Prof. Bryan Caplan

bcaplan@gmu.edu

http://www.bcaplan.com

Econ 849

Fall, 2001

HW #3 (NOT to be graded)

Cooter, Questions 1 and 2, pp.217-218.

Plus:

1.  (half page, double-spaced)  If the entire U.S. population were given a test of general political knowledge, what percentile do you think you would get?  Qualitatively speaking, what factors analyzed in the empirical literature suggest you would do better than average?  Worse than average?

2.  (half page, double-spaced)  Name one political issue where you think random errors largely "cancel each other out."  If a referendum were held on this issue, how would the vote shares and outcome differ from a world with perfect information?

3.  (half page, double-spaced)  It frequently happens that two senators who represent  the same state disagree.  Is there any way for the Median Voter Theorem to explain this?

4.  (half page, double-spaced)  Name one policy of the federal government that you believe a majority of Americans oppose.  How does this policy survive?

5.  (one page, double-spaced)  Which is more predictively accurate in the modern U.S.: the Median Voter Theorem or the Mean Voter Theorem?  Explain your answer.

6.  (half page, double-spaced)  Using economic arguments, comment on the following: "Due to the 'race to the bottom,' it is more efficient for the federal government, rather than the states, to control welfare policy."

7.  Suppose both the federal government and the Virginia state government can tax the Internet.  The quantity of Internet services supplied is given by:  Qs=100-(tf+ tv), where tf is the federal tax and tv is the Virginia tax.

a.  Give an intuitive explanation for the functional form of the Internet services supply curve.

b.  Assume that the federal government and the state of Virginia both maximize their own total revenue.  Write down the state of Virginia's objective function and solve for optimal tv as a function of tf.

c.  Now use your answer to (b) to solve for the total level of taxation.  Hint: Use symmetry, as in the Cournot oligopoly game.

d.  In this example, does "tax competition" between the branches of government benefit suppliers?  What would the toll be if there were only one taxing authority?  Can you offer an intuitive explanation?