罗森 财政学 第七版(英文版) 配套习题及答案Answers to CHAPTER 5
罗森财政学第七版（英文版）Chap009
罗森财政学第七版（英文版）Chap009CHAPTER 9 – Social Insurance I:Social Security and Unemployment InsuranceMultiple-Choice Questions1. A pay-as-you-go system meansa) you pay for your dinner as you go to the table to eat.b) current working citizens pay for current retired citizens.c) there is no need for taxes since current workers pay for current retirees.d) retirees are paid from accounts that have accumulated with interest over theirworking lives.e) all of the above.2. Asymmetric information generally impliesa) information between parties is not equal.b) all parties are fully informed.c) information is costless.d) information is too costly to transmit.e) a and c.3. A fully funded plan requiresa) you to pay for your dinner as you go to the table to eat.b) current working citizens to pay for current retired citizens.c) no taxes since current workers pay for current retirees.d) retirees to be paid from accounts that have accumulated with interest over theirworking lives.e) all of the above.4. An actuarially fair return meansa) returns on investments are indexed to the stock market.b) returns on investments have to be positive.c) benefits received, on average, would be equal to the premiums paid.d) premiums for insurance are generally paid by the government.e) none of the above.5. When workers save less during their working lives due to the fact that they have beenpaying Social Security taxes, this is known asa) the Social Security effect.b) the wealth substitution effect.c) the bequest effect.d) the life cycle hypothesis.6. The Social Security earnings testa) applies only to workers between 65 and 69 years of age.b) was redesigned in the 1980s to include foreign workers.c) has a tax rate of no more than 16.9 percent.d) does all of the above.7. Social Security pension benefits area) subject to income taxes for those with certain income levels.b) nontaxable for all retirees.c) subject to state, but not federal, income taxes.d) subject to capital gains taxes.e) all of the above.8. The Social Security Administration has which program(s) to administer?a) disability paymentsb) health benefitsc) pensionsd) survivors' benefitse) all of the above9. The percentage of unemployed Americans that actually collects unemployment insurancebenefits isa) 9 percent.b) 18 percent.c) 25 percent.d) 33 percent.10. An earnings test as it relates to Social Security impliesa) benefits are reduced by some predetermined amount for those who have notreached normal retirement age.b) the amount of money earned during the working life of an individual determinesthe amount of benefits received.c) family earnings determine the amount of benefits received.d) all of the above.11. Social security taxes are projected to fall short of benefits starting ina) 2005.b) 2010.c) 2016.d) 2020.e) 2030.12. Social insurance can be justified on the grounds ofa) adverse selection.b) decision-making costs.c) income distribution.d) paternalism.e) all of the above.13. The retirement effect isa) when people retire later than they normally would have due to Social Security.b) when people decide not to retire at all because of problems with Social Security.c) when people retire earlier than they normally would have due to Social Security.d) when people save less for their retirement due to Social Security.e) none of the above.14. The gross replacement rate isa) the proportion of pretax earnings replaced by unemployment insurance.b) a rate of employment in key sectors of the economy.c) the percentage of each paycheck that is removed for unemployment insurance.d) the rate that tax receipts are used to cover tax expenditures.e) none of the above.15. A current worker may save more towards retirement so that he or she will have more toleave his or her children later. This altruistic motive is known as thea) altruism effect.b) bequest effect.c) income effect.d) savings effect.Discussion Questions1. Suppose in the market for labor that the labor supply curveis perfectly inelastic. Thiswould mean that the supply curve is vertical. Furthermore, suppose that demand is normal and downward sloping. Your textbook has explained that unemployment taxes are paid entirely by the employer (demanders). Who actually pays the tax in the scenario described above?2. Suppose that a fresh college grad gets a new job initially paying $20,000 a year. Theemployee gets a 3 percent raise annually. After 5 years of working, the employee quits and never works again. How much will this worker have earned over her brief working career? How much will she have paid in Social Security and Medicare taxes if the tax rate is 7.45 percent?3. Suppose that the ratio of retirees to working citizens is currently 1 to 5, meaning thatthere are 5 working people for every retiree. Suppose that in thirty years the ratio will change to 1 to 2. If benefits remain the same, what will happen to the tax rate assuming retirees are provided benefits in a pay-as-you-go system? How much would benefits decrease if the tax rate remained the same?4. A worker within the middle-income class is preparing to retire. In the year before heretired, his gross monthly earnings are $2,000. His Social Security benefits will be $1,200 per month. Before he retired, his income was subject to a tax of 25 percent. Find his before-tax and after-tax replacement rates.True/False/Uncertain Questions1. Having unemployment insurance available makes people work less.2. The percentage of retired older workers has decreaseddramatically since the introductionof Social Security.3. Social Security benefits have played an important role in the improved economic statusof the elderly over time.4. Unemployment taxes are collected from both employees and employers.5. A pay-as-you-go system of financing Social Security is not as good as a fully fundedsystem.6. A worker can begin receiving benefits as early as age 62.7. Social Security is used to redistribute income.8. Average indexed monthly earnings are derived from the worker’s earnings history anddetermine the primary insurance amount (PIA).9. Having a Social Security program makes people less inclined to save for their ownretirement.10. The gross replacement rate is typically 95% of pretax earnings.Essay Questions1. Work disincentives in the system of Social Security have seen the number of persons inthe program increase dramatically. What incentives could be put in place to reverse, or at least slow, this trend?2. Why should firms in industries with higher levels of turnover be required to pay more inunemployment insurance payments?3. Do you feel that when you retire there will still be Social Security? If so, do you feel thatbenefits will be at present levels or tax rates will have increased? Finally, has this discussion changed your plans regarding your own personal savings for your retirement?Answers to CHAPTER 9 - Social Insurance I:Social Security and Unemployment InsuranceAnswers to Multiple-Choice Questions1. b2. a3. d4. c5. b6. a7. a8. e9. d10. a11. c12. e13. c14. a15. bAnswers to Discussion Questions1. The suppliers of labor (employees) would be totally responsible for the paying the tax,despite the fact that the tax was levied on employers.2. The worker will have earned a total of approximately $106,182. She will have paidapproximately $7,910.59 in taxes.3. Initially, a worker paid for 20 percent of a retiree’s benefits. In the future, the sameworker would be responsible for paying for half of a current retiree’s benefits. If benefits remained the same, then each worker’s tax burden would increase by approximately30 percent of the cost of benefits. If tax rates remained the same, then benefits wouldneed to fall by approximately 60 percent.4. His before-tax replacement rate would be 1,200/2,000 = 0.6. His after-tax replacementrate would be 1,200/1,500 = 0.8.Answers to True/False/Uncertain Questions1. U2. F3. T4. F5. U6. T7. T8. T9. U10. FAnswers to Essay Questions1. Increasing the retirement age would see fewer people in the program. Other solutionsinclude removing the survivor’s benefits and introducing a more stringent wealth threshold that says that those persons with a certain wealth are not allowed to receive benefits.2. The employees in these industries are more likely to need unemployment benefits in thefuture.3. This is a personal question but, as recently as August 2004,the current chairman of theFederal Reserve, Alan Greenspan, has warned that benefits will need to be reduced for future recipients or that there will need to be increases in taxes. Many working adults today are changing their saving patterns because of this outlook.。
第七版答案(翻译-英译中结果)
内容第1章介绍 (1)第二章会计..........................................................在理想的条件7第三章财务报告的决策有用法 (68)第四章......................................................................有效的证券市场129第五章会计信息的价值相关性 (153)第六章决策有用性................................测量方法194第七章........................................................................测量应用237第8章有效的决策有用的契约方法 (285)第九章的分析冲突 (321)第十章高管薪酬 (371)第十一章盈余管理 (425)第十二章标准设置:经济问题 (487)第十三章标准设置:政治问题 (527)版权©2015年皮尔森加拿大公司。
第一章介绍1.1 这本书的目的1.2 一些历史的角度来看1.3 2007-2008年的市场崩盘1.4 有效的合同1.5 关于道德行为的说明1.6 基于规则的与基于原则的会计准则1.7 财务会计和报告信息的复杂性1.8 会计研究的作用1.9 信息不对称的重要性1.10财务会计理论的基本问题1.11监管作为对根本问题的反应1.12本书的组织结构1.12.1理想条件1.12.2逆向选择1.12.3道德风险1.12.4标准设定1.12.5标准设定过程1.13财务会计理论与会计实务的相关性学习目标及建议教学方法1. 这本书的概要我使用图1.1作为模板来描述这本书的大致轮廓。
由于学生们通常没有机会在第一节课上阅读第一章，所以我非常关注这一章的内容。
我讨论的要点是:•理想的会计环境。
在这里，基于现值的会计是很自然的。
我讨论了这种会计基础可行所需的理想条件，但没有详细讨论，因为这个主题在第2章有更深入的讨论。
罗森财政学第七版(英文版)配套习题及答案Chap002
Test Bank to accompany Rosen’s PublicFinance, Seventh Edition Chapter 2CHAPTER 2 - Tools of Positive AnalysisMultiple-Choice Questions1. Positive economicsa) does not depend on market interactions.b) only looks at the best parts of the economy.c) examines how the economy actually works (as opposed to how it should work).d) is very subjective.2. The Law of Demand statesa) that there is an inverse relationship between price and quantity demanded.b) that the judicial branch of government sets demand schedules.c) that laws can have no effect on market economies.d) none of the above.3. The function Y = f(X,Z) meansa) X multiplied by Y equals f.b) X + Y = Z.c) Y is a function of both X and Z.d) none of the above.4. If there is a function and one component is Y3, then there is a ____ in the function.a) square rootb) cubicc) cosined) circlee) all of the above5. Refer to Question 4 above. The equation containing Y3 would bea) linear.b) quadratic.c) a Nash equilibrium.d) inefficient.e) nonlinear.6. Marginal and average taxes area) calculated using the same methodology.b) not used in modern tax analysis.c) not calculated using the same methodology.d) all of the above.77. The slope of a regression line is calculated by dividinga) the intercept by the change in horizontal distance.b) the change in horizontal distance by the change in vertical distance.c) the change in horizontal distance by the intercept term.d) the change in vertical distance by the change in horizontal distance.e) none of the above.8. Unobserved influences on a regression are captured in thea) error term.b) parameters.c) regression line.d) significance term.e) regression coefficient.9. The following can be analyzed using econometrics:a) labor supply.b) market demand.c) tax-setting behavior.d) poverty.e) all of the above.10. Normative economicsa) does not depend on market interactions.b) only looks at the best parts of the economy.c) examines how the economy actually works (as opposed to how it should work).d) embodies value judgments.11. The Latin phrase ceteris paribus meansa) let the buyer beware.b) other things being the same.c) swim at your own risk.d) whatever will be will be.12. The substitution effecta) is when individuals consume more of one good and less of another.b) is associated with changes in relative prices.c) will have no effect if goods are unrelated.d) is all of the above.13. Self-selection bias affects empirical estimation bya) leading to samples that are not representative of the entire population.b) making estimators improved.c) increasing the accuracy of test results.d) doing none of the above.14. When different bundles of commodities give the same level of satisfaction, you area) said to be indifferent between the bundles.b) said to be confused.c) not able to make a decision.d) unhappy with any combination.e) none of the above.15. The marginal rate of substitution isa) the slope of the utility curve.b) the slope of the contract curve.c) the slope of the utility possibilities curve.d) none of the above.Discussion Questions1. Suppose tha t a competitive firm’s marginal cost of producing output q is given byMC=2+2q. Assume that the market price of the firm’s product is $13.a) What level of output will the firm produce?b) What is the firm’s producer surplus?2. Use the following function for elasticity: = -(1/s)(P/X), wheres is the slope of thedemand curve, P is the price, and X is the quantity demanded, tofind elasticity when demand is X d= 22-(1/4)P when the price of good Xis 20.3. Imagine that the demand for concert tickets can be characterized by the equation X d = 7 –P/5. The supply of tickets can be written as X d = -2 + P/5. Find the equilibrium price and quantity of concert tickets.True/False/Uncertain Questions1. Empirical analysis generally deals with theory and little data.2. Economists attempt, with moderate success, to perform controlled experiments makingpolicy analysis helpful.3. Regression coefficients are indicators of the impact of independent variables ondependent variables.4. Primary data sources include information gathered from interviews and experiments.5. Multiple regression analysis typically requires several computers.6. Econometrics is the statistical analysis of economic data.7. Theory is always necessary for empirical research.8. The demand for a good is not affected by the demand for arelated good.9. Equilibrium in the market is where supply is equal to demand.10. A model is a simplified description of some aspect of the economy.Essay Questions1. “S ince the social sciences are not like the natural sciences, experiments are a waste oftime.” Comment on the above statement.2. Discuss the concept in econometrics that states, “garbagein . . . garbage out.”3. It is possible that two different economists can examine the same situation, such asschool funding, and reach entirely different conclusions. Why is this so?。
罗森《财政学》期中考试卷(附答案)
注意：答案按题号顺序写在答题纸上，写在本试卷或草稿纸上一律不给分，考试时间120分钟，满分100分。
一、名词解释（15*1=15分）1．正常品 2．帕累托效率 3．契约曲线 4．边际转换率5．外部性 6．公共物品 7．免费搭车者 8．科斯定理9．庇古税 10．多数票规则 11．投票悖论 12．单峰偏好13．影子价格 14．消费者剩余 15．成本——收益分析二、单选题（20*1=20分）1．下列哪项不属于准实验研究的缺陷？（ ）A ．不能真实模仿处理组的随机分派B ．不是估计政府计划影响的可靠方法C ．能够应用的研究问题有限D ．面临如何将结果推广到其他背景和讨论的问题2．在财政学中，实证研究的一个重要目的是，估计政府政策与某种行为之间的（ ）。
A ．因果关系B ．相关关系C ．统计关系D ．回归关系3．在埃奇沃斯框图中的契约曲线上，所有消费者的（ ）都相等。
A ．帕累托效率B ．边际效用C ．边际替代率D ．边际转换率4．在生产可变的情况下，af af MRT =MRS 是帕累托效率的（ ）。
A ．充分条件B ．必要条件C ．充分必要条件D ．扩展条件5．（ ）告诉我们，竞争的经济会“自动地”实现有效的资源配置，无须任何集权性指导。
A ．政府机械论B ．科斯定理C ．第一福利定理D ．第二福利定理6．政府对产生外部正效应的经济主体进行补贴，带来了各种影响，下面说法错误的是（ ）A ．促进了社会整体福利水平的提高B ．降低了该企业的生产成本C ．降低了该企业的均衡产量D ．有效地纠正了外部性7．（ ）意味着一个人对某物品的消费并不妨碍其他任何人对它的消费。
A ．非干扰性B ．非拒绝性C ．非排他性D ．非竞争性8．在消费理论中，追求效用最大化的个人，使消费品A 对消费品B 的边际替代率等于二者的（ ）。
厦门大学本科课程《财政学》期中试卷＿＿学院＿＿系 年级 ＿＿专业主考教师： 冯俊诚 试卷类型：（A 卷）A．边际效用之比B．边际转换率C．相对效用D．相对价格9．第二福利定理指出，社会通过适当地安排（），然后让人们彼此自由地交易，就可以实现帕累托效率资源配置。
罗森 财政学 第七版(英文版) 配套习题及答案Chap002
CHAPTER 2 - Tools of Positive AnalysisMultiple-Choice Questions1. Positive economicsa) does not depend on market interactions.b) only looks at the best parts of the economy.c) examines how the economy actually works (as opposed to how it should work).d) is very subjective.2. The Law of Demand statesa) that there is an inverse relationship between price and quantity demanded.b) that the judicial branch of government sets demand schedules.c) that laws can have no effect on market economies.d) none of the above.3. The function Y = f(X,Z) meansa) X multiplied by Y equals f.b) X + Y = Z.c) Y is a function of both X and Z.d) none of the above.4. If there is a function and one component is Y3, then there is a ____ in the function.a) square rootb) cubicc) cosined) circlee) all of the above5. Refer to Question 4 above. The equation containing Y3 would bea) linear.b) quadratic.c) a Nash equilibrium.d) inefficient.e) nonlinear.6. Marginal and average taxes area) calculated using the same methodology.b) not used in modern tax analysis.c) not calculated using the same methodology.d) all of the above.7. The slope of a regression line is calculated by dividinga) the intercept by the change in horizontal distance.b) the change in horizontal distance by the change in vertical distance.c) the change in horizontal distance by the intercept term.d) the change in vertical distance by the change in horizontal distance.e) none of the above.8. Unobserved influences on a regression are captured in thea) error term.b) parameters.c) regression line.d) significance term.e) regression coefficient.9. The following can be analyzed using econometrics:a) labor supply.b) market demand.c) tax-setting behavior.d) poverty.e) all of the above.10. Normative economicsa) does not depend on market interactions.b) only looks at the best parts of the economy.c) examines how the economy actually works (as opposed to how it should work).d) embodies value judgments.11. The Latin phrase ceteris paribus meansa) let the buyer beware.b) other things being the same.c) swim at your own risk.d) whatever will be will be.12. The substitution effecta) is when individuals consume more of one good and less of another.b) is associated with changes in relative prices.c) will have no effect if goods are unrelated.d) is all of the above.13. Self-selection bias affects empirical estimation bya) leading to samples that are not representative of the entire population.b) making estimators improved.c) increasing the accuracy of test results.d) doing none of the above.14. When different bundles of commodities give the same level of satisfaction, you area) said to be indifferent between the bundles.b) said to be confused.c) not able to make a decision.d) unhappy with any combination.e) none of the above.15. The marginal rate of substitution isa) the slope of the utility curve.b) the slope of the contract curve.c) the slope of the utility possibilities curve.d) none of the above.Discussion Questions1. Suppose that a competitive firm’s marginal cost of producing output q is given byMC=2+2q. Assume that the market price of the firm’s product is $13.a) What level of output will the firm produce?b) What is the firm’s producer surplus?2. Use the following function for elasticity: = -(1/s)(P/X), where s is the slope of thedemand curve, P is the price, and X is the quantity demanded, to find elasticity when demand is X d= 22-(1/4)P when the price of good X is 20.3. Imagine that the demand for concert tickets can be characterized by the equation X d = 7 –P/5. The supply of tickets can be written as X d = -2 + P/5. Find the equilibrium price and quantity of concert tickets.True/False/Uncertain Questions1. Empirical analysis generally deals with theory and little data.2. Economists attempt, with moderate success, to perform controlled experiments makingpolicy analysis helpful.3. Regression coefficients are indicators of the impact of independent variables ondependent variables.4. Primary data sources include information gathered from interviews and experiments.5. Multiple regression analysis typically requires several computers.6. Econometrics is the statistical analysis of economic data.7. Theory is always necessary for empirical research.8. The demand for a good is not affected by the demand for a related good.9. Equilibrium in the market is where supply is equal to demand.10. A model is a simplified description of some aspect of the economy.Essay Questions1. “Since the social sciences are not like the natural sciences, experiments are a waste oftime.” Comment on the above statement.2. Discuss the concept in econometrics that states, “garbage in . . . garbage out.”3. It is possible that two different economists can examine the same situation, such asschool funding, and reach entirely different conclusions. Why is this so?。
财政学 哈维罗森 第七版 课后习题答案(英文)(2)
Chapter 7 – Income Redistribution: Conceptual Issues1. Utilitarianism suggests that social welfare is a function of individuals’ utilities. Whetherthe rich are vulgar is irrelevant, so this part of the statement is inconsistent with utilitarianism. O n the other hand, Stein’s assertion that inequality per se is unimportant is inconsistent with utilitarianism.2. a. To maximize W, set marginal utilities equal; the constraint is I s + I c = 100.So,400 - 2I s = 400 - 6I c.substituting I c = 100 - I s gives us 2I s = 6 (100 - I s ).Therefore, I s = 75, I c = 25.b.If only Charity matters, then give money to Charity until MU c = 0 (unless all themoney in the economy is exhausted first).So,400-6 I c = 0; hence, I c = 66.67.Giving any more money to Charity causes her marginal utility to become negative,which is not optimal. Note that we don’t care if the remaining money ($33.33) isgiven to Simon or not.If only Simon matters, then, proceeding as above, MU s. 0 if I s = 100; hence, givingall the money to Simon is optimal. (In fact, we would like to give him up to $200.)c.MU s = MU c for all levels of income. Hence, society is indifferent among alldistributions of income.3. The main conceptual problem with the poverty gap is that it doesn’t account fo r theincome effect on labor force participation rates. The poverty gap is calculated assuming there are no behavioral responses; e.g., that labor income would remain unchanged even after the income was transferred to the poor population, but economic theory predicts that this will not be so. In fact, if the poor household were given enough income to bring it out of poverty, we would believe that the household would work less as a result of receiving this transfer. This complicates the analysis, of course, because once the household works less, then it will generate less labor income, thus lowering its overall income. This means that the poverty gap actually understates the amount of money necessary to alleviate poverty in the United States. In addition, the poverty gap is based on the official poverty line, which is thought to be an ad-hoc measure of the true “needs”of a family.4. A day care center is an example of an in-kind compensation. The figure below is similarto Figure 8.2 in the text. The original budget line is G1 H1 If the employee received $5,000 cash, the budget line moves to G2 H2 . An employee who uses the day care center may not be $5,000 better off. The employee consumes at point A, but would be better off at point B, which represents consumption after a cash transfer of $5,000.5. a. This would increase the incomes of the providers of computer equipment and theindividuals who maintain the equipment. In the long run, this might also increasethe incomes of the students who use the equipment. Moreover, giving a laptop toall seventh graders (rather than poor seventh graders) may simply “crowd-out”computer transfers from parents to children. One could imagine that nowadaysmany children do have a computer at home, paid for by the parents. Thisgovernment transfer may simply result in less parental transfer to the child.b.Providing free after-school programs for children in impoverished families largelyacts as an in-kind transfer for poor, working households. The program is of littlevalue for unemployed households, as the alternative would be childcare at home.For those who are employed, and paying for childcare, this program provides analternative and effectively changes the after-tax, after-working-cost wage. Thisalso may affect work behavior on the extensive margin. The likely “losers” fromsuch a program are childcare providers, who see a reduction in demand for theirservices. In principle, this reduction in demand could lower the hourly childcarecost for all workers with children, though this effect is likely to be modest becausemost impoverished families do not have a very large labor force attachment and,thus, their effect on the childcare market as a whole is likely to be small.6. a. False. Society is indifferent between a util to each individual, not a dollar to eachindividual. Imagine that U L=I and U J=2I. Then each dollar given to Jonathanraises welfare more than the same dollar given to Lynne.b. True. The social welfare function assumes a cardinal interpretation of utility sothat comparisons across people are valid.c. False. Departures from complete equality raise social welfare to the extent thatthey raise the welfare of the person with the minimum level of utility. Forexample, with the utility functions U L=I and U J=2I, the social welfare functionW=min[U L,U J] would allocate twice as much income to Lynne than Jonathan.7. Initially the price of food was $2 and the price of other goods was $1. The black marketfor food stamps changes the price of food sold to $1. In Figure 7.2 of the textbook, as one moves to the “northwest” from point F, the segment will now have a slope (in absolute value) of 1 rather than 2. The black market may make the individual better off if the best point on her budget constraint AFD was initially at the corner solution of point F, and the black market certainly does not make her worse off. It is important to note that the black market does not always make the recipient better off. If the (absolute value) of the marginal rate of substitution (MRS) were between 1 and 2, the indifference curve would not “cut” into the new part of the budget constraint with the black market.If the MRS were less than (or equal to) 1 in absolute value, the person would be made better off and would reduce food consumption by selling the food stamps on the black market.Food StampGuarantee Food8. Pareto efficient redistribution is a reallocation of income that increases (or does notdecrease) the utility of all consumers. With these two consumers, Marsha’s utility increases as Sherry’s utility increases. Thus, it may be possible to reallocate income from Marsha to Sherry and raise both of their utility. With Sherry’s initial utility function of U S=100Y S1/2, her utility with $100 of income is U S=100($100)1/2, or U S=1,000. With Marsha’s initial utility function of U M=100Y M1/2+0.8U S, her utility with $100 of income is U M=100($100)1/2+0.8(1,000), or U M=1,800. If the social welfare function is additive, then initial welfare is W=U S+U M=1,000+1,800=2,800. If $36 is reallocated from Marsha to Sherry, then Sherry’s income is now $136 and Marsha’s is now $64. With Sherry’s utility function, her utility with $136 of income is U S=100($136)1/2, or U S=1,166.190.With Marsha’s utility function, her utility with $64 of income is U M=100($64)1/2+0.8(1,166.190), or U M=800+932.952=1,732.952. In this case, Sherry’s utility increases from 1,000 to 1,166.190, while Marsha’s utility falls from 1,800 to 1,732.952. Social welfare increases with this redistribution, going from 2,800 to 2,899.142. Thus, this redistribution increases social welfare, but is not Pareto efficient redistribution.Chapter 8 – Expenditure Programs for the Poor1. a. Note that the figure below shows the correct shape of the budget constraint, butthe numbers themselves are outdated. With a wage rate of $10 per hour,Elizabeth earns $100. Because the deduction in California is $225, none of herearnings are counted against the $645 welfare benefit. Thus, her total income is$745 (=$100+$645).b.The actual welfare benefits collected by a person equals B=G-t(Earnings-D),where B=actual benefits, G=welfare grant, t=tax rate on earned income, andD=standard deduction. Thus, (Earnings-D) is the net earnings that are taxed awayin the form of reduced benefits. When benefits equal zero (B=0), the expressionbecomes 0=G-t(Earnings-D), which collapses to: Earnings=G/t+D. This is knownas the “breakeven formula.” In the California context here, the expressionbecomes Earnings=$645/0.5 + 225, or Earnings=$1,515. With a wage rate of $10per hour, this corresponds to 151.5 hours of work per month.c.The diagram shows the correct shape of the budget constraint, but the “577” figureshould be r eplaced with “645” and the “9” hours should be replaced with “22.5”.d.The diagram above shows one possibility – in this case, Elizabeth is both workingand on welfare – but she collects a reduced welfare benefit in this case.2. One could gather data on the earnings of those in the program, as well as earnings datafrom nonparticipants. Regress the earnings variable on demographic variables and other factors that determine earnings (such as education and experience), and a variable that indicates whether the individual participated in the training program. Factors that affect local employment conditions, such as unemployment levels, may help explain earnings, but they may also explain participation in the program. The econometric strategy should be chosen carefully to account for this.3. If the quantity of leisure consumed by X appears as an argument in the utility function ofY, then X’s consumption of leisure creates an externality. If the externality is negative(i.e., Y likes X to work), then a wage subsidy of X might induce him to work the efficientnumber of hours. Alternatively, a workfare program might achieve the same goal by simply forcing X to work. However, to the extent that the feasible quantity of labor supply is determined less through market incentives now, workfare would be less efficient.4. He participates in the public housing program as long as P1P2ca cef.5. As illustrated below, the budget constraint with food stamps has a “notch” in it, similar tothe analysis of Medicaid in Figure 8.9 of the textbook. At the notch, the marginal tax rate is greater than 100%. One key difference from the figure in the textbook is that the marginal tax rate on earned income for Medicaid is 0% until the “Medicaid notch,” while the marginal tax rate on earned income for food stamps is 24% until the “food stamp notch.” The reason the food stamp notch exists at all is that there is a “gross income test,” where a recipient is ineligible if income is higher than the limit. The characterization in the Rosen textbook on page 189 that “at some point near the poverty line, food stamps worth about $1,250 are suddenly lost” implicitly assumes that childcare costs are quite high. This is likely to be true for many households. In the year 2004, this monthly (annual) gross income limit was $1,994 per month ($23,928 per year) for a family of four, while the monthly guarantee was $471 ($5,652 per year). Assuming the family had earnings at the limit of $1,994 of earnings during the month, and after applying a 20% earnings deduction and a $134 monthly standard deduction, the household would receive a monthly (annual) benefit of $32 ($384). We arrive at this number using the equation B=G-t(E-.2E-D)=471-.3(.8*1994-134)=$471-$438.36=$32.64, which is then rounded down to $32. In this case, B=actual benefits received, G=food stamp guarantee, t=tax rate, E=earnings, and D=standard deduction. Increasing annualearnings by $1 from $23,928 to $23,929 would reduce food stamp benefits from $384 to $0; hence the “food stamp notch.” This notch would be even higher if the household qualified for a childcare deduction, child support deduction, or shelter deduction. The childcare deduction ranges between $175 and $200 per child per month. Assuming this family of four consisted of a mother and three children, each with $175 of monthly childcare costs, then B=G-t(E-.2E-D-C)=471-.3(.8*1994-134-525)=$471-$280.86=$190.14, which is then rounded down to $190. The modification here is that C=childcare costs. This amount corresponds to an annual food stamp benefit of $2,280. Figure 8.5 below draws the budget constraint using annual levels for the food stamp program, using 2004 rules and assumes no childcare expenses.6. For an individual who is not working while on welfare, in this case the highestindifference curve touches the budget constraint on the right vertical axis. Note that the marginal rate of substitution (MRS) does not necessarily equal the after-tax wage rate at the time endowment – rather, it is possible that the person would want to consume more leisure than the time endowment but is obviously constrained from doing so.Leisure$23,928Leisure7.In all cases, the demand curve for housing slopes downward. a. If the price of low income housing gets bid up but there is no increase in the stock of housing, then the supply curve is perfectly inelastic, e.g., vertical.Q 0Q HOUSINGFIGURE 8.7a – Demand curve shiftsb.If there is no increase in the price of housing, but there is an increase in the stockof housing, then the supply curve is perfectly elastic, e.g., horizontal.Q 0Q HOUSINGFIGURE 8.7b – Demand curve shifts Q 1c.If there is an increase in both the price and quantity of housing, then the supplycurve slopes upward.According to Sinai and Waldfogel, there is partial crowding out, consistent with case cabove. Although the underlying housing stock itself is probably quite inelastic in the short-run, the number of rental homes can be more elastic as (potential) landlords convert vacation homes or vacant homes into rental units.8. a.When Eleanor’s hours (earnings) go from 0 to 1,000 ($0 to $8,000), she qualifiesfor an additional earned income tax credit (EITC) worth $3,200 (=0.4*8,000).Thus, her income goes up from $0 to $11,200. Note to instructors – thedistinction between earnings and income may cause confusion in the students’answers. b.When Eleanor’s hours (earnings) go from 1,000 to 1,500 ($8,000 to $12,000), shequalifies for the maximum EITC (according to Figure 8.8 in the textbook). Shereceives the full EITC when her earnings exceed $10,510, at which time the creditequals $4,204 (=0.4*$10,510). The earnings between $10,510 and $12,000 face neither a subsidy nor phase-out from the EITC. Thus, her income goes up from $11,200 to $16,204.c. When Eleanor’s hours (earnings) go from 1,500 to 2,000 ($12,000 to $16,000),she moves into the range where the EITC is phased out. According to Figure 8.8 Q 0Q HOUSINGFIGURE 8.7c – Demand curve shifts outward,Q 1in the textbook, she receives the maximum subsidy of $4,204 until her earningsexceed $14,730. For the marginal earnings between $14,730 and $16,000, theEITC is reduced at a 21.06% tax rate. Thus, her EITC falls by $267.46 from$4,204 to $3,936.54 (=4,204-0.2106*(16,000-14,730)). Her income rises from$16,204 to $19,936.54.Chapter 9 – Social Insurance I: Social Security and Unemployment Insurance1. With adverse selection, insurance contracts with more comprehensive coverage arechosen by people with higher unobserved accident probabilities. To make up for the fact that a benefit is more likely to be paid to such individuals, the insurer charges a higher premium per unit of insurance coverage.2. There are many possible implications of a voluntary Social Security system. Onepossibility is that people would save less for retirement, betting that society would not put up with having great numbers of elderly poor. Part of the effect of the Friedman program, then, would depend on the government's credibility when it promises not to bail out people who do not save enough to survive during retirement.3. Use the basic formula for balance in a pay-as-you-go social security system:t =(N b/N w)*(B/w).Call 1990 year 1 and 2050 year 2. Thent1 = .267*(B/w)1t2 = .458*(B/w)2It follows that to keep (B/w)1=(B/w)2 we require t2/t1=.458/.267=1.71. That is, tax rates would have to increase by 71 percent. Similarly, to keep the initial tax rate constant, we would require (B/w)2/(B/w)1=.267/.458=0.58. Benefits would have to fall almost by half.4. If Social Security benefits are partially taxed for those who have other income over acertain level, then there is an implicit means test in receiving full, untaxed benefits.However, there is no explicit means test for eligibility for the program. Everyone receives benefits, though some recipients must pay some tax on them. Thus, the two statements are somewhat inconsistent with each other.5. Austen’s quote seems like it could relate adverse selection, but perhaps more likely, tomoral hazard. The q uote “If you observe, people always live forever when there is any annuity to be paid them” in a sense sounds like they act differently (e.g., better diet, more exercise, etc.) when an annuity is to be paid –the idea of moral hazard. In contrast, adverse selection suggests that people who expect to live a long time to be the ones who purchase annuities. A recent paper by Finkelstein and Poterba (NBER working paper, December 2000) found that “mortality patterns are consistent with models of asymmetric inf ormation” and that annuity “insurance markets may be characterized by adverse selection.”6. Equation (9.1) relates taxes paid into the Social Security system to the dependency ratioand the replacement ratio, that is, t=(N b/ N w)*(B/w). If the goal of public policy is to maintain a constant level of benefits, B, rather than a constant replacement ratio, (B/w), then taxes may not need to be raised. If there is wage growth (through productivity), then it is possible to maintain B at a constant level, even if the dependency ratio is growing.By rearranging the equation, we can see that B=t*w*(N b/ N w)-1. That is, increases in wage rates (the second term) offset increases in the dependency ratio (the third term).Thus, constant benefits do not necessarily imply higher tax rates.7. The statement about how the different rates of return in the stock market and governmentbond market affect the solvency of the trust fund is false. If the trust fund buys stocks, someone else has to buy the government bonds that it was holding. So, there is no new saving and no new capacity to take care of future retirees.8. Diamond and Gruber’s calculations suggest that the additional year of work (and delayedretirement) lowers the present discounted value of expected Social Security wealth by $4,833. If the adjustment were actuarially fair, Social Security wealth would neither rise nor fall. Since wealth falls, the adjustment is actuarially unfair.9. For those who argue that the scheme for financing Social Security is unfair becausepeople with low earnings are taxed at a higher rate than those with high earnings, the key issue is that the cumulative payroll tax of 12.4 percent is capped for each person, after which the payroll tax is zero (this ignores the 2.9 percent uncapped Medicare tax, however). The earnings ceiling in 2004 is $87,900. Hence, Social Security payroll taxes as a share of earnings fall after the ceiling is passed – thus, the Social Security payroll tax may be thought of as regressive. The opponents to this view note that the above analysis only focuses on taxes paid, not benefits received. As shown in Table 9.3, Social Security redistributes from high earners to low earners, and the formula for the primary insurance amount offers extremely high replacement rates to very low earners, and much lower replacement rates to high earners. Thus, the net tax payment(taxes minus benefits) is likely to be progressive, not regressive. One critical assumption in this kind of analysis is how one computes lifetime benefits –e.g., do we assume that low earners and high earners live the same number of years?10. Let G stand for the individual’s gross earnings. The question assumes that the personfaces a marginal tax rate of 15% and a payroll tax of 7.45%. Thus, the person’s after-tax earnings (denoted by N) are N=(1-t earn-t payroll)G, or N=(1-0.15-0.0745)G, or N=0.7755G.It is assumed that the gross unemployment benefits, U, are equal to 50 percent of before-tax earnings, or U=0.5G. Net unemployment benefits, B, take out income taxes, so B=(1-t earn)U=(1-t earn)0.5G=(1-0.15)0.5G=0.425G. The percentage of the individual’s after-tax income that is replaced by UI is therefore equal to B/N, or 0.425G/0.7755G, which is approximately 54.8%.Unemployment benefits are about 55% of the individual’s previous after-tax income. The effects of unemployment insurance on unemployment area matter of considerable debate. While the high replacement rates from UI may increasethe duration of unemployment, the longer search time may reduce recurrence of unemployment by allowing time for a worker to find a better job match. Empiricalstudies seem to show that the hazard rate into employment spikes up around the time that benefits run out – perhaps suggesting that job matches are not really improving.Chapter 10 – Social Insurance II: Health Care1. The quotation contains several serious errors. First, concern with health care costs doesnot mean that health care is not a “good.” Economists do not care about the cost of health care per se. Rather, the issue is whether there are distortions in the market that lead to more than an efficient amount being consumed. Second, it makes a lot of difference how money is spent. One can create employment by hiring people to dig ditches and then fill them up, but this produces nothing useful in the way of goods and services. Thus, employment in the health care sector is not desirable in itself. It is desirable to the extent that it is associated with the production of an efficient quantity of health care services.2. a. Those who have a relatively high probability of needing the insurance are the oneswho are most likely to buy it. This raises the premium, which in turn, leads toselection by people who have an even higher probability of using it. The cyclecontinues until the price is so high that virtually no one purchases the policy.b.Employer-provided health insurance is deductible to the employer and not taxed tothe employee.c.Because of the tax subsidy, individuals may purchase more than the efficientamount of health insurance. That is, they “over-insure.” An interesting exampleof how the tax system leads to overinsurance is given in a recent Wall StreetJournal (January 19, 2004) article by Martin Feldstein. He gives an example oftwo different California Blue Cross health plans – identical in all respects exceptfor the deductible and annual premiums. The low-deductible plan (the “generous”plan) has a deductible of $500 per family member, up to a maximum of two andan annual premium of $8,460. Thus, the maximum out-of-pocket expense is$1,000. The high-deductible plan (the “less generous” plan) has a deductible of$2,500 per family member, up to a maximum of two, and an annual premium of$3,936. Thus, the maximum out-of-pocket expense is $5,000. Note that thepremium savings of $4,524 actually exceeds the maximum incremental deductiblepayment of $4,000 (which would only occur if the family had very high healthexpenses). In principle, the high deductible plan is unambiguously better. But thetraditional tax rules could lead an employer to choose the low deductible policy.If the employee faced a marginal tax rate of 45% (the sum of federal, state, andpayroll tax rates), then if the $4,524 premium saving was turned into taxablesalary, the individual’s net income would only rise by $2,488. Thus, families withhigh expected medical expenses do better with the “generous” plan, even though itis more costly in terms of premiums.3. a. D d=4.22–(0.044)(50)=2 visits per year.Total expenditure =(2)(50)=$100b.Now the individual pays only $5 per visit.D d = 4.22 – (0.044)(5) = 4 visits, with out-of-pocket costs of $20.Insurance company pays ($45)(4) = $180Total expenditure = $200, double its previous level.4. Examining Figure 10.1, we can see why health care costs increased for the state ofTennessee. As insurance coverage increases, this lowers the cost of medical expenses for those who were previously did not have insurance, which increases the overall amount of medical services they consume. Before receiving insurance, these people demand M o units of medical services, and the amount they pay is represented by the area OP o aM o.But after receiving insurance coverage, they demand M1amounts of medical services, paying only OjhM1, while their insurance pays jP o bh. The increase in insurance payments is sizable for two reasons – first, by providing coverage, it pays for the majority of the already sizable medical expenses incurred by this group, and second, the introduction of insurance makes the group consume even more medical services. In short, if the people who designed the Tennessee program had realized that the demand curve for medical services is downward sloping, they would not have been surprised at the consequences of their program.To explain why HMOs have been unable to contain long-run health care costs, it is necessary to consider the effect of technology on health care costs in the long-term. The inherent problem is that the market for medical care places a large premium on using the latest and most-developed medicines and machinery for treating patients. These technologies tend to be expensive. Hence, while introducing HMOs can lead to a once and for all decrease in the rate of change in health care costs, there is nothing that an HMO can do to lower the cost of continually providing the latest in medical treatments. 5. The goal of making the Medicare prescription drug benefit a one-time, permanentdecision is to reduce the adverse selection problem (no te: the current “Medigap”program operates in this manner to some extent – a senior citizen has choice over all 10 of the Medigap plans for only a short period of time after they turn 65, after which they may be denied based on their health). Imagine a cohort of people turning age 65 and becoming eligible for the Medicare drug benefit. If the decision to enter (or exit) could be made every year, then healthy senior citizens would have a strong incentive to wait until they became unhealthy and needed drugs, and then enter the prescription drug program (presumably resulting in economic losses for the program). Similarly, when people who were collecting the prescription drug benefit became healthy, they would have a strong incentive to “opt-out” of the prog ram. By making the decision opt-in at the beginning or not at all, the healthy younger seniors are likely initially cross-subsidizing the older seniors. Note that this “opt-in at the beginning” works because bad health and older age are positively correlated with each other. If, for example, younger seniors used more drugs (and perhaps older seniors used more inpatient care, etc.), then older seniors could simply stop paying annual premiums and give up their option of being in the program. If this scenario held empirically, this would exacerbate the adverse selection problem and the opt-in scenario would not completely solve the adverse selection problem.6. The budget constraint initially has units of Medigap on the x-axis, and other goods on they-axis. Given initial prices of $1 per unit for each good, and $30,000 of income, the budget constraint has a slope of -1, and the intercepts on both axes are at 30,000 units. It is assumed that the initial utility maximizing bundle consumes 5,000 units of Medigap, hence the indifference curve is tangent at (5000,25000). All of this is illustrated in the figure below.Medigapefficiency units30,000 5,000After the “minimum Medigap” mandate, the consumer can either choose 0 units of Medigap or 8,000 or more units of Medigap. Thus, part of the budget constraint is eliminated (though the overall shape remains the same as before). After the mandate, the point (0,30000) is available, as well as all of the points to the southeast of the point (8000,22000). Clearly, the person’s utility must fall since the preferred choice, (5000,25000) is no longer available. If the person attains a higher level of utility as (0,30000) compared with (8000,22000), the person chooses to not purchase Medigap. In this case, the marginal rate of substitution is no longer equal to the price ratio. This is illustrated below.Medigapefficiency units30,000 5,000 8,000。
罗森 财政学 第七版(英文版) 配套习题及答案Chap004
CHAPTER 4 - Public GoodsMultiple-Choice Questions1. Public goods are characterized bya) nonrivalness.b) excludability.c) the sum of the MRSs equaling MRT.d) all of the above.2. Market mechanisms are unlikely to providea) prices.b) nonrival goods efficiently.c) supply and demand.d) none of the above.3. A pure private good isa) nonrival in consumption and subject to exclusion.b) rival in consumption and subject to exclusion.c) rival in consumption and not subject to exclusion.d) all of the above.4. Commodity egalitarianism refers to commodities thata) are important for most consumers.b) are too dangerous for most consumers.c) should be made available to all consumers.d) are good ideas but never produced.e) are produced in bulk.5. Charging individual prices that are based on consumers’ willingness to pay isa) government price supports.b) will pricing.c) second tier pricing.d) price discrimination.6. Equilibrium for public goods is characterized bya) MSB = MSB.b) MRS = MRT.c) MRS = MRS = MRS=…=MRS = MRT.d) MC = MB.e) MRS – MRT = MSB.7. Summing demand curves horizontally sends market ______________ to individuals,while summing vertically sends market ______________ to individuals.a) price; priceb) quantity; quantityc) quantity; priced) price; quantity8. Public goods can bea) provided privately.b) provided publicly.c) subject to free rider problems.d) all of the above.9. A ________ is a person who wants to enjoy the benefits of a public good withoutcontributing his or her marginal benefit to the cost of financing the amount made.a) free riderb) politicianc) price makerd) price optimizer10. Congestible public goodsa) are nonrival in consumption.b) can not be priced in the market.c) are rival in consumption.d) are never provided by the private sector.11. A private good isa) nonrival in consumption.b) subject to free rider problems.c) subject to exclusion.d) not subject to exclusion.e) none of the above.12. When those that do not contribute to the costs of a public good are denied use, this is acase ofa) exclusion.b) being nonrival.c) price discrimination.d) infeasibility.e) all of the above.13. Which of the following is a public good?a) public defenseb) public televisionc) a libraryd) schoolse) all of the above14. Pure private goods are supplied througha) the market.b) government taxes.c) merit pricing.d) none of the above.15. School vouchers area) provided by the government.b) provided by private organizations.c) public funds to be used for private tuition.d) all of the above.Discussion Questions1. Suppose there are two individuals with identical demand curves characterized by theequation Q = (33/2) – (P/2). What is market demand if these demand curves are added horizontally? Vertically?2. Redo problem 10 of Chapter 4 in your textbook. Assume now that the marginal cost ofgetting snow plowed is now $24.3. Use the answer you found when adding market demand curves vertically in Question 1above to find the market equilibrium quantity if the market supply is constant at 10.4. Suppose you are given the following demand curves: Q = 32 – P and Q = 16 – (P/2).Add these two demand curves vertically and find the market demand curve.5. Suppose there is a public good that has market supply characterized by the equation X =(P/3) – (32/3). Suppose further that market demand for this good can be characterized by the equation X = 25 –P. Find the equilibrium quantity of the public good that will be supplied.True/False/Uncertain Questions1. The free rider problem causes less than optimal production of a public good.2. Pure private goods are nonrival in consumption.3. Most goods that are nonexcludable are pure public goods.4. Vertical summation of demand curves yield results equivalent to those of horizontalsummation.5. Increasing the quantity of a pure public good can be done at zero cost.6. Demand curves for pure public goods satisfy the law of demand.7. Pure public goods involve positive externalities.8. Increases in spending on education will lead to an increase in student performance.9. Privatization means taking services that are supplied by the government and turning themover to the private sector for provision.10. Private goods are always provided by the private sector.Essay Questions1. You have read that the free rider problem affects equilibrium in a public good context.Explain how this situation can be modeled as a prisoner’s dilemma game.2. Discuss and contrast the advantages and disadvantages of public highways versus tollroads.3. Some economists believe that public schools would improve if they were subjected tocompetition. Discuss the pros and cons of this idea.。
国际会计第七版英文版课后答案(第九章)
Chapter 9International Financial Statement AnalysisDiscussion Questions1. a. Business strategy analysisDifficulties in cross-border business strategy analysis: Identifying key profit drivers and business risk in two or more countries can be daunting. Business and legal environments and corporate objectives vary around the world. Many risks (such as regulatory risk, foreign exchange risk, and credit risk) need to be evaluated and brought together coherently. In some countries, sources of information are limited and may not be accurate.b. Accounting analysisDifficulties in accounting analysis: Two issues are important here. The first is cross-country variation in accounting measurement quality, disclosure quality, and audit quality. National characteristics that cause this variation include required and generally accepted practices, monitoring and enforcement, and extent in managerial discretion in financial reporting. The second issue concerns the difficulty in obtaining information needed to conduct accounting analysis. The level of credibility and rigor of financial reporting in Anglo-American countries generally is much higher than that found elsewhere. In fact, financial reporting quality can be surprisingly low in both developed and emerging-market countries.c. Financial analysis (ratio analysis and cash flow analysis)Difficulties in financial analysis: Extensive evidence reveals substantial cross-country differences in profitability, leverage, and other financial statement ratios and amounts that result from both accounting and non-accounting factors. Differences in financial statement items caused by national differences in accounting principles can be significant, and unpredictable in amount. Even after financial statement amounts are made reasonably comparable, interpretation of those amounts must consider cross-country differences in economic, competitive, and other conditions.d. Prospective analysis (forecasting and valuation)Difficulties in prospective analysis: Exchange rate fluctuations, accounting differences, different business practices and customs, capital market differences, and many other factors have major effects on international forecasting and valuation. Application of price multiples in a cross-border setting requires that the determinants of each multiple, and reasons why multiples vary across firms, be thoroughly understood. National differences in accounting principles are one source of cross-country variations in these ratios.Finally, all four stages of business analysis may be affected by:i. information access,ii. timeliness of informationiii. foreign currency issuesiv. differences in financial statement formatsv. language and terminology barriers.2. Here we will consider the information needs of investors, creditors, regulators, and competitors.Investors have high information needs at all stages of business analysis. They need to be able to accurately assess the merits of the company’s business strategy, the quality of its accounting, the company’s financial strength, and its future prospects. Since each step in the business analysis process builds on its predecessors, each step is critical in its turn. It can’t be said that any one step is more or less important than the others.Creditors need to go through much the same analysis, but are advantaged in that through direct contact with the companies they often have more extensive and detailed information than do investors. The goal of analysis is also often somewhat different. Many investors, hoping that their shares will increase in value, are interested in prospective analysis. The creditor’s interest is more often limited to being sure (with a margin of safety) that the loan will be repaid. For the creditor, the accounting analysis, financial analysis, and forecasting, all are important; valuation is less so. Regulators have much different interests. Since regulators have no direct interest in the future earnings of the companies they regulate, a prospective analysis (in most cases) is of limited value to them. However, if regulators need to be aware of the financial strength of the companies they regulate, they will need to conduct accounting analysis and (in many cases) financial analysis, particularly when assessing how much of an economic burden can be imposed on companies resulting from a particular regulation.Competitors are intensely interested in finding out as much about a company as possible. Business strategy analysis of one’s competitors is an important part of formulating one’s own business strategy, especially in terms of assessing strengths and weaknesses. Accounting and financial analysis also can uncover strengths and weaknesses. Prospective analysis may be important if a merger or acquisition is contemplated.3. Information accessibility is a major condition for an efficient capital market, that is, information must be rapidly analyzed and made available to investors capable of acting on it. In the United States and other broadly-based financial markets, a whole industry specializing in information analysis and dissemination has developed. Similar investment analysis services in many non-U.S. capital markets are at an earlier stage of development.4. Investment analysis almost always involves paired comparisons, even if the benchmark alternative is to do nothing. In evaluating the risk and return characteristics of a non-domestic company differences in accounting measures of risk and return are often due as much to differences in measurement rules between countries as they are to real economic differences. Corporate transparency compounds the problem by depriving analysts of information necessary to adjust for national measurement differences. Many analysts consider the disclosure issue to be even more important than measurement differences.5. One way of coping with GAAP differences is to restate foreign accounting measures to an internationally recognized set of principles or the reporting framework of the investor’s home country. An alternative tack is to develop a detailed understanding of accounting practices in the investee’s country.Students will definitely disagree on this one. Eventually some will offer a compromise: use the former coping mechanism if the investee company is being compared with a firm in the investor’s home country and adopt a “multiple principles capability” when comparing the investee company to another company in the same country. Another tack would be to examine who is making the market for the investee’s shares. If local investors are making th e market, one should not ignore local norms. However, if investors in the investor’s country are making the market; e.g., U.S. institutional investors, then restatement to the investor’s home country GAAP makes sense.6. Prospective analysis invo lves forecasting a firm’s future cash flows and then valuing those cash flows. As future cash flow estimates are based on accounting measurements, differences in measurement rules between countries complicate this effort. The range of accounting choicesavailable abroad add to this complexity. However, measurement differences are only one of the variables that complicates prospective analysis, Differences in environmental variables such as rates of inflation, sovereign risk, business practices, and institutions complicate both forecasting and valuation. Different institutions include financial norms, tax regimes and market enforcement mechanisms. In terms of valuation, while P/E multiples may be popular in one country, discounted dividends may be more popular in another. Even if two countries employ the same valuation framework, differences in investment horizons and methods of calculating discount rates/cost of capital will vary.7. Translation of foreign financial statements for the convenience of domestic readers is fundamentally distinct from the translation of branch or subsidiary accounts for purposes of consolidation. In the latter case, translation involves a remeasurement process. In most countries, foreign accounts first are restated to the accounting principles of the parent country prior to restatement to parent currency. Convenience translations merely involve a restatement process in the sense that foreign accounts are multiplied by a constant to change the currency of denomination fro m domestic currency to the currency of the reader’s domicile.8. Rules of thumb can vary substantially from one country to another due to both accounting and non-accounting factors. Japan provides a striking example. Many Japanese companies are members of large trading groups (keiretsu) with large commercial banks at their core. Keiretsu often postpone interest and principal payments, so that long-term debt in Japan works more like equity in the United States. Short-term debt is attractive to Japanese companies because short-term obligations typically have lower interest rates than long-term obligations, and normally are renewed or “rolled over” rather than repaid. Thus, debt has a much different nature and purposein Japan than in the United States.The acid test ratio specifically involves cash, marketable securities and receivables as the numerator in the equation, and current liabilities as the denominator. But what counts as current liabilities versus long-term debt (or how long-term debt is viewed) is very different in Japan than in the U.S. In Japan, high short-term debt is less likely to indicate a lack of liquidity, for the reasons stated above. Banks often are willing to renew these loans because it allows them to adjust their interest rates to changing market conditions. Thus, short-term debt works like long-term debt elsewhere, and Japanese companies can operate successfully with a quick ratio at a level that would be entirely unacceptable in the United States. Note, however, that banking practices in Japan are changing rapidly, and the tolerance in Japan for high levels of debt financing may well decrease in the future.9. Important recommendations include the following:•Be aware that national differences in accounting measurement rules c an add “noise” to reported performance comparisons. The reader should be prepared to unwind accounting differences where necessary.•Use a structured approach, such as the one presented in this chapter, to ensure that all relevant factors are considered.•Cash flow-related measures are less affected by accounting principle differences than are earnings-based measures, thus making them potentially valuable in international analysis.•Audit quality varies dramatically across countries. Become familiar with the level of audit quality in a particular country before reaching conclusions using financialstatements prepared by companies in that country.•Corporate transparency also varies dramatically across countries. Be sure to assess accurately the quality of financial disclosures before reaching conclusions based on them.•Above all, appreciate that measurement and disclosure practices are environmentally based. Appreciation for institutional differences will greatly aid in proper interpretation of accounting based performance and risk measures.10. The following list describes in general fashion what probable effect the Dutch translation practice would have on selected financial ratios in comparison with the temporal method. The analysis assumes that the original financial statements of the two companies are identical in all respects save for the currency translation method used. Inventories are assumed to be carried at cost._________________________________ _______________________________________________ Devaluation ___ R evaluationCurrent ratio (liquidity) decrease increaseInv. At mkt goes downInv at mkt goes upDebt ratio (solvency) increase decreaseLoss goes in ATA so eq. smallerGain in ata eq lrg.Fixed asset turnover (efficiency) increase decreaseNet sales/assets assets smaller so inc.A ssets larger so dec.Return on assets (profitability) increase decreaseloss not in incomeGain not in incomeAs can be seen, the current rate method can have a significant effect on key financial indicators. Accordingly, security analysts must be careful to distinguish between the currency in which a foreign account is denominated and the currency in which it is measured.11. The attest function is what gives credibility to the financial statements. If this function is important in the domestic case, it is even more important internationally where statement readers are separated from the companies they are interested in not only by physical distance but also by cultural distance.12. Internal control is an activity performed by a firm’s int ernal auditors that helps to assure that management’s policies and procedures are being carried out effectively, that financial transactions are being properly reported both internally and externally and that the assets of the firm are safeguarded. Intern al control is relied upon by a firm’s external auditors in determining to what extent their work should replicate the work of the internal auditor. The role of the internal auditor has become even more important in assuring the reliability of management’s financial representations owing to the large number of financial scandals that has rocked the U.S. and other financial markets during the start of this decade. Recent legislation in the U.S., which is increasingly being emulated elsewhere, has made management responsible for assuring that their system of internal controls are not only in place but are working well. This has beennecessary to reduce investor uncertainty regarding the quality and reliability of a firm’s published financial accounts.In the absence of a strong system of internal controls, investors will adopt a more passive approach to investing as opposed to relying on firm-specific information. This involves taking a mutual fund approach to investing which attempts to diversify away information risk, although at the cost of lesser performance.Exercises1. The trend of dividends from a U.S. dollar perspective can be ascertained by translating the peso dividend stream using the $/P exchange rate prevailing at the beginning of the time series or the end. Use of the ending exchange rate provides the following trend data:20X6 ________ 20X7 ________ 20X8 ______Net income (P) 8,500 10,800 15,900Dividends (P mill’s)2,550 3,240 4.770Dividends ($000) 850 1,080 1,590Percentage change --- 27.1% 47.2%2.How the statement of cash flows appearing in Exhibit 9.5 was derived:Beg. Bal. DR. CR. End. Bal.Cash 2,400 3.990New fixed assets 8,500 (3) 2,695 (2) 555 10,640ST $ payable 500 500LT debt 4,800 (3) 1,584 6,384Capital stock 3,818 3,818Retained earnings 1,782 (1) 250 2,030Translation adjustment 1,898Sources Usesof ofFunds FundsSources:Net income (1) 250Depreciation (2) 555Increase in LT debt (3) 1,584Translation adjustment (4) 1,898Uses of funds:Increase in fixed assets (3) 2,6954,287 2,695Net increase in cash 1,5924,287 4,2873. Consolidated Funds Statement(figures appearing in parentheses denote changes due primarily to translation effects) Sources:Net income 250Depreciation 555Increase in LT debt 1,584 (1,584)Translation adjustment 1,898 (1,898)less intercompany payable 138Uses of funds:Increase in fixed assets 2,695 (2,695)Net increase in cash 1,590 (924) The $924 translation effect is that part of the $1,898 gain on the translation of net worth which is related to the translation of cash. It is derived as follows.a. Opening cash of 24,000 krona translated at .10 =$2,400Opening cash retranslated at 12/31 at .133 = 3,192Gain 792b. 6,000 krona increase in cash during the yearinitially translated at .111 =$6666,000 krona retranslated at 12/31 at .133 = 798Gain 132Total translation gain applicable to cash 9244. Yes, Infosys added value for its shareholders as its EVA was a positive RPE 1,540. Operating income more than covered the company’s cost of debt and equity.5. Debit: Cost of goods sold ¥250,000,000Taxes payable 87,500,000Credit Inventories ¥250,000,000Tax expense 87,500,0006. a.20X6 20X7 20X8Sales revenue (£) 23,500 28,650 33,160Sales revenue ($) 49,350 63,030 53,056b. Percentage change 20X7/20X6 20X8/20X7Pounds 21.9% 15.7%Dollars 27.8% -15.8%The two time series do not move in parallel fashion because of changes in exchange rates used to perform the convenience translations.c. This problem can be minimized by translating the time series using the 20X6 exchange rate or by using the 20X8 exchange rate. Trend analysis can also be performed in the local currency.7. a. ROE (per Swedish GAAP) = 4,709/88,338 = 5.3%ROE (per U.S. GAAP) = 3,127/84,761 = 3.7%b. Some students will favor using the ROE based on Swedish GAAP, especially if Volvo’sperformance is being compared with that of another company in Sweden. Others willfavor basing their performance assessment on ROE per U.S. GAAP, especially if Volvois being compared to a U.S. counterpart. The latter at least minimizes the apples tooranges issue. It is not clear which viewpoint is correct, and this question should provoke good discussion of the value of restated accounting numbers.c. Even if students all agreed that an ROE based on U.S. GAAP were preferable, the user ofthis information should take into account all institutional considerations, such asdifferences in tax laws, financial norms and business practices that affect all ratios in the Swedish business environment. In the absence of such analysis, restated ratios are likely to be misinterpreted.8. Assessing reasons for P/E ratio trends and cross-country comparisons is difficult. Thetext discusses two studies that have analyzed differences in P/E ratios between Japan and the United States in the late 1980s. The studies differ greatly in their explanations of the(then) much higher Japanese P/E ratios, and neither study claims to explain more than apart of the difference. Part but not all of the reasons were attributable to accountingmeasurement differences. We suspect that differences in institutional factors probablyexert the dominant reason for observed differences internationally.9. Students answers will naturally vary. However, they should recognize that audit practiceare influenced as much by differences in social, economic and political environments as are measurement standards. They should also recognize that standard setting is as mucha political process as it is a process of logic or sound principles.10. Judging from information provided in Exhibit 9-22, liability cases vary far more bycountry than by auditor – with 35 cases in the U,.S., over twice as many as in the nexthighest country (the U.K., with 17). No audit firms had cases in every country, and thetotal number for each auditor is relatively similar, ranging from 11 (Arthur Andersen) to18 (KPMG). The country where liability cases were least frequent was the Netherlands,with only one case.Why? Laws and regulations in the Anglo-American countries, including the UnitedStates, stress investor protection. This places more liability on the auditor and makes iteasier for companies or shareholders to bring or prove a suit. In response to the threat of litigation, auditors are probably more careful in the United States, and more willing tosubject themselves to strict regulations.Implications? It is reasonable to argue that financial reporting quality is positivelycorrelated with frequency of audit litigation. For example, the patterns of auditorlitigation shown in the table above are consistent with the relatively high financialreporting quality found in the U.S., the U.K., Australia and Canada.11. Student opinions are likely to vary on this one as well. Some will argue for opinionscoined by private professional bodies. Others, in light of Enron, et. al., will opt for more legal opinions. In the end, students should conclude that enforcement mechanisms arealso very important. Recent U.S. indictments of company officers for accountingviolations as well as mandated prison terms is unprecedented. Together with increasing recourse to the courts by aggrieved investors, the imbalance between an auditor’sresponsibility and authority is being redressed.12. Reasonable criteria for judging the merits of a database for company research include(but are not limited to):-coverage (number of companies, countries, years of data).-amount of information for each company (number of financial, market-based measures per company).-reliability, ease of use, language translations, search features.-cost (a re only some of the data “freely available?”).-access and links to other Web sites provided?Case 9-1Sandvik1.a. There are several advantages that accrue to Swedish firms employing the system of special reserves. First, political dividends accrue to firms that align their goals with those of the government. Second, there are tax advantages as expenses recognized in establishing a reserve are tax deductible. Third, the use of reserving allows companies to manage their earnings. Disadvantages include the risk of reducing a company’s reporting credibility with the international investing community. This, in turn, may limit the company’s external financing flexibility.2. The government benefits from the reserving system in that it has ally in maintaining full employment. That is to say, its macroeconomic tool kit is expanded in that it yet another vehicle for managing the economy in addition to monetary and fiscal policy.3. The use of reserves makes it difficult for statement readers who are unfamiliar with Swedish reporting practices to assess the risk and return attributes of the firm. For example, it will not be clear to what extent observed differences in financial ratios between a Swedishcompany and a non-Swedish company are due to accounting differences as opposed to real economic differences in the attributes being measured.4. The use of reserves had a dampening effect on Sandvik’s reported earnings.5. The entries used to increase the reserves can be determined by examining the change in Untaxed Reserves in the balance sheet as well as examining the relevant notes to the financial statements. The entries were:Depreciation expense 172Excess depreciation reserve 172Other expenses 13Other untaxed reserves 136. With reserves Without reservesROS 3,731/15,242 3,731 + 185(1-.03)/15,242= 24.5% = 25.7%ROA 3,731 + 1 + 633 3,731 + 1 + 633 + 185(38,142 + 22,286)/ 2 [(38,142 – 185) + (22,286 + 85)] /2= 14.4% = 15.1%Case 9-2Continental A.G.Students will first gravitate to the notes to the financial statements dealing with Special Reserves and Provisions. Their instincts are correct. The problem facing an external analyst is that it is difficult to determine which of the reserve and provision items are legitimate and which are not. It turns out that two important keys to this case are to be found in footnotes 21 and 22. Focusing on the consolidated figures, we see that Continental is using entries under Other operating income and Other operating expenses to smooth reported earnings. The following analysis backs out 1) Credit to income from the reversal of provisions, 2) Credit to income from the reduction of the general bad debt reserve, and 3) Credit to income from the reversal of special reserves appearing in note 21 and Allocation to special reserves under note 22.Adjustments:19X9Operating income DM68,029Provisions DM33,559General B/D Reserve 2,014Special reserve 32,456Special reserves 1,278Operating income 1,27820X0Operating income DM57,237Provisions DM17,312General B/D Reserves 1,101Special Reserves 38,824Special Reserves 168Operating income 168To determine the net overstatement on an after-tax basis, the students should attempt to approximate Continental’s effective tax rate. Information to do this are contained in footnote 24 and Continental’s income statement.Effective Taxes: 19X9 20X0Income tax 141,476 59,884Income after tax 227,838 93,435Income before tax 369,314 153,319Effective rate: 141,476/369,314 59,884/153,319= 39% = 39%Reduction in taxes:66,751 X .39 57,069 X .39= 26,033 = 22,257Net overstatement:66,751 57,069-26,033 -22,25740,718 34,812This overstatement, as a percentage of reported consolidated earnings, was 18% for 19X9and 37% for 20X0. Dietrich and Marissa have cau se to pay Continental’s CFO a visit.。
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Answers to CHAPTER 5 - Externalities
Answers to Multiple-Choice Questions
1. d
2. a
3. c
4. b
5. c
6. d
7. a
8. b
9. a
10. d
11. c
12. b
13. d
14. a
15. c
16. d
17. a
Answers to Discussion Questions
1. a. Set PMC equal to demand and solve for P and X. X= 50/9, P = 170/9.
b. Find SMC by adding PMC to MD. Set SMC equal to demand and solve for P and
X. X = 49/11, P = 232/11.
c. At X = 49/11, subtract PMC from SMC. Tax = 109/22.
2. a. Set MD = MB and solve for X. X= 32/6.
b. Insert 32/6 into either MD or MB. Fee = 86/3.
c. Set MB equal to zero and solve for X. X = 34/3.
3. Without intervention, optimal will be where PMB = 0. X = 15. The efficient level is X =
5. The area beneath the PMB is gained. Gain = 25.
4. a)
b)
c) Not socially optimal.
5. Put 25 into demand equation. P = 7.5.
SMC(PMC+MB)
PMC
MB H
MB/MC
Pesticides
MB T
1
1H T X X = SMC(PMC+MB)
PMC
MB H
MB/MC
Pesticides
MB T
1
1H T X X = *H X *T X
Answers to True/False/Uncertain Questions
1. F
2. T
3. T
4. T
5. U
6. T
7. U
8. F
9. T
10. U (Depends on the amount of time spent partying.)
Answers to Essay Questions
1. Social conventions help in alleviating externalities without government intervention by
teaching others to make some form of compensation for damages caused.
2. Market forces have been effective in areas like the environment, when applied correctly.
They have not worked as well in the area of medical services, for example.
3. Bargaining costs are generally not zero. Identifying damages is difficult. There is
generally some amount of asymmetric information.。