Government intervention in this regard will help limit negative externalities and promote positive
externalities, creating a healthy working and living environment, contributing to improving
people's quality of life.
Question 7: Considering the reality at the local or national level, which public goods should be
performed by the private sector? Why? Why does the private sector rarely provide pure public goods?
Examples of public goods that should be provided privately might include:
Infrastructure construction projects: such as highways, Long Thanh airport, hydroelectric
dams... These projects require large investments and are highly risky. Implementing them by
the private sector can help increase competitiveness, reduce production costs and create
diversity in production.
Public services such as health care: Such as hospitals, medical centers... The private sector can
come up with innovative solutions and optimize productivity to provide better services to the
i
community.
Reasons why the private sector rarely provides public goods: The private sector has few
sanctions, unlike the public sector, so it is difficult to control; besides, providing purely public
goods is difficult to bring high profits to the private sector, and corruption or loss of resources
is likely to occur.
Question 8: Analyze why economists are interested in the issue of externalities in production? Give an
example of government policy to address the issue of externalities in Vietnam.
Economists are interested in the issue of production externalities because they relate to trade,
commerce, and investment between countries. Balancing externalities is important in maintaining
a country's economic stability, ensuring that production activities are not hampered by oversupply
or shortages of goods in the market, or by problems related to exchange rates, tariffs, and
economic policies.
For example, the Vietnamese government has implemented a number of policies to address
externalities in production. One of these is the Investment Promotion Program (IPP), established
in 2006. This program provides a range of benefits, including financial support, tax exemptions
and other incentives for investors in specific pre-determined manufacturing sectors, to attract
domestic and foreign investment.
Furthermore, the Government also applies tariff policies to protect domestic industries. For
example, in recent times, the Government has applied a number of import control measures on
pangasius, aiming to protect domestic producers from unfair competition from imported products
from abroad.
Question 9:
a. What externalities will the act of getting and not getting the Covid-19 vaccine create? Why?
Star?
b. In your opinion, what criteria should be used to arrange priority vaccination groups?
Covid-19 vaccine equitably?
Question 11:
a. State two attributes of the fire department and give examples.
b. Are prisons public goods or private goods?
c. There are countries in the world that allow private prisons. Do you think they should?
promote privatization of the treasury or not? Why?
Question 12: What is income distribution? How can the government implement income distribution?
Using simple utilitarian theory, describe the construction and meaning of the social welfare function.
What is the “maximum, minimum” criterion? What is the meaning of the social welfare function
according to this criterion?
Answer: Social income redistribution is the intervention of the State through legal regulations and
policies to mobilize and persuade people with high incomes to contribute to help the community and
people with low incomes with the State.
Social welfare function: W=F(U1, U2,…,Un). Meaning: When the welfare of someone in society
increases under the condition that other members maintain the same status, social welfare
increases. Income should be redistributed to increase general welfare.
Welfare function: W=min(U1,U2….,Un). Meaning: Social welfare is measured by the welfare of
the person with the lowest utility. Income must be redistributed to a level of perfect equality.
Question 13: It is argued that “To reduce unemployment, the marginal income tax rate should be cut
to increase the supply of labor.” Using the theory of labor supply, explain why it is difficult to
determine the impact of tax cuts on labor supply. Can empirical research be used to help you make
predictions based on the above argument? If so, what type of research is appropriate?
ANSWER: Cut income tax → after-tax wages increase → labor supply increases → unemployment
decreases (draw a graph). However, the theory of labor supply states that when tax rates increase, it
causes two effects: substitution effect and income effect: Tax reduces the price of leisure time, so
people tend to consume more of it Substitution effect; Tax reduces income, so people tend to consume
less leisure goods Income effect. The total impact of these two effects is not determined, so there is no
basis to conclude that increasing tax rates reduces labor supply, or in other words, there is no basis to
assume that reducing marginal tax rates increases labor supply. Econometric research or interviews
can be used to make predictions.
Question 14: Propose a tax/subsidy policy for a type of externality in Vietnam.
Answer: There needs to be solutions to promote the development of research activities in seed
selection, production, processing, preservation and supply to build an advanced Vietnamese seed
industry that can not only reduce imports but also export seeds to regional markets. One of the
necessary solutions is a suitable subsidy policy for plant variety research institutes and centers.
Question 15: Apply the general equilibrium model to analyze the scope of tax impact on one good
relative to another good.
Answer: If the tax on gasoline is increased, the price of gasoline will increase, causing people's
demand for gasoline to decrease. Instead of using motorbikes, people may switch to using public
transportation such as buses. In addition, when gasoline prices increase, it will affect the increase in
prices of transportation services, passenger cars, and lead to an increase in the prices of goods.
Consumers are affected by a decrease in income twice: once because the increase in gasoline prices
directly affects their use of vehicles, and once because the prices of transportation services and goods
increase.