Law/ Principle of Maximum Social Advantage (MSA)

The Law/ Principle of Maximum Social Advantage was first developed by _______ and then later reinterpreted by ________.

• Musgrave; Keynes

• Hugh Dalton; Smith

• Hugh Dalton; Musgrave

• Musgrave; Samuelson

Taxes are subject to ___________ Marginal Social Sacrifice (MSS) and public expenditure is subject to _______ Marginal Social Benefit (MSB)

• increasing; diminishing

• diminishing ; increasing

• increasing; contant

• diminishing; constant

Social advantage is maximized at that level of taxation and public expenditure at which:

• ASB – ASS is maximized

• MSB = MSS

• Both of the above

• None of the above

Musgrave calls Dalton’s principle of MSA as:

• ‘Maximum Welfare Principle of Satisfaction Determination’

• ‘Maximum Welfare Principle of Budget Determination’

• ‘Maximum Satisfaction Principle of Budget Determination’

• ‘Minimum Welfare Principle of Budget Determination’

Resources should be distributed between two alternatives so as to equalize _______ from each alternative expenditure.

• total returns

• returns

• marginal returns

• marginal cost

When MSB = MSS, Net Benefits are _________.

• Maximim

• Minimum

• variable

• Zero

Which of the following is NOT an assumption of the MSA model:

• For the public, taxes imply sacrifice and (government/public) expenditures lead to benefits.

• Government’s source of income is government revenue and loans.

• Government’s budget is always balanced i.e. revenue is equal to expenditure.

• Taxes are subject to increasing MSS and public expenditure is subject to diminishing MSB.

Social advantage is maximized at that level of taxation and public expenditure where ASB – ASS is maximized. This is called the _______ criterion of MSA.

• marginal

• additional

• total

• extra

MSS increases at an increasing rate because as the community pays more and more taxes, the sacrifice they experience goes on ____________--.

• decreasing

• varying

• increasing

• fluctuating

The MSB curve _______ because as the government expenditure increases, it is spent on less important social activities so that the benefits go on decreasing.

• increases at a decreasing rate

• decreases at an increasing rate

• decreases at a decreasing rate

• increases at an increasing rate