1. In a society in which households differ significantly in income, two processes occur simultaneously that affect where households live: the Tiebout process and the separation process. Explain each.
2. Using a diagram, explain what happens to the price of homes if a property tax is levied and the local government (A) completely wastes the revenue and (B) uses the revenue to provide good quality schools, police, and fire protection.
3. Compare a private school system to a public school system.
4. Use a diagram to explain the optimal quality of a public school and how taxes can be set so that there is unanimous support for this quality from its citizens.
5. Explain how the EITC works and how it differs from welfare.
6. Explain why government borrowing shifts the burden from present taxpayers to future taxpayers.