1. Suppose a monopolist's cost function is given by C(q)=10+2q+0.5q^2. The demand function for the product is 47 -q. The government imposes a tax of Rs 9 per unit.

Determine the equilibrium quantity and price of the product.

Determine the amount of tax borne by the consumer and by the monopolist.

2. You are asked to estimate the following labour supply relationship
Labour Supply Lj= -320 85 Wj 320 Gj -120 Mj
where labour supply hours of annual work and wages are given as hourly wage.
Wj after-tax wage
Gj dummy variable (college graduate)
Mj dummy variable (marital status)

Interpret the coefficient of after-tax wages.

Discuss about income and substitution effects of wages on labour supply from the estimated equation.

How might this estimated coefficient be biased? Explain your answer.

3. What is the income tax base in India? Discuss the impact of horizontal and vertical equity aspect of such a tax system.

4. Suppose that a corporate tax rate is 20% with the provision of investment tax credit of depreciation rate of and dividend yield of 10%.
The official depreciation schedule is such that the present discounted value of depreciation allowances is 40% of the purchase price of the machine.

What is the per-period marginal cost of each rupee that a firm spends on the machine?

If the marginal benefit per-period is given as MB=40-0.6 where K=rupees spent on the machine find the optimal amount of machinery purchased.

If the investment tax credit is increased to what will happen firm's decision? Discuss your answer.

Answer any five questions from this section.

5. Why do you think that vertical and horizontal equity as goals of a tax system are important Which of these two concepts is easier to measure in practice? Explain.

6. Compare the equity and efficiency aspects of two consumption tax systems where one imposes uniform rates on all goods while the other provides for taxation of luxury items at a higher rate and exemption of necessaries.

7. Why does a lump-sum tax involve no excess burden? If this wind of tax is so efficient, why governments do not use it more often?

8. If the cost function of a monopolist is given as =10 +2q +0.5q^2 and the demand function is 47 and government levies a tax of Rs 9 per unit, what is the what the welfare loss?

9. Discuss the positive effects of supply-side fiscal policy.

10. Discuss the meaning of built-in stabilizers. How do these help eliminate recession or inflation

11. Write a critical note on India's system of inter-governmental fiscal relations.

12. Write short notes on

Fiscal responsibility by state government and 13th Finance Commission of India.

Domar's stability condition on debt.