DOC-2019 0825-WA0024, Assignments of Business Taxation and Tax Management

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UNIVERSITY OF LUSAKA

SCHOOL OF ECONOMICS, BUSINESS AND MANAGEMENT

BACHELOR OF SCIENCE IN BANKING AND FINANCE

ECF410 – PUBLIC FINANCE AND TAXATION

FIRST SEMESTER ASSIGNMENT 08TH^ FEBRUARY 2021

Course Lecturer: Chibwe JDB Phone: 260 211 233407, +260 211 258409 E-mail: [email protected]

Due Date: 11th^ March 2021 - 20:30 (Full Time / Part Time Students And

Distance Students)

INSTRUCTIONS: (PLEASE READ)

THIS WORK MUST DONE IN MICROSOFT WORD (OR ANY OTHER WORD

PROCESSOR) SAVED AS A PDF FORMAT FILE AND UPLOADED TO THE UNILUS

MOODLE LEARNING PLATFORM IN PDF FORMAT. ANSWER ALL QUESTIONS AND

PLEASE NUMBER YOUR ANSWERS ACCORDING TO THE WAY THE QUESTIONS

ARE NUMBERED. ALL ANSWERS MUST BE SUBMITTED IN PDF FORMAT

INCLUDING THE GRAPHS WHICH MUST BE SCANNED AND UPLOADED AS WELL.

PLEASE PUT A COVER PAGE TO YOUR WORK STATING YOUR NAME, STUDENT

NUMBER, AND MODE OF STUDY.

QUESTION ONE.

Figure 1A graphs the marginal social benefit (MSB) and marginal social cost (MSC) of making various quantities of bread available per month in a nation. Figure 1B shows the total social benefit (TSB) and the total social cost (TSC) of

producing the bread. The marginal social benefit is ΔTSBΔQ , where TSB is the

change in the social benefit of the good and Q is a one-unit increase in the output of bread per month. The marginal social benefit is measured by the slope of the total social benefit curve at any point. Similarly, the marginal social cost,

FIGURE 1 : Efficient Output

Price,

Marginal

Benefit and Cost (Kwacha)

ΔTSC ΔQ , is measured by the slope of the total social cost curve at any point. Analyse the diagram and answer the following questions. REQUIRED: (A) Explain how can one determine the efficiency of the production of bread from Figure 1A, in the diagram? [5 Marks] (B) Looking at the output corresponding to 10,000 loaves of bread per month (𝑄 1 ) in Figure 1A, would one conclude that this monthly output level is efficient or not? Explain why you conclude so. [5 Marks] (C) What is the net marginal benefit at point 𝑄 1 in Figure 1A? [3 Marks] (D) Looking at the output corresponding to 20,000 loaves of bread per month (𝑄 2 ) in Figure 1A, would one conclude that this monthly output level is efficient or not? Explain why you conclude so. [5 Marks] (E) What is the net marginal benefit at point 𝑄 1 in Figure 1A? [3 Marks] (F) Looking at the output corresponding to 15,000 loaves of bread per month (𝑄∗) in Figure 1A, would one conclude that this monthly output level is efficient or not? Explain why you conclude so. [5 Marks] (G) What is the net marginal benefit at point 𝑄∗^ in Figure 1A? [3 Marks] (H) Explain how can one determine the efficiency of the production of bread from Figure 1B, in the diagram? [5 Marks] (I) Why doesn’t the equality of Total Social Benefits to Total Social Costs of making bread in the Figure IB bring about efficiency? [6 Marks] [TOTAL: 40 Marks] QUESTION TWO. (30 Marks) The supply of paper is described by the following equation: Qs = 5,000 P (PMC) where Qs is tons supplied per year and P is the price per ton. The demand equation is described by: QD = 400,000 - 1 000P (PMB = SMB) where QD is tons demanded per year. Because of the pollution associated with paper production, marginal external costs of K are associated with each ton of paper.

REQUIRED:

1. Assuming that paper is sold in a competitive market, graph the PMB and the PMC curves [10 Marks]
2. What is the market price and how many tons of paper will be produced per year at that price? [2 Marks]
3. Graph in the SMC curve and determine the price of the socially inefficient output given the marginal damage. [5 Marks]
4. What would be the efficient price and the efficient annual output of paper at that point where the SMB curve is equal to the SMC curve? [2 Marks]
5. What would be the deadweight loss of the socially inefficient output given the marginal damage? [2 Marks]
6. How can a corrective tax achieve efficiency in this example? [4 Marks] Total [25 Marks] END OF ASSIGNMENT ONE

[TOTAL: 42 Marks]

END OF ASSIGNMENT ONE