Public Finance (The McGraw-Hill Series in Economics)
10th Edition
ISBN: 9780078021688
Author: Harvey S Rosen, Ted Gayer
Publisher: McGraw-Hill Education
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Chapter 6, Problem 3DQ
Three voters, A, B, and C, will decide by majority rule whether to pass bills on issues X and Y. Each of the two issues will be voted on separately. The change in net benefits (in dollars) that would result from passage of each bill is as follows:
- a. Which issues (if any) would pass if decided by majority rule? Is this the efficient out-come?
- b. Which issues (if any) would pass if logrolling were allowed? Would logrolling improve efficiency? Would it result in the efficient outcome?
- c. Suppose that it were legal for one voter to pay another to vote a certain way. Would allowing such side payments improve efficiency from part b? Would it result in the efficient outcome?
- d. What amount of side payments would take place if paying for votes were allowed?
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Q1. A own > 50% voting rights of B, and has the right to appoint three out of four board members of B. Most decisions that significantly affect B’s returns require consensus from all board members. Does A have control over B (non-VIE) per IFRS vs. US GAAP?
Q2. A own < 50% voting rights of B, but has the right to appoint four out of seven board members of B. One of these four board members rarely attends board meetings. Most decisions that significantly affect B’s returns require majority votes of board members. Does A have control over B (non-VIE) per IFRS vs. US GAAP?
Q3: Do you favor effective control or legal control?
11. Consider the weighted voting system {q: 20, 12, 8, 6, 6}What is the smallest value the quota could be?
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Quota is 12 5 members with votes {8, 5, 2, 2, 2}A) All B) 8, 5 C) 8 D) 2, 2, 2 E) None13. In the following weighted voting system, determine which member(s) have vetopower.Quota is 11 5 members with votes {8, 5, 2, 2, 2}A) All B) 8, 5 C) 8 D) 2, 2, 2 E) None
Chapter 6 Solutions
Public Finance (The McGraw-Hill Series in Economics)
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