Question 1

Why might two presidential candidates appear to have very similar opinions during an election year even if they come from different parties?

Accepted Answer

A) They aim to please special-interest groups. 
B) They are logrolling. 
C) They try to appeal to the median voter. 
D) Republicans and Democrats usually agree on most issues. 
E) They don't wish to appear rationally ignorant. 
A) They aim to please special-interest groups. 
B) They are logrolling. 
C) They try to appeal to the median voter. 
D) Republicans and Democrats usually agree on most issues. 
E) They don't wish to appear rationally ignorant.

Question 2

Suppose a carpenter builds a bookcase for an attorney in exchange for legal services.This transaction is

Accepted Answer

A) a means of tax avoidance 
B) likely to be taxed 
C) not part of the economy's total production 
D) a means of tax evasion 
E) likely to result in double taxation 
A) a means of tax avoidance 
B) likely to be taxed 
C) not part of the economy's total production 
D) a means of tax evasion 
E) likely to result in double taxation

Question 3

Budget maximization results in a budget equal to that desired by the median voter.

Accepted Answer

A) True 
 B)False

Question 4

A good that is neither rival nor exclusive is called

Accepted Answer

A) a private good 
B) a public good 
C) a quasi-private good 
D) an external good 
E) an open access good 
A) a private good 
B) a public good 
C) a quasi-private good 
D) an external good 
E) an open access good

Question 5

Because information and the time required to acquire and digest it are scarce,

Accepted Answer

A) consumers concentrate on private choices rather than on public choices 
B) consumers concentrate on public choices rather than on private choices 
C) it is irrational for consumers to remain ignorant of the costs and benefits of government proposals 
D) consumers have greater incentive to gather and act upon information about public choices than to gather and act upon information about their private choices 
E) an individual voter has more incentive to examine the performance records of candidates for public office 
A) consumers concentrate on private choices rather than on public choices 
B) consumers concentrate on public choices rather than on private choices 
C) it is irrational for consumers to remain ignorant of the costs and benefits of government proposals 
D) consumers have greater incentive to gather and act upon information about public choices than to gather and act upon information about their private choices 
E) an individual voter has more incentive to examine the performance records of candidates for public office

Question 6

Under representative democracy,

Accepted Answer

A) the median voter's preferences are always satisfied 
B) citizens no longer have any influence since they do not vote on each issue 
C) representatives may reflect the preferences of the median voter 
D) less vote trading will occur than under direct voting 
E) vote trading is impossible 
A) the median voter's preferences are always satisfied 
B) citizens no longer have any influence since they do not vote on each issue 
C) representatives may reflect the preferences of the median voter 
D) less vote trading will occur than under direct voting 
E) vote trading is impossible

Question 7

A rise in marginal income tax rates would likely increase the size of the underground economy.

Accepted Answer

A) True 
 B)False

Question 8

Private firms and public bureaus differ in the sense that

Accepted Answer

A) only private firms employ capital 
B) public bureaus usually show a profit 
C) some public bureaus are inefficient 
D) ownership of private firms is transferable 
E) ownership of public bureaus is transferable in the marketplace 
A) only private firms employ capital 
B) public bureaus usually show a profit 
C) some public bureaus are inefficient 
D) ownership of private firms is transferable 
E) ownership of public bureaus is transferable in the marketplace

Question 9

In a direct, majority-rule vote,

Accepted Answer

A) all voters get what they want 
B) a majority of voters get exactly what they want 
C) only the median voter is completely satisfied 
D) a minority of voters are dissatisfied 
E) only the median voter is dissatisfied 
A) all voters get what they want 
B) a majority of voters get exactly what they want 
C) only the median voter is completely satisfied 
D) a minority of voters are dissatisfied 
E) only the median voter is dissatisfied

Question 10

A good that is both rival and exclusive is called

Accepted Answer

A) a private good 
B) a public good 
C) a quasi-private good 
D) an external good 
E) an open access good 
A) a private good 
B) a public good 
C) a quasi-private good 
D) an external good 
E) an open access good

Question 11

The basic difference between a public bureau and a market firm is that the bureau

Accepted Answer

A) has an incentive to maximize profits 
B) has no incentive to minimize costs 
C) managers do not attempt to maximize their self interest 
D) managers are more likely to be concerned with the public interest than their own self interest 
E) faces a budget constraint placed up it by the voters 
A) has an incentive to maximize profits 
B) has no incentive to minimize costs 
C) managers do not attempt to maximize their self interest 
D) managers are more likely to be concerned with the public interest than their own self interest 
E) faces a budget constraint placed up it by the voters

Question 12

Legislation that benefits many individuals at the expense of a few is a natural outcome of representative democracy.

Accepted Answer

A) True 
 B)False

Question 13

Legal attempts to arrange one's financial decisions so as to pay the least tax possible are known as

Accepted Answer

A) tax evasion 
B) logrolling 
C) tax avoidance 
D) rent seeking 
E) underreporting 
A) tax evasion 
B) logrolling 
C) tax avoidance 
D) rent seeking 
E) underreporting

Question 14

Special-interest legislation is legislation where there are both widespread costs and benefits.

Accepted Answer

A) True 
 B)False

Question 15

Suppose you want to buy a boat, but you know that interest paid on a boat loan is not tax deductible.Therefore, you take out a home equity loan, the interest on which is still tax deductible.This procedure is an example of

Accepted Answer

A) illegal tax avoidance 
B) illegal tax evasion 
C) legal tax avoidance 
D) legal tax evasion 
E) the answer cannot be determined from the information given 
A) illegal tax avoidance 
B) illegal tax evasion 
C) legal tax avoidance 
D) legal tax evasion 
E) the answer cannot be determined from the information given

Question 16

In deciding between using a public bureau or a private firm to collect garbage, elected officials may prefer a public bureau because

Accepted Answer

A) public bureaus have been shown to be more efficient than private firms in garbage collection 
B) they can convey political favors by giving people jobs in the public bureau 
C) public bureaus will be more responsive to consumers 
D) citizens would have to pay if private firms collected garbage 
E) taxes will be lower if the public bureau is in charge of garbage collection 
A) public bureaus have been shown to be more efficient than private firms in garbage collection 
B) they can convey political favors by giving people jobs in the public bureau 
C) public bureaus will be more responsive to consumers 
D) citizens would have to pay if private firms collected garbage 
E) taxes will be lower if the public bureau is in charge of garbage collection

Question 17

Exhibit 16-5   Exhibit 16-5 represents the market for leaf tobacco.Suppose the government imposes a floor of $1.25 in this market.In order to maintain this price the government will need to buy how many pounds of tobacco?

Accepted Answer

A) 1, 000 lbs. 
B) 2, 000 lbs. 
C) 3, 000 lbs. 
D) 4, 000 lbs. 
E) 5, 000 ibs. 
A) 1, 000 lbs. 
B) 2, 000 lbs. 
C) 3, 000 lbs. 
D) 4, 000 lbs. 
E) 5, 000 ibs.

Question 18

As a result of legislation to establish a floor price for milk, most dairy farmers will

Accepted Answer

A) end up earning a normal rate of return in the long run 
B) end up earning a zero rate of return in the long run 
C) end up earning a negative rate of return in the long run 
D) benefit from the increased cost of specialized resources used in dairy farming 
E) suffer if they own specialized resources at the time the legislation is passed 
A) end up earning a normal rate of return in the long run 
B) end up earning a zero rate of return in the long run 
C) end up earning a negative rate of return in the long run 
D) benefit from the increased cost of specialized resources used in dairy farming 
E) suffer if they own specialized resources at the time the legislation is passed

Question 19

Private firms and public bureaus differ in the sense that public bureaus

Accepted Answer

A) sometimes have top-level managers chosen by shareholders 
B) sell most of their output on a per unit basis 
C) receive most of their revenues through a budget appropriation rather than through the sales of goods or services 
D) are sometimes inefficient 
E) hire consultants to solve difficult problems 
A) sometimes have top-level managers chosen by shareholders 
B) sell most of their output on a per unit basis 
C) receive most of their revenues through a budget appropriation rather than through the sales of goods or services 
D) are sometimes inefficient 
E) hire consultants to solve difficult problems

Question 20

Which of the following would be considered part of the underground economy?

Accepted Answer

A) selling subway tokens 
B) tax avoidance 
C) deducting housing interest when figuring your income taxes 
D) sales of alcohol and cigarettes 
E) paying by credit card to avoid writing a check 
A) selling subway tokens 
B) tax avoidance 
C) deducting housing interest when figuring your income taxes 
D) sales of alcohol and cigarettes 
E) paying by credit card to avoid writing a check

Exam 16: Public Goods and Public Choice

Why might two presidential candidates appear to have very similar opinions during an election year even if they come from different parties?

Suppose a carpenter builds a bookcase for an attorney in exchange for legal services.This transaction is

Budget maximization results in a budget equal to that desired by the median voter.

A good that is neither rival nor exclusive is called

Because information and the time required to acquire and digest it are scarce,

Under representative democracy,

A rise in marginal income tax rates would likely increase the size of the underground economy.

Private firms and public bureaus differ in the sense that

In a direct, majority-rule vote,

A good that is both rival and exclusive is called

The basic difference between a public bureau and a market firm is that the bureau

Legislation that benefits many individuals at the expense of a few is a natural outcome of representative democracy.

Legal attempts to arrange one's financial decisions so as to pay the least tax possible are known as

Special-interest legislation is legislation where there are both widespread costs and benefits.

Suppose you want to buy a boat, but you know that interest paid on a boat loan is not tax deductible.Therefore, you take out a home equity loan, the interest on which is still tax deductible.This procedure is an example of

In deciding between using a public bureau or a private firm to collect garbage, elected officials may prefer a public bureau because

Exhibit 16-5 Exhibit 16-5 represents the market for leaf tobacco.Suppose the government imposes a floor of $1.25 in this market.In order to maintain this price the government will need to buy how many pounds of tobacco?

As a result of legislation to establish a floor price for milk, most dairy farmers will

Private firms and public bureaus differ in the sense that public bureaus

Which of the following would be considered part of the underground economy?

The Art and Science of Economic Analysis

Appendix--Understanding Graphs

Economic Tools and Economics Systems

Economic Decision Makers

Demand, Supply, and Markets

Elasticity of Demand and Supply

Appendix--Price Elasticity and Tax Incidence

Consumer Choice and Demand

Appendix--Indifference Curves and Utility Maximization

Production and Cost in the Firm

A--Perfect Competition

B--Perfect Competition

A--Monopoly

B--Monopoly

Monopolistic Competition and Oligopoly

Resource Markets

Labor Markets and Labor Unions

Capital, Interest, and Corporate Finance

Transaction Costs, Imperfect Information, and Behavioral Economics

Economic Regulation and Antitrust Policy

Externalities and the Environment

Income Distribution and Poverty

International Trade

International Finance

Economic Development

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