PUBLIC FINANCE THEORY QUESTIONS

CHAPTER I: OVERVIEW OF PUBLIC FINANCE

Question 1. Distinguish between public finance and private finance.
Public finance Private finance
- Involves the management of money by - Is the finance of individuals,
governments or public entities. organizations, private businesses and
non-profit organizations.
- Contains common interests, public benefits:
used to carry out public activities, such as - Used to carry out business,
infrastructure construction, education, investment, consumption and other
healthcare, national security and other public financial activities.
services.
- Private financial sources include
- Public financing sources include: taxes, income from business, personal
fees, and loans from local or international investments, loans from private
financial institutions. financial institutions or commercial
banks.
- Objective: to meet public needs and goals
and create benefits for society as a whole. - Objective: create profit or added
value for individuals, organizations,
- Contains common interests and public
their shareholders.
benefits.
- The effect cannot be quantified.

Question 2. Distinguish between public finance and state finance.

Public finance State finances
Relationship Public finance studies and manages Is a form of state
financial resources for government financing to maintain
agencies and public organizations public activities and
services
State finance includes
Public Finance and State
Enterprises.
Object Applies to government agencies, Applies to all State
organizations and activities activities and public
services
Method of Focus on managing, allocating and It is a form of tax
revenue and using government financial collection and spending
expenditure resources to support business to maintain State
activities of public agencies and operations and public
 organizations services.

Question 3. The invisible hand and the visible hand symbolize which sector of the
economy. Which hand do you think is stronger?
· "Invisible hand" is a metaphor, an economic idea introduced by economist Adam Smith
in 1776. He said that "Invisible hand" means: in a market economy, the Individual
participants want to maximize profits for themselves. Everyone wants that, so it has
invisibly promoted development and consolidated benefits for the whole community.
According to Adam Smith, each country's government does not need to interfere with
individuals and businesses, just let them do business freely; He concluded: "The wealth of
each country is achieved not by strict regulations of the State, but by freedom of business."
· The "Visible Hand" is the State's intervention and regulation of the market through
mechanisms, policies and tools for macroeconomic management, such as fiscal policy,
monetary policy, and policy. foreign trade, income policy. The process of regulating every
country's economy is operated by both "visible" and "invisible" hands. That means the state
intervenes but must also respect the "invisible" hand of the financial economy for it to
develop.
· It is impossible to say which hand is stronger than the other. Because each has its own
advantages and disadvantages. Depending on the pulse of the economy, appropriate
adjustments will be made.
Question 4. Free market equilibrium maximizes social efficiency, why does the
government always intervene in the economy?
The free market automatically balances and adjusts its efficiency. However, when it comes
to efficiency in a certain field, when it comes to the efficiency of balancing the national
market, the free equilibrium market does not reach equilibrium in efficiency. national fruit.
For example, in remote areas, the competitive market can never be automatically balanced
because investors do not come and invest to give people jobs. Competitive free markets
tend to their interests, towards their interests; They look for places that can benefit them,
and they don't go to places that don't benefit them. Thus, the government must intervene
and influence with many policies to let them come (building roads, electricity, building
seaport systems, infrastructure systems, tax incentive policies...). New investments come to
make difficult areas more developed, the efficiency of the country and the whole society is
more developed. The government must intervene to ensure that all regions enjoy general
welfare and efficiency, bringing fairness to society.
Question 5. In each of the following areas, give as many examples as possible of
Government involvement as a producer, regulator, or purchaser of goods and services for
direct distribution to personal or government use: 1 - Education; 2 - Transportation; 3 -
Credit market; 4 - Housing.
1. Education: The Government implements the teaching program or lets the private sector
build schools and hire teachers. The Government acts as a regulator; The Government is
responsible for paying for private training of teachers
2. Transportation: Government assigns to the private sector for a toll, and controls the issue
to ensure on-time toll collection
3. Credit market: This mechanism makes a lot of private decisions, between lenders and
borrowers; The state only intervenes in interest rates to adjust (monetary policy); Credit
grants for special subjects such as grants for students for support.
4. Housing: The State allows the private sector to stabilize investment for the people, the
State does not intervene; However, the private sector's housing prices are increasing day by
day (due to the manipulation of speculators to push up house and land prices, causing
insecurity for society. Therefore, the State has intervened and introduced policies for the
society. (The State buys back commercial housing from companies and then leases it to
ministries and State employees at low prices for about 50 years). Policy to ensure fairness
for income or housing construction social, tax reduction, tax exemption for people to buy
with acceptable income.
Question 6. What are the manifestations of failure of the market economy in recent times
in Vietnam and the implementation of the function of public finance in resolving those
failures of the government?
Signs of failure of the market economy in Vietnam in recent times include:
1. Uneven development: Regions and areas have not developed evenly, with clear
disparities between regions.
2. Gap between rich and poor: The gap between rich and poor is increasing and has not
been controlled.
3. Unemployment: Unemployment is increasing, especially among young people who have
just graduated from school.
4. Living environment and production of pollution: Living environment and production of
serious pollution, especially in large cities.
Functions of public finance:
First, ensure financial resources for the state
Second, Reallocate resources, improve economic efficiency, ensure social equity through
mandatory revenues and reflect public spending on goals.
Third, regulate the macro economy such as: Accelerating GDP growth rate, increasing
employment and reducing unemployment; stabilize prices, implement exchange rate
regulation policies...
Fourth: Supervision inspection: Check the revenue planning process; comply with the law
in the process of using public financial resources;
CHAPTER II: ANALYSIS TOOLS
Question 1. The following statements are positivist or normative viewpoints.
1. The minimum wage should not be set too high because it will increase the number of
unemployed people.
Ø Subjective evaluation: norms
2. How high is inflation acceptable?
Ø Raise a problem, and ask for a certain level of response Subjective Normative
3. Gasoline tax increases will affect How about gasoline consumption?
Ø Note that the word "will be like" is a Positivist argument
4. What proportion of the budget should defense spending account for?
Ø Norms (same as question 2)
5. The recent increase in the cost of living has caused the real income of the population to
decline.
Ø Objective reasoning, based on empirical reality
6. Should medical examination and treatment costs for the elderly be fully subsidized?
Ø Norms
7. To what extent should the government intervene in the economy?
Ø Give specific answers Subjective Normative
8. Start taxing income at a reasonable level of income.
Ø Norms
9. Oil prices in the 2000s doubled compared to the 90s.
Ø Realization
10. People with higher incomes will be distributed more goods.
Ø Norms
11. In the early 90s, the unemployment rate in our country increased dramatically.
Ø Realization
12. Smoking is not beneficial to society and should not be encouraged.
Ø Realization
13. The government needs to apply economic policies to reduce unemployment.
Ø Norms
14. To improve the living standards of the poor, the government needs to increase subsidies
to them.
Ø Norms
Question 2. Like economists, astronomers generally cannot perform controlled
experiments. However, astronomy is still considered a more exact science than
economics. Why?
Like economists, astronomers generally cannot perform controlled experiments. However,
astronomy is still considered a more exact science than economics. Astronomy uses
observational methods to collect data. Data is collected through measuring devices or
telescopes and then analyzed using mathematical and physical tools. And the results of
empirical astronomy are objective. Therefore, the results of astronomy are based on data
collected and analyzed in a precise way, which can be checked by other scientists. In
economics, data is often collected from surveys, surveys or financial reports and often
studies human behavior and emotions. However, because of the many different factors that
influence outcomes, the results of economics cannot be compared to simpler, more easily
testable scientific experiments.
Another answer: Astronomy experiments are natural objects that are not psychologically
affected, while economics experiments involve human subjects that depend on
psychological developments and moods.
Question 3. During the 2000 election campaign, George W. Bush introduced cuts in
marginal income tax rates. Explain why it is difficult to determine the impact of tax cuts
on labor supply based on theory alone. What kind of empirical research can help you
make predictions?
+ It is difficult to determine the impact of tax cuts on labor supply based only on theory
because each person will have income or substitution effects depending on their
circumstances. Income effect: due to reduced income taxes and increased income, people
will reduce working hours and often tend to consume, rest more, and work less. Substitution
effect (the effect that causes consumers to change their use of products): if taxes are low,
people will work more to generate more income.
+ Interview research format is applied to determine the reaction when applying a reduction
in marginal income tax rates and an econometric model can be applied to measure impact
data.
Question 4. During the international cancer conference held in Atlanta. The main source
of controversy is the efficacy of high-strength chemotherapy after bone marrow
transplantation as a treatment for severe cases. Relate the problem faced by medical
researchers in determining the effectiveness of one treatment relative to others and the
problem faced by economists in determining the effects of other treatments. economic
policy.
+ The problem that medical researchers face in determining the effectiveness of one
treatment over another is that it can be easily tested across different methods for the same
disease. , which treatment method is better can be tested over a short period of time. As for
the problem of economists having to determine the impact of economic policies, it takes a
lot of time and high risk in an economic cycle to verify.
Question 5. In the 1970s, RAND researchers conducted a social experiment studying the
relationship between health insurance coverage and health care utilization. In this
experiment, a group of people were encouraged to exchange their regular insurance
policies for new RAND insurance policies with different coinsurance rates (i.e., take out
a new policy in which the different rates at which insurance will cover an individual's
medical expenses). In 1993, the Clinton administration used the results of a RAND
experiment to predict how health care utilization might increase if insurance coverage
were widely adopted. What problems might arise if social research results were used to
predict the impact of national 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 adopted. The
problem that may arise if the results of social research are used to predict the impact of
national coverage is that RAND's new contract social experiment applies only to a group of
people based on the results of the study. If social experiment research is widely applied, the
actual results of each region will not follow the same trend as the experimental results.
Because in each region, socioeconomic conditions and living standards will be different, or
a group of experimenters may not fully represent the entire multiracial society and spread
across many different geographical regions like the United States.
Question 6. Each student chooses a case study using empirical methods (Social Test,
Interview & Econometrics or a combination of methods) to evaluate public finance policy
(spending, tax/fee collection and debt...)
Social quiz:
For example, design an online or paper survey about people's opinions about public
spending policies in their area. The survey could ask about their satisfaction with the current
use of public funds and their eyes on future spending, while considering different
government priorities.
Interview:
For example, interviews could be conducted with a number of public finance officials to
learn more about the public budgeting process and how they evaluate the effectiveness of
expenditures. Questions can be asked about the tax collection mechanism, the topics
prioritized in the budget and the barriers that need to be overcome to achieve the
government's goals.
Econometrics:
For example, economic and social data can be used to evaluate the impact of expenditures,
tax/fee collections or public borrowing on the economy and people's rights. For example,
you can compare the economic growth rate after the government implemented a new debt
policy with previous years or explore the impact of raising taxes to the highest possible
level on reducing consumption from the people.
Combine methods:
For example, design a survey to collect people's opinions on a policy and then use
econometric methods to analyze the results. Or, you can use interviews to compare
information with economic and social data to evaluate 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 what are the characteristics of highways?
- Public goods have two characteristics:
+ No competition: An individual can consume a good without reducing the presence or
benefit of that good to other consumers.
+ Non-excludable: Cannot prevent others from consuming or receiving the benefits of the
goods.
- Loudspeakers: Only those who have loudspeaker equipment can listen to the radio, so
loudspeakers are impure public goods, without competitive characteristics, because an
individual often consumes goods without paying. reduces the presence or benefit of
listening to loudspeakers for other listeners.
- Highways are not pure public goods because they are all goods of common
consumption, used by many people and do not compete.
Question 2: Distinguish between pure public goods, limited public goods, and public
goods that can be priced.
Pure public goods Public goods are limited Public goods can be priced
 - There is no These are products or - There is competition
competition services produced or
- Can be excluded
provided by state agencies,
- There are no
but are limited in quantity - These are products or
exclusions
or scope of use. For services produced or provided
For example, example, vaccines, by state agencies that can be
railways, roads, antitoxins, etc. These goods priced based on cost or market
electricity, water, are commercial and are sold price. For example, gasoline,
etc. Pure public on the market, but there are electricity, water, etc. These
goods are not limits on production and goods are commercial, sold on
commercial in distribution. the market and make a profit,
nature, cannot be but prices are regulated by
sold and do not state agencies or adjusted to
make a profit. ensure fairness and
compliance with the
provisions of law.

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
displays?
Radio waves and highways are public goods because they have properties that benefit an
individual or group, everyone can use them without reducing the presence of Radio waves
and highways. speed towards others. And they don't have to pay any money to use it. We
cannot prevent others from using its benefits.
Watching fireworks in Da Nang is considered a public good, at this time 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 achieve satisfaction. the end of yourself.
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 web site provides information about airline operating schedules; f.
Urban water supply.
Ø Public goods: Wastelands, prisons, medical school education (pure), public television
programs (pure), Internet web sites providing information about airline schedules.
Ø Private goods: Urban water supply.
Question 5. What are non-excludable goods? There is a view that the private sector
produces few goods and is not excludable. Please comment on this issue.
Non-excludable goods are goods or services that consumers cannot be prevented from using
without paying or participating in the production process. This means that, once one person
has used or consumed that good, another person can also use or consume that good without
reducing the benefit of the first user.
There is a view that the private sector produces few non-excludable goods which is correct.
The reason is that private production enterprises mainly want to make profits for
themselves. If they produce non-excludable goods, it will lead to the phenomenon of "free
riders" meaning that some people use taking advantage of the common public benefit but
not contributing to the costs with others, leading to a decrease in the company's revenue and
affecting other consumers. Therefore, private firms produce fewer non-excludable goods
than public or international firms.
However, this view also has some limitations. Some products are not excludable but are
produced by private enterprises. Examples include open source software products, music
and video products shared on the internet. Besides, there are also private enterprises that
produce highly exclusive products (such as cars) but contribute to reducing environmental
pollution or improving the quality of human life.
Therefore, it cannot be asserted that the private sector produces few non-excludable goods
is completely true or false, this depends on each specific case.
Examples of non-excludable 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 providing public goods
By shifting the provision of public goods to the private sector, the state can use competition
among service providers to obtain the most efficient service provider. Therefore, promoting
competition in service provision between the public and private sectors is a goal aimed at by
many countries 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, state activities are not simply regulating but also
encouraging and creating market incentives for the government to create a level playing
field for everyone capable of providing services. public service 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 always
innovate and that benefits both the public and service providers.
2. Improve the quality of public goods provision in state services
An important issue to pay attention to first in order to improve service quality 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 cadre work and encouraging the
participation of civil servants and management activities, strengthening personal authority
and responsibility. The state's method of recruitment and promotion based on merit has
enabled the civil servant apparatus to have a high-quality workforce. In addition to
improving the professional capacity of the staff directly providing public goods, special
attention should be paid to improving the ethical qualities of customer service. Experience
from many countries shows that an employee who is conscious of his work and has a
dedicated attitude to serving customers will greatly increase his work efficiency.
3. Enhance community participation and supervision in policy making and ensuring public
service quality
This participation process occurs through many different ways from self-consultation,
information exchange, to direct actions of citizen participation, proactively submitting
initiatives or suggestions and policies. . Especially in places where the supply of goods is
ineffective, people can inform the authorities about this problem 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 flow smoothly and be shared. Through this, people
and service providers have the opportunity to evaluate and exchange ideas to improve
service quality.
Question 7. What are the views on collecting user fees for pure public goods?
There is a view that charging user fees for purely public goods is a way to finance the
production and provision of public goods effectively and ensure the sustainability of public
goods projects. . Charging can also be a way to control the use of public goods, especially
in cases where resources are overused or underprotected. But on the contrary, the
consequence of collecting fees will not encourage individuals to use those public goods and
lead to those goods not being exploited at full capacity, reducing social welfare. Therefore,
collecting user fees is still not advisable, the costs paid for public goods must rely on
community awareness and the generosity of users.
Question 8. The city government plans to build a walking street. The benefits given to
convince people to agree to this project are: (1) there will be more pedestrians, (2) traffic
congestion will be reduced, and (3) 15 jobs will be created. Do you agree with this
opinion?
Question 9. Explain why the supply and use of public goods can appear in a situation of
free-riding? There is an opinion that: "The state does a better job than the private sector
in providing public goods." Do you agree with that opinion? Why?
The free-riding situation also means "riders who don't pay" because public goods have two
characteristics: non-rivalry and non-excludability, so everyone can use them. These people
enjoy the benefits of public goods without participating in bearing the costs necessary for
those goods to be provided or bearing costs that are less than the benefits they enjoy. It is
also because those people's use of public goods is not hindered by anyone and the cost to
consumers is usually zero that this situation arises.
I agree with the above opinion because the private sector's goal is to seek profits and create
added value for the organization, but providing public goods to make a profit is very
difficult. If public goods are provided by private individuals, 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 areas of public sector activities where the products produced are often provided to
society as public goods, although the laws of those countries still recognize and encourage
businesses. Enterprises in the private sector have the right to invest and supply. Therefore,
the public sector must play a role in providing public goods and collecting contributions
through taxes.
Question 10. People in Da Nang city often contribute to building 120km of roads in 1
year. After the city government spent its own money to build 100km of roads each year,
the people reduced their contribution to 30km. What happened? Explain?
Question 11. Give an example of a free driver in your locality. What did local authorities
do to overcome this problem?
An example of a local non-paying beneficiary could be a user of parks, sports facilities and
other public amenities that pay no or very low fees, and do not contribute to their
construction. construction of public works. This causes overuse and causes local
governments to spend more to maintain, clean, and maintain these amenities.
To overcome this problem, local authorities can impose measures such as charging fees to
enter these areas, increasing ticket prices to parks and sports facilities, or creating
restrictions on their use. public amenities. In addition, authorities can also invest in
education and propaganda campaigns to increase public awareness of the importance of
paying fees to maintain public amenities.
Question 12. The Government requests that private enterprises manage part of the
national highway through some provinces, be allowed to collect tolls and use that money
to repair and preserve the road. Do you think privatization of highway management is a
reasonable idea?
The proposal to privatize management of part of 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 a lot of money from the state budget. Therefore,
sharing some of these costs with private enterprises can reduce financial pressure on the
state budget.
+ Improve quality and management efficiency, 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.
+ Enhance competitiveness and investment ability: Allowing private enterprises to
manage national highways can create competition among them, increase investment
possibilities 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 effectively transferred to the private sector? Explain.
+ Pure public goods:
Defense goods and national security protection.
Public services such as entertainment, education, public health, roads, public transportation,
firefighting, disaster prevention, and public administrative services.
+ Non-pure public goods:
Goods produced from natural resources such as electricity, water, gas, petroleum...
Public services are provided in the form of contracts such as: hospitals, schools, garbage
collection, environmental sanitation, quality control and testing...

CHAPTER 4: FOREIGN AFFAIRS AND THE GOVERNMENT'S FOREIGN

AFFAIRS POLICY
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 this subject it
is positive but it can also be positive. For others, it is a negative externality. For example,
building a factory to produce electricity can help meet increased energy demand, but it
causes environmental pollution and affects the environment. human health. Or for example,
Mr. A uses pesticides to kill insects, creating a positive externality of killing insects, but the
pesticides fly into Mr. B's fields and seep into the water leading to person B's fish pond.
negative influence.
Question 2. What measures does the Government use to influence positive externalities?
Negative externalities?
+ Negative externalities:
 Taxation - Pigou tax: is a tax levied on each unit of production of the firm's output that
causes negative externalities, such that it is exactly equal to the marginal external cost at
the socially optimal level of output. It is difficult to determine the tax rate, when That
switches to indirect taxation. (Special consumption tax)
 Subsidies: Under the condition that the number of people causing negative externalities
is fixed, it is possible to subsidize them to reduce the level of negative externalities.
Apply restrictions (sedentary farming).
 Creating a market (on environmental pollution): auctioning off pollution permits, also
known as discharge permits.
 Set regulations and sanctions: each polluting firm will be required to only pollute at a
certain level, called the emission standard, otherwise it will be forced to close.
+ Positive externalities:
· Subsidies: Subsidies can create a tax burden
· Sponsor and encourage businesses and units to create positive externalities
· For example: Governments have repeatedly subsidized positive externalities by
providing certain public services at prices below the marginal cost of providing them. For
example, many urban environmental companies collect city waste, but people only have to
pay a sanitation fee that is lower than the actual cost of operating that waste collection
system. This difference will be compensated by the government - that is, a form of subsidy
to reduce the accumulation of waste that causes loss of general aesthetics. However, when
the government intends to subsidize positive externalities, the following points should be
kept in mind: Either way, subsidies will create an additional burden on taxpayers.
Therefore, providing subsidies will create a redistribution from taxpayers to recipients.
Therefore, both efficiency and social equity impacts need to be considered.
Question 3. Can the government granting property ownership internalize externalities?
Compare this solution with direct government intervention.
d Maybe there will always be “free riders”
d The government grants ownership rights, but those individuals and businesses do not have
strong enough sanctions.
Question 4. Give examples of negative externalities and positive externalities in public
projects. Describe the externalities of a specific project and how to measure them.
Evaluate the effectiveness of a specific public policy through learned theories, depicted
through graphs.
*Examples of negative and positive externalities in public projects:
+ Negative externalities:
 Affects the environment, such as exploiting natural resources, destroying ecology and
polluting the environment.
 Impacts on local communities, such as reducing the land area of farmers or causing
noise and dust to people living near the road.
+ 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 transporting tourism-related
goods and services.
Question 5. For each of the following cases, which cases can the Coase Theorem be
applied? Why yes and why not?
a. A group of university students in a dormitory share a communal kitchen. Some students
never clean up the trash when they cook. Not applicable, because CP cannot give students
a license to use the kitchen because students are only renters and may not stay long term.
b. On Vermont's lakes, high-speed motorboats annoy swimmers and boaters It is
applicable, because the Government can hand over ownership of this lake area to a person
so they can manage and limit negative factors.
c. In Washington State, many farmers burn their fields to clear stubble in preparation for
the upcoming growing season. Residents in neighboring cities complain about pollution.
Not applicable, because there is nothing to assign ownership
Measure: introduce regulations and internal rules
d. Internet users generally incur zero costs to convey information. As a result, congestion
occurs and users are frustrated by delays. It is applicable, because the government assigns
ownership of internet connections to individual households.

CHAPTER 5: REDISTRIBUTION OF INCOME

DISCUSSION QUESTIONS
Question 1. How do you understand what is fair? Inequality in income distribution? A
measure of a country's income inequality? Describe graphically.
Economics views justice from the perspective of sharing benefits and costs among
individuals in society. On that basis, equity is understood in two aspects: horizontal equity
and vertical equity.
Horizontal equity is understood as equal treatment of people with the same initial status. For
example: The same disease conditions receive the same treatment; Equal ability to pay
means equal contribution; Two people A and B working in the same industry, with the same
seniority, and both earning 20 million VND/month will be subject to the same personal
income tax rate.
Vertical equity is understood as the unequal treatment between members with different
initial statuses in the direction that people with better conditions will enjoy more benefits
from society or have to bear more social costs than those with better conditions. with others.
For example: Different medical conditions are treated differently; Different paying abilities
contribute differently; Two people A and B work in the same industry with the same
seniority, but A has an income of 20 million/month and B has an income of 30
million/month, so they will be subject to different personal income tax rates.
Income inequality is a large difference in income distribution, with most of the total income
in the economy concentrated in the hands of a group of people who make up a small
proportion of the total population. When income inequality occurs, there is a large gap
between the assets and wealth of one segment of the population compared to the remaining
segment of the population. The basic basis for studying income inequality and income gap
is income distribution according to demographic segments. The different types of income
segments studied when analyzing income inequality can include distributions for: Men
versus women, ethnicity, geographic location, occupation, past earnings.
Question 2. Are the concepts of fairness and equality in income distribution
synonymous? To what extent is income inequality consistent with equity? What are the
suggestions in your answer for government spending policy?
Fairness and equality in income distribution are not synonymous. Inequality is too large a
difference in income and usefulness, while equity represents the distribution of income
according to ability, capacity and work results. Each person's ability and work results may
be different, so their income will be different. If the difference is too large, it will lead to
great inequality. However, to be equal would be unfair and would not stimulate motivation
to work and maintain creative wisdom. So fairness is different from equality. There are
many different views on fairness and inequality. Some believe that equality of opportunity
should only be created for everyone, others believe that some special goods should be
distributed fairly from the point of view of equality. However, fairness and equality are
related to each other and where there is equal opportunity, equal income and utility, income
equality is consistent with fairness. Income inequality is consistent with equity when
marginal utility is the same even though income may be different (at the point where
marginal utility is equal welfare will be maximized).
For example: When governments invest in education and public health to provide people
with similar amenities and opportunities, this can create equality in individual opportunities
and contributions, and encourage fairness in income distribution.
Question 3. Analyze why the government must redistribute income in society.
Income distribution is an important issue in today's society. In a society, the difference in
income between classes of people can cause inequality and affect the development of the
country. Some main reasons for the government to redistribute income in society include:
1. Reduce inequality: When some people earn more than others, this can cause inequality
and tension in society. By redistributing income, governments can help reduce disparities
and ensure that everyone has the opportunity to thrive and live better.
2. Increased motivation: When a working person receives a higher income than others, this
can lead to a loss of energy and motivation from others. When the government redistributes
income, people will be more motivated to work to improve their circumstances.
3. Promote economic development: Income redistribution can also help promote the
country's economic development. When people have a stable income, they will be able to
spend money on products and services, thereby promoting economic growth.
4. Ensuring national security: If some people earn more money than others, this can cause
tension and crisis in society. When the government redistributes income, it can help ensure
stability and security in the country.
In summary, income redistribution is an important measure to help reduce inequality,
increase labor motivation, promote economic development and ensure national security.
The government needs to apply reasonable policies to ensure that everyone has the
opportunity to develop and live better.
Question 4. Analyze the idea that redistribution to ensure social justice will reduce the
efficiency of the economy. What is your opinion?
In my view, redistribution to ensure social justice does not necessarily reduce economic
efficiency. In fact, redistribution can help increase equity and protect disadvantaged groups
in society, while improving economic efficiency.
For some, redistribution can cause tension because it appears to be taking from the rich to
give to the poorer. However, redistribution can be accomplished through measures such as
wealth taxes, general income taxes, or other means to reduce fiscal disparities and increase
resources for more disadvantaged groups. . Done properly, redistribution can improve the
living conditions of the poorer, reduce inequality, while increasing consumption and
economic activity.
In addition, redistribution can also enhance economic stability. When a large number of
people have low incomes and are unable to consume products and services, this can cause
an economic crisis. However, if these people are supported through distributive policies,
they can consume more and contribute more actively to the economy.
In short, redistribution to ensure equity and protect disadvantaged groups does not
necessarily reduce economic efficiency. Appropriate distributive measures can help increase
equity and economic stability while protecting disadvantaged groups in society.
Other comments: According to this opinion, to be effective, one must accept inequity and
conversely, to ensure fairness, one must sacrifice efficiency to a certain extent. The reasons
are as follows:
- The redistribution process incurs administrative costs, mistakes in selecting objects,
loss due to corruption, waste...
- Reduces work motivation for people whose income is regulated, reduces accumulation and
concentration
capital.
- Creates a mentality of dependence on the distributor.
Question 5. Consider the following government programs:
a. Subsidies for companies in the biotechnology sector;

b. Buy Patriot missiles for the Air Force.

How might each program impact income distribution?
Subsidies to biotechnology firms only benefit the companies and biological products that
can be discounted and consumers of these products can benefit. However, in society, not
everyone has the opportunity to enjoy these benefits or enjoy them equally. On the contrary,
when buying missiles for the national defense and security system, it will create pure public
goods, everyone will enjoy the same security services, and income distribution in this case
is fair and equal.
Question 6. Types of subsidies that the government can apply. List some positive and
negative points of each form.
1. Unemployment benefits
Positive point: Supports workers when they lose their jobs and have no income to maintain
their lives.
Limitations: Some people may abuse benefits and not want to find a new job, reducing their
motivation to look for work.
2. Subsidies for the elderly, children and disabled people
Positive points: Helping vulnerable people in society, ensuring the rights of the elderly,
children and people with disabilities.
Limitations: The cost to the government of maintaining this subsidy program can be very
high and put pressure on the budget.
3. Subsidies for the poor and poor households
Positive point: Helping the poor and poor households overcome difficulties in life, ensuring
their rights.
Limitations: Some people may abuse benefits and not want to look for work to support
themselves.
4. Education allowance
Positive point: Helping pupils and students have access to education and training, creating
conditions for them to maximize their personal potential.
Limitations: The cost to the government of maintaining this subsidy program can be very
high and put pressure on the budget.
Question 7. List some measures the government can use to reduce the gap between rich
and poor. What are the advantages and disadvantages of each measure?
1. Educational support
 Advantages: Helps children learn and develop themselves, can create equal
opportunities between rich and poor families.
 Disadvantages: Need to invest a lot of money to create facilities and train quality
teachers.
2. Improve the income of the poor
 Advantages: Creates opportunities for poor people to better support themselves and their
families, while reducing income differences between classes.
 Disadvantages: The cost of paying the government to improve the incomes of the poor
can be very high and put pressure on the budget.
3. Construction of new residential areas and clusters
 Advantages: Creates new opportunities for people, promotes economic development and
reduces infrastructure gaps between regions.
 Disadvantages: The cost of building new areas can be huge.
4. Implement tax policy
 Advantages: Tax policy can encourage the rich to spend on production, expand
companies or invest in new projects, helping to create more job opportunities and
improve the income of the poor.
 Disadvantages: Need to ensure tax policy does not cause additional burden on the rich
and does not reduce the attractiveness of the business environment.
Question 8. Consider an economy with two people, Henry and Catherine. They consume
two goods: bread and water. Suppose that, because of a drought, the government decides
to allocate exactly half of the available water to each person. To prevent people from
"exploiting" others, no one is allowed to trade water with others in exchange for bread.
Construct an Edgeworth Box to represent this situation and explain why it is usually not
Pareto efficient.
Suppose at point v, the utility of Ca and He is maximized. Because water is scarce, He can
only use water at point a and Ca at point b (each person only gets ½ of what they need). The
state lines of He and Ca both go down and move in opposite directions. They cannot touch
each other, so they cannot have geometric contact, so they are ineffective. On the other
hand, in this case, water cannot be exchanged, the distribution does not make anyone better
off, both people are worse off, it is not Pareto efficient (one distribution makes another
person better off and the other person worse off). harm)
Question 9. A psychologist from Yale University once proposed that the government tax
“foods with low nutritional value.” Fatty foods should be evaluated according to their
nutritional value per calorie or per gram of fat; The least healthy food should be taxed at
the highest rate” (Brownell, 1994, p. A26). So how does this proposal relate to the
concept of "Promotional Goods"?
Promotional goods are goods that society thinks people should consume or receive
regardless of their income level. Food is a promotional commodity, and high taxes on
unhealthy food protect the rights of consumers. The government intervenes with taxes on
unhealthy foods to encourage people to consume healthier products.
Question 10. In each of the following cases, how would you reasonably explain the
government's policy on the basis of welfare economics?
a. In Michigan, when ice fishermen are in danger, the Coast Guard rescues them for free.
b. Honey production is subsidized by the federal government.
c. The U.S. Department of Agriculture subsidizes ranchers' crop insurance. Farm owners
pay zero premiums to insure against loss of production due to natural disasters.
d. In Washington DC, you cannot work as a barber unless you are licensed by the city
government.
The government should only intervene when initial help is needed, then let people trade
freely. Cases a and c require government assistance because there is no market for natural
disaster risks, or a natural disaster risk insurance market exists but is ineffective. In cases b
and d, the market should operate competitively to ensure effective resource distribution
conditions.

CHAPTER 6: TAXES
DISCUSSION QUESTIONS
Question 1. Analyze nominal tax burden and actual tax burden in the
taxes in Vietnam.
Taxes in Vietnam are often divided into two types: nominal tax burden and actual tax
burden.
1. Nominal tax burden
 Is the amount calculated based on the tax rate prescribed by law for each unit or
individual with the obligation to pay tax.
 This is the amount determined before tax payments are made.
 For example: 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
 Is the actual payable amount after subtraction tax reductions, tax exemptions, tax
deductions or other allowances.
 This is the actual amount payable after recalculation.
 For example: Personal income tax (PIT) for civil servants and public employees with a
specific deduction rate, after deducting the deduction, the actual tax rate will be
obtained.
Question 2. Give an example to demonstrate: Discriminatory tax on a type of serviced
goods
services that affect non-taxable goods and services. This effect is positive or negative in
the sense of Pareto efficiency.
An example of differential taxation on a good or service would be a tax on cryptocurrencies
such as Bitcoin or other cryptocurrencies. In this case, imposing taxes only on
cryptocurrency transactions would affect the attractiveness of these transactions compared
to other types of payment instruments such as cash or credit cards.
The effect of differential taxation on cryptocurrency transactions could be positive If
Income from these transactions is used to reinvest or develop new technology in the
cryptocurrency sector. However, this unfair and biased tax imposition can also cause a
negative Pareto effect because it will cause cryptocurrency users to switch to other types of
payment means to avoid taxation. This will reduce the popularity of cryptocurrencies and
affect the revenues of companies in this field.
Question 3. In what cases does the state's tax increase have no effect?
affect supply output? Use graphs to prove? Should the government then continue to
increase taxes to increase budget revenue? Why.?
Case: is when the product's demand cannot be met by price changes. This means that
consumers will buy products at higher prices without paying attention to the increased cost
due to increased taxes. At this time, the state should not increase taxes to collect budget
revenue because increasing taxes can lead to a decrease in supply output and thus reduce the
total tax income of the state.
Question 4. Explain how individual behavior is influenced by characteristics
following of tax laws:
a- Charitable donations are deducted from taxable income
This characteristic of tax law may lead individuals to support and participate in charitable
activities to minimize tax liability. People who are inclined to minimize their tax liability
can use financial donations to charitable causes as a way to minimize their taxable income.
b- Beer is taxed with special consumption tax
This tax law may lead to reduced beer consumption by some individuals, especially those
with lower incomes. Consumers can switch to other beverages or reduce the amount of beer
consumed to avoid significant tax costs. However, consumers with higher incomes may not
be significantly impacted by this tax cost and will continue to consume beer as normal.
c- Interest on loan capital is taxed
This feature of tax law 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 of tax costs and their effect on the debt to be repaid. They may consider
reducing their loan amount or looking for other solutions such as increasing their income to
cope with this tax cost.
Question 5. Please propose a tax/subsidy policy for a type of externality in Vietnam.
The type of externality mentioned is environmental pollution from industrial production
activities.
1. Tax Policy: For domestic and foreign businesses that cause environmental pollution in
Vietnam, we propose to impose environmental taxes. Taxes will be calculated based on
emissions, waste volume, water and soil pollution levels, and will be calculated as a
percentage of product value. Businesses can save on tax costs by investing in greener
technologies and reducing pollution.
2. Subsidy Policy: We propose financial support for domestic businesses developing
environmental treatment technology and renewable solutions. Subsidies can include capital
investments and tax breaks. Businesses that have modern environmental treatment
technologies will be exempt from environmental taxes.
In summary, our proposed tax/subsidy policy will encourage domestic and international
businesses 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 drink
alcohol
create negative impacts on the rest of society - for example through
disruptive 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 reason for imposing taxes on alcohol consumption as above is correct and well-
founded. Without government taxes, people could consume too much alcohol without
worrying about the price or negative consequences of excessive drinking. However, this
depends on each person and specific situation. For wine lovers, imposing taxes will only
increase wine prices and affect their personal budgets, but will not necessarily cause them to
consume less. On the contrary, people who do not care about the price of alcohol or do not
know the negative effects of excessive alcohol consumption may consume too much
alcohol, leading to unfortunate consequences for themselves and society.
Question 7. Please tell us what is a good tax system?
1. Fairness: The tax system should be designed to distribute the weight toward those with
higher incomes, while minimizing the tax burden on those with lower incomes.
2. Efficiency: The tax system should be designed so that tax revenues are sufficient to meet
government goals, but do not overburden people and businesses.
3. Simplicity: The tax system should be simple and clear, easy to understand and
implement to avoid inconvenience and costs to taxpayers.
4. Encourage economic activity: The tax system should be designed to encourage
economic activity and encourage investment, as well as maintain competition and
economic development.
5. Flexibility: The tax system should be flexible so that it can adapt to changes in the
economy and other public policies.
6. Clarity and transparency: The tax system must be designed based on a clear strategic
direction for a relatively long period in terms of revenue rates, clearly demonstrating the
policy of encouraging or restricting certain industries and fields. and must be specified.
7. International commonality and competition: International commonality represents the
degree of correspondence with the tax systems of other countries around the world.
International competitiveness is demonstrated by comparative tax advantages in
attracting international resources compared to other countries.
Question 8. Why is it said that studying the additional burden in the overall balance
makes the tax picture less "ugly"? Give some examples.
Question 9. One of the characteristics of special goods and services is that their
consumer demand is less sensitive to price. Ramsey's rule suggests that we should tax
these special goods and services high or low? Explain why?
The Ramsey Rule suggests that goods with lower price elasticity should be taxed higher.
This applies to both physical goods and services.
However, in the case of special goods and services, setting tariffs based on price sensitivity
is not the best option. Because consumer demand for these services is less sensitive to price,
high taxes will not reduce consumer demand, but will only make them pay more. This will
negatively affect people's comfort and may reduce demand for this service.
Question 10. Considering the local environment, indicate the scope of influence of taxes
in the country
the following cases:
a. The Ministry of Finance decided to increase imported A95 gasoline by 2,000
VND/liter. Assuming market
international gasoline market, no import quotas are applied.
b. The Ministry of Labor requires businesses to increase the rate of paying health
insurance for workers
dynamic from 2% to 5%.
c. The government decided to increase taxes on resort villas in the area
The scope of impact of the tax on imported A95 gasoline prices will focus on consumers in
the domestic market. Users of imported A95 gasoline will have to pay more for gasoline,
which may lead to a switch to other fuels or a reduction in the consumption of imported
A95 gasoline.
Health insurance tax is calculated based on the employee's income ratio, so the scope of the
tax will affect 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 resort villas only affects those who own and use these villas. These
people will have to pay more in taxes to use and own these villas, which may lead to some
people no longer being able to afford to own or maintain their resort villas. .

Some questions from previous exams: d

Question 1: Give examples and suggest government policies on positive externalities (two
examples) and negative externalities (two examples) occurring at the production stage. To
produce socially optimal efficiency, how must manufacturers perform production when
there are positive or negative externalities or both occurring during the production of the
product?
**Examples of Positive and Negative Externalities in Production:**

1. **Positive Externalities (Positive External Effects):**

- **Example 1: Investment in Renewable Energy**
A company that invests in solar power not only benefits from lower energy costs but also
contributes to reducing pollution. This clean energy source benefits society as a whole by
lowering carbon emissions, improving air quality, and contributing to the fight against
climate change.
- **Example 2: Research and Development in Pharmaceuticals**
A pharmaceutical company invests in research and development (R&D) for a new
vaccine. This research may lead to innovations that benefit the broader public health
system, reducing disease spread and improving societal well-being.

2. **Negative Externalities (Negative External Effects):**

- **Example 1: Pollution from Factories**
A factory emits pollutants into the air and nearby water sources during production. This
causes harm to local communities, health issues, and environmental degradation, which are
costs borne by society, not the producer.
- **Example 2: Deforestation by Logging Companies**
A logging company cuts down large areas of forest for wood production, leading to loss
of biodiversity and increased carbon emissions, which affect global climate change and the
ecosystem, creating societal costs not reflected in the company’s expenses.
---

**Proposed Government Policies:**

1. **For Positive Externalities:**

- **Subsidies or Tax Incentives for Innovation**: Governments can provide subsidies or
tax incentives to companies that engage in beneficial activities, such as investing in
renewable energy or conducting health-related research. This encourages more businesses
to invest in projects that create social value.
- **Public Funding for R&D**: Governments can offer grants or public funding for R&D
in industries that contribute to societal welfare, such as pharmaceuticals or green
technologies, ensuring these industries can thrive and the public benefits from their
innovations.

2. **For Negative Externalities:**

- **Pollution Taxes or Carbon Pricing**: Governments can impose taxes on companies
that pollute, based on the amount of emissions they release. This would make it more
expensive to pollute and incentivize companies to adopt cleaner technologies and practices.
- **Environmental Regulations and Fines**: Strict regulations and fines can be enforced
for companies that cause significant environmental harm, such as deforestation or water
pollution. By penalizing harmful activities, the government can deter these behaviors and
push for sustainable production practices.

---

**Optimal Social Efficiency in Production:**

To achieve socially optimal efficiency, producers should internalize the externalities they
create, whether positive or negative. This means:

- **In cases of positive externalities**, companies may underinvest in activities that benefit
society because they do not capture all of the benefits (e.g., clean air from using renewable
energy). The government should provide subsidies or tax breaks to encourage more of such
activities to reach the socially optimal level of production.
- **In cases of negative externalities**, companies often overproduce harmful goods or
activities because they do not bear the full costs (e.g., pollution). Governments can correct
this by imposing taxes or regulations, making it more expensive to cause harm, thereby
aligning private costs with social costs. This will reduce the harmful production to an
optimal level where societal welfare is maximized.
Question 2: Please classify the following goods: pure public goods, impure public goods or
private goods. Explain your answer specifically.
· Public television program
· Website provides information about Vietnam Airlines' operating schedule
· 4-year study program at University of Finance and Marketing
a/ Public television programs:
– No competition: because having one more viewer does not affect others
– Non-excludable: because there is no fee, there is no payment
So public television programming is a pure public good.
b/ Website providing information about the operating schedule of Vietnam Airlines:
– No competition: because adding one person to watch does not affect others
– There is no exclusion: because accessing the Website is free, there is no need to pay
So the Website providing information about the operating schedule of Vietnam Airlines is a
pure public good.
c/ 4-year study program at University of Finance and Marketing:
– Competitive: because of competition for points to enter the school, one more person
admitted to the school will affect the admission of others.
– Exclusionary: because tuition fees must be paid.
So the 4-year program at the University of Finance and Marketing is a private good.
Question 3: You said, when the government imposes taxes on consumers, who will bear
the tax economically? Please explain specifically and illustrate with graphs.
**Who bears the tax burden when the government imposes a tax on consumers?**

When the government imposes a tax on consumers, the tax burden is not necessarily borne
solely by the consumers. In reality, both consumers and producers may share the tax
burden, depending on the **elasticity of supply** and **elasticity of demand** for the
product.
### **Case of Inelastic Demand (Demand not sensitive to price):**
If the demand for a product is inelastic, meaning consumers need the product regardless of
the price increase, most of the tax burden will be shifted to the consumers. Consumers will
pay higher prices due to the tax and continue to buy the product with relatively unchanged
quantities.
- **Example:** Essential items such as food and medicine often have inelastic demand.

### **Case of Elastic Demand (Demand sensitive to price):**

If the demand for a product is elastic, meaning consumers significantly reduce their
purchases when prices rise, most of the tax burden will fall on the producer. As the price
increases (due to the tax), consumers will reduce their consumption, forcing producers to
lower prices to maintain sales revenue.
- **Example:** Luxury or non-essential goods typically have elastic demand.

### **Case of Inelastic Supply (Supply not sensitive to price):**

When supply is inelastic, meaning producers find it difficult to reduce production even if
the product’s price falls due to the tax, most of the tax burden will fall on the producer. The
producer cannot reduce output, so they must bear a large portion of the tax by lowering their
selling price.

### **Case of Elastic Supply (Supply sensitive to price):**

When supply is elastic, meaning producers can easily adjust their output as prices change,
consumers will bear most of the tax burden. Producers can easily reduce production when
prices are affected by the tax, so most of the tax burden will shift to consumers.

### **Illustrative Graph:**

To understand this more clearly, let’s look at a simple supply and demand graph:

- **Y-axis (vertical axis):** Represents price.

- **X-axis (horizontal axis):** Represents the quantity of goods.
- **Demand curve (D):** Shows the amount of goods consumers are willing to buy at each
price.
- **Supply curve (S):** Shows the amount of goods producers are willing to sell at each
price.

When the government imposes a tax, the supply curve will shift upwards or the demand
curve will shift downwards, depending on who bears the tax. As a result, the price paid by
consumers rises, and the price received by producers falls, creating a "gap" between the
final selling price and the price producers actually receive.

#### **Graph Example:**

- **Before tax:** The initial equilibrium price is P1, with equilibrium quantity Q1.
- **After the government imposes a tax on consumers:** The demand curve shifts
downwards (or the supply curve shifts upwards), creating a new price P2 that consumers
must pay. Meanwhile, the producer receives a lower price, P3. The difference between P2
and P3 represents the tax collected by the government.

### **Conclusion:**
- **The tax burden** is not entirely borne by one side but is shared between consumers and
producers, depending on the elasticity of supply and demand.
- **If demand is more elastic than supply,** the producer bears most of the tax burden.
- **If supply is more elastic than demand,** the consumer bears most of the tax burden.

Thus, who actually bears the tax economically depends on how supply and demand react to
the price change caused by the tax.
Question 4: What are Public Goods? How many types of public goods are there? Can you
give an example? Explain in your own way 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) Lighthouse in Vung Tau; (c) Viettel's ADSL transmission line to
people's homes; (d) Entrance ticket to Suoi Tien tourist area; (e) Current Covid-19
vaccination in Vietnam; (f) Read current news online.
- Public goods are: Goods have two properties: non-rival and non-excludability.
- There are two types of public goods:
+ Pure public goods: These are goods that consumers can use for free and do not affect the
use of others. Both non-contest and non-excludable properties are met. For example: street
lighting, sky, public buildings,...
+ Impure public goods: These are goods whose use by one person can reduce the ability to
use by others. However, these goods cannot be excluded. (Only one of the above two
goods). For example: Highway..
- Pure public goods: (a) Lo Te - Rach Soi Expressway (b) Lighthouse in Vung Tau
- Impure public goods: e, f
Question 5: What external effects? (a) Give 03 examples of positive externalities and
03 examples of negative externalities; (b) Are there any cases where an action causes
both positive and negative externalities? Give an illustrative example (c) To achieve
socially optimal production efficiency, how must manufacturers perform production
when positive or negative externalities or both occur during the production process?
product ?
Reply: - When the activities of one entity (individual or business) directly affect the
benefits of another entity in a way that is not through market prices, economists call that
impact an externality or externality. response.
(a) Positive externalities: - Teachers who have been vaccinated against influenza will
reduce the probability of students being infected with influenza
- Building and operating an airport will benefit local businesses, as trade and mobility will
increase.
- The state invests in building more highways, making travel faster.
Negative externalities: - Smoking in public places
- Napkin paper factories discharge wastewater into the environment
- The neighbor's house sings karaoke loudly late at night, affecting the quality of sleep of
others.
(b) An action that can cause positive externalities can also cause negative externalities
because this action affects many objects with different purposes, possibly with this object
being an externality. positive but for others it is negative. For example, the production of
new phones with advanced technology may have a positive externality of improved user
experience because of better functionality, but also a negative externality of generating
large amounts of electronic waste, pollutes the environment and affects human health.
(c) Increase the use of positive externalities and minimize negative externalities.
Question 6: The production or consumption process generates externalities. This is
one of the reasons the government has to intervene in the economy. Please give an
example and comment on the above issue.?
Reply: An example of negative externalities in the production and consumption process is
air pollution caused by factories producing toxic emissions, causing adverse impacts on
human health and the living environment. Meanwhile, positive externalities can be the
generation of renewable energy, reducing emissions and waste.
This issue requires government intervention to impose environmental and labor safety
regulations and standards, as well as environmental taxes to encourage companies and
individuals to use these methods and technologies. Environmentally friendly. The
government may also have a role in controlling business activities by monitoring production
and consumption activities, penalizing businesses for violations, and providing incentives to
those who use products. environmentally friendly products.
Government intervention in this issue will help limit negative externalities and promote
positive externalities, creating a healthy working and living environment, contributing to
improving people's quality of life. people.
Question 7: Considering the local or national reality, which public goods should be
implemented by the private sector? Why.? Why does the private sector rarely provide
pure public goods?
Examples of public goods that should be left to the private sector may include:
 Infrastructure construction projects: Such as highways, Long Thanh airport,
hydroelectric dams... These projects require large investments and are highly risky.
Private implementation 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 creative solutions and optimize productivity to provide better
services to the 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 pure
public goods hardly brings high profits to the private sector, easily causing corruption or
loss of resources.
Question 8: Analyze why economists are interested in the issue of externalities in
production? Give an example of a government policy to address externalities in
Vietnam.
Economists are interested in the issue of externalities in production because they relate to
trade, commerce, and investment activities between countries. Balancing externalities is
important in maintaining a country's economic stability, ensuring that productive activities
are not hampered by oversupply or shortages in the market, or by other problems. related to
exchange rates, tariffs and economic policies.
For example, the Vietnamese government has implemented many policies to address the
problem of externalities in production. One of them is the Investment Promotion Program
(KKT), established in 2006. This program provides a range of benefits, including financial
supports, tax exemptions and other incentives for investors in pre-determined special
manufacturing industries, aiming to attract domestic and foreign investment capital.
Furthermore, the Government also applies tariff policies to protect domestic industries. For
example, in recent times, the government has applied a number of measures to control
pangasius imports, to protect domestic producers from unfair competition from products
imported from abroad.
Question 9:
a. What are the externalities of getting and not getting the Covid-19 vaccine? In
Star?
b. In your opinion, what criteria should we base on to prioritize vaccination groups?
Covid-19 vaccine equitably?
Question 11:
a. Name two provinces of the fire industry and give examples.
b. Are prisons a public good or a private good?
c. There are countries in the world that allow private prisons to open. According to you
should
Promote privatization or not? Why?
Question 12: What is income distribution? How can the government carry out income
distribution? Using simple utilitarianism, describe the construction and meaning of
the social welfare function. What are the “maximum, minimum” standards? What
does the social welfare function according to this standard mean?
Reply: Redistribution of social income is the intervention of the State through provisions of
law and policies to mobilize and persuade people with high incomes to contribute to helping
the state and the community. people with low income.
Social welfare function: W=F(U1, U2,…,Un). Meaning: When the welfare of someone in
society increases while 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: There is an opinion that “To reduce unemployment, marginal income tax
rates should be cut to increase labor supply.” Use the theory of labor supply to explain
why it is difficult to determine the impact of tax cuts on labor supply.? Can empirical
research be used to help predict whether or not you can make predictions based on the
above argument? If so, what type of research is appropriate?
REPLY: Cut income tax → after-tax wages increase → labor supply increases →
unemployment decreases (graph). However, the theory of labor supply says that increasing
tax rates causes two effects: the substitution effect and the income effect: Taxes reduce the
price of leisure time, so people will tend to spend more of it. up Replacement effect; Taxes
reduce income, so people tend to use less leisure goods. Income effect. The overall impact
of these two effects cannot be 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 supply. labor. Econometric research or interviews can be used
to make predictions.
Question 14: Please propose a tax/subsidy policy for a type of externality in Vietnam.
Reply: There is a need for solutions to promote strong development of seed research,
production, processing, preservation and supply to build an advanced Vietnamese seed
industry, which not only can reduce imports but also export seeds to the regional market.
One of them that is needed is an appropriate subsidy policy for plant variety research
institutes and centers.
Question 15: Applying a general equilibrium model analyzes the extent of the impact
of a tax on one good in relation to other goods.
Reply: If taxes on gasoline are increased, gasoline prices will increase, causing people's
need to use gasoline to decrease. Instead of riding motorbikes, people may switch to using
public transportation such as buses. In addition, when gasoline prices increase, it will affect
the price of transportation services, passenger cars, and lead to increased prices of goods.
Consumers are affected by a decrease in income twice: once because the increase in
gasoline prices directly affects their car use, and once because the price of transportation
services and goods increases.