Question 1

Payments that users (consumers) are required to make if they want to receive certain services provided by the government are called

Accepted Answer

A) tax deductions. 
B) transfer payments. 
C) user charges. 
D) sales taxes. 
A) tax deductions. 
B) transfer payments. 
C) user charges. 
D) sales taxes.

Question 2

Economic theory indicates that the behavior of

Accepted Answer

A) government employees differs from the behavior of employees in the private sector because government employees generally disregard their own personal self-interest when making decisions. 
B) elected public officials differs from the behavior of all other individuals in society because they are not influenced by private interests. 
C) individuals when they make decisions about who to vote for is very different from the behavior of these same individuals when they make other types of choices. 
D) voters, government employees, and public officials is best understood by applying the same basic principle we use to predict the behavior of people in the private sector--that incentives matter. 
A) government employees differs from the behavior of employees in the private sector because government employees generally disregard their own personal self-interest when making decisions. 
B) elected public officials differs from the behavior of all other individuals in society because they are not influenced by private interests. 
C) individuals when they make decisions about who to vote for is very different from the behavior of these same individuals when they make other types of choices. 
D) voters, government employees, and public officials is best understood by applying the same basic principle we use to predict the behavior of people in the private sector--that incentives matter.

Question 3

Government action will often result in the counterproductive use of resources because

Accepted Answer

A) there is often a conflict between winning political elections and adoption of only productive programs. 
B) many politicians are not interested in how their legislative votes will influence their chances of winning future elections. 
C) politicians are often unwilling to listen to interest groups that have specialized knowledge. 
D) voter participation is low; if more people voted, the political process would be more efficient. 
A) there is often a conflict between winning political elections and adoption of only productive programs. 
B) many politicians are not interested in how their legislative votes will influence their chances of winning future elections. 
C) politicians are often unwilling to listen to interest groups that have specialized knowledge. 
D) voter participation is low; if more people voted, the political process would be more efficient.

Question 4

Government decisions tend to be biased toward actions that have

Accepted Answer

A) current costs and future benefits that are both easily observable. 
B) future costs that are difficult to identify and current benefits that are easily observable. 
C) future costs and future benefits that are both difficult to identify. 
D) current costs that are easily observable and future benefits that are difficult to identify. 
A) current costs and future benefits that are both easily observable. 
B) future costs that are difficult to identify and current benefits that are easily observable. 
C) future costs and future benefits that are both difficult to identify. 
D) current costs that are easily observable and future benefits that are difficult to identify.

Question 5

When goods are produced privately, but the cost of their purchase is paid for by the taxpayer or some other third party,

Accepted Answer

A) consumers have a strong incentive to search out those firms offering them the best deal. 
B) private producers of such goods will have little incentive to control costs and provide them at low prices. 
C) goods and services will only be supplied if consumers are willing to pay an amount sufficient to cover their production costs. 
D) the invisible hand will direct consumers and producers toward an efficient level of output. 
A) consumers have a strong incentive to search out those firms offering them the best deal. 
B) private producers of such goods will have little incentive to control costs and provide them at low prices. 
C) goods and services will only be supplied if consumers are willing to pay an amount sufficient to cover their production costs. 
D) the invisible hand will direct consumers and producers toward an efficient level of output.

Question 6

Economic analysis suggests that bureaucrats and public-sector managers have a strong incentive to

Accepted Answer

A) make sure that their budgets are as small as possible so more funds will be available for other government programs. 
B) expand their budgets to sizes beyond what would be considered economically efficient. 
C) ensure that their budgets are exactly the size that would be considered economically efficient. 
D) economize on their spending and return unspent funds to the general treasury. 
A) make sure that their budgets are as small as possible so more funds will be available for other government programs. 
B) expand their budgets to sizes beyond what would be considered economically efficient. 
C) ensure that their budgets are exactly the size that would be considered economically efficient. 
D) economize on their spending and return unspent funds to the general treasury.

Question 7

At the most basic level, the distinguishing characteristic of government that makes it different from private firms is

Accepted Answer

A) the difference in incentive structure motivating economic activity. 
B) its ability to direct resources in a manner that is more economically efficient. 
C) its ability to produce goods and services that people value. 
D) its ability to use coercive force against people to modify their behavior or force them to pay for a good or service whether they benefit from it or not. 
A) the difference in incentive structure motivating economic activity. 
B) its ability to direct resources in a manner that is more economically efficient. 
C) its ability to produce goods and services that people value. 
D) its ability to use coercive force against people to modify their behavior or force them to pay for a good or service whether they benefit from it or not.

Question 8

From the standpoint of society as a whole, rent seeking is

Accepted Answer

A) counterproductive because it takes resources away from the creation of wealth in the private sector. 
B) counterproductive because it fails to alter public policy. 
C) productive because each interest group gains more than they spend on rent-seeking activities. 
D) productive because the resources used in rent seeking have no opportunity cost to society. 
A) counterproductive because it takes resources away from the creation of wealth in the private sector. 
B) counterproductive because it fails to alter public policy. 
C) productive because each interest group gains more than they spend on rent-seeking activities. 
D) productive because the resources used in rent seeking have no opportunity cost to society.

Question 9

If a federal agency requested funds to build a dam on an Idaho river to irrigate nearby farmland used for growing potatoes, the most active support for the project probably would come from

Accepted Answer

A) potato farmers who own land that wouldn't be irrigated by the project. 
B) taxpayers who would pay for the project. 
C) consumers of potatoes who might benefit from an expansion in supply and slightly lower potato prices. 
D) potato farmers who own the land to be irrigated. 
A) potato farmers who own land that wouldn't be irrigated by the project. 
B) taxpayers who would pay for the project. 
C) consumers of potatoes who might benefit from an expansion in supply and slightly lower potato prices. 
D) potato farmers who own the land to be irrigated.

Question 10

Public choice theory assumes voters, politicians, and other individuals in the public sector are largely motivated by

Accepted Answer

A) a desire to promote the general welfare. 
B) a desire to meet the conditions of economic efficiency for the economy as a whole. 
C) altruism or the good of the public as a whole. 
D) personal self-interest. 
A) a desire to promote the general welfare. 
B) a desire to meet the conditions of economic efficiency for the economy as a whole. 
C) altruism or the good of the public as a whole. 
D) personal self-interest.

Question 11

Producers tend to be better represented in lobbying efforts and other elements of the political process than consumers because

Accepted Answer

A) producers are generally more intelligent and, therefore, better informed. 
B) producers are generally better organized than consumers. 
C) producers are better educated than consumers. 
D) the number of producers affected by the outcome of a particular political issue is usually greater than the number of consumers affected. 
A) producers are generally more intelligent and, therefore, better informed. 
B) producers are generally better organized than consumers. 
C) producers are better educated than consumers. 
D) the number of producers affected by the outcome of a particular political issue is usually greater than the number of consumers affected.

Question 12

Economic theory implies that the incentive for a manager of a publicly operated firm (for example, a state university or the post office) to promote internal efficiency of their operations would be

Accepted Answer

A) strong because inefficiency is easily detected and leads to the loss of voter support. 
B) strong because public officials are unconcerned about personal gain. 
C) weak because government employees are less educated than employees who work in the private sector. 
D) weak because it is difficult for voters to detect inefficiency and for public officials to gain from actions that would improve the efficiency of government. 
A) strong because inefficiency is easily detected and leads to the loss of voter support. 
B) strong because public officials are unconcerned about personal gain. 
C) weak because government employees are less educated than employees who work in the private sector. 
D) weak because it is difficult for voters to detect inefficiency and for public officials to gain from actions that would improve the efficiency of government.

Question 13

Which of the following is a predictable side effect of increased government activity (for example, taxes and subsidies) designed to redistribute income among citizens?

Accepted Answer

A) improvement in the operational efficiency of government agencies 
B) rapid economic growth 
C) a reduction in the amount of lobbying 
D) an increase in rent-seeking activity 
A) improvement in the operational efficiency of government agencies 
B) rapid economic growth 
C) a reduction in the amount of lobbying 
D) an increase in rent-seeking activity

Question 14

Which of the following provides the most reasonable explanation for why agricultural interests lobby for higher farm subsidies and price supports?

Accepted Answer

A) Without the farm subsidies, food shortages would result. 
B) Subsidies promote the efficient use of agricultural resources. 
C) Agricultural interests seek a redistribution of income favoring themselves. 
D) The price support programs reduce food costs, which helps the poor. 
A) Without the farm subsidies, food shortages would result. 
B) Subsidies promote the efficient use of agricultural resources. 
C) Agricultural interests seek a redistribution of income favoring themselves. 
D) The price support programs reduce food costs, which helps the poor.

Question 15

People who spend more time and effort investigating the advantages and disadvantages of different automobile models when they go to purchase one than they do investigating the strengths and weaknesses of presidential candidates are saying, in effect, that

Accepted Answer

A) a good car is more important to their well-being than a good president. 
B) they expect to use the information on the merits of alternative cars to greater personal advantage than they could information on the merits of alternative presidential candidates. 
C) they are irrational, because the choice of a president is obviously far more important than the choice of a car. 
D) they do not think it matters who is elected president. 
A) a good car is more important to their well-being than a good president. 
B) they expect to use the information on the merits of alternative cars to greater personal advantage than they could information on the merits of alternative presidential candidates. 
C) they are irrational, because the choice of a president is obviously far more important than the choice of a car. 
D) they do not think it matters who is elected president.

Question 16

According to public choice theory, which of the following groups will likely benefit the most from government income transfers under a system of representative democracy?

Accepted Answer

A) the poor 
B) consumers 
C) small businesses 
D) concentrated interest groups 
A) the poor 
B) consumers 
C) small businesses 
D) concentrated interest groups

Question 17

Public choice theory indicates someone who spends more time evaluating which tennis racket to buy than deciding which U.S. Senate candidate to support

Accepted Answer

A) is behaving irrationally. 
B) is behaving rationally, given the structure of incentives confronted. 
C) will likely be responsible for electing the wrong senator. 
D) is failing to maximize his own personal utility. 
A) is behaving irrationally. 
B) is behaving rationally, given the structure of incentives confronted. 
C) will likely be responsible for electing the wrong senator. 
D) is failing to maximize his own personal utility.

Question 18

Which of the following is the most likely explanation for the imposition of a price floor in the market for corn?

Accepted Answer

A) Policymakers have studied the effects of the price floor carefully and they recognize that the price floor will improve the efficiency of resource use. 
B) Buyers and sellers of corn have agreed that the price floor is good for both of them and have therefore pressured policy makers into enacting the price floor. 
C) Buyers of corn, recognizing that the price floor is good for them, have pressured policy makers into enacting the price floor. 
D) Sellers of corn, recognizing that the price floor is good for them, have pressured policy makers into enacting the price floor. 
A) Policymakers have studied the effects of the price floor carefully and they recognize that the price floor will improve the efficiency of resource use. 
B) Buyers and sellers of corn have agreed that the price floor is good for both of them and have therefore pressured policy makers into enacting the price floor. 
C) Buyers of corn, recognizing that the price floor is good for them, have pressured policy makers into enacting the price floor. 
D) Sellers of corn, recognizing that the price floor is good for them, have pressured policy makers into enacting the price floor.

Question 19

Under democratic representative government, spending on a government program will likely be larger than the amount consistent with economic efficiency when

Accepted Answer

A) tax costs are levied in direct proportion with the benefits received. 
B) both the costs and benefits are widespread among the voters. 
C) benefits of the program are highly concentrated, while the costs are widely dispersed among voters. 
D) costs of the program are highly concentrated, while the benefits are widely dispersed among voters. 
A) tax costs are levied in direct proportion with the benefits received. 
B) both the costs and benefits are widespread among the voters. 
C) benefits of the program are highly concentrated, while the costs are widely dispersed among voters. 
D) costs of the program are highly concentrated, while the benefits are widely dispersed among voters.

Question 20

Which one of the following is a major difference between market and collective action through government?

Accepted Answer

A) Individuals are motivated by personal interests when making market choices, but they will be motivated primarily by the public interest when making collective choices. 
B) Competitive behavior is present when decisions are made in the marketplace, but competition is absent when choices are made collectively. 
C) Scarcity constrains output when decisions are made in the market sector, but scarcity is absent when goods are provided by the government. 
D) In the market sector, there is generally a one-to-one link between payment and consumption; this link is often absent in the government sector. 
A) Individuals are motivated by personal interests when making market choices, but they will be motivated primarily by the public interest when making collective choices. 
B) Competitive behavior is present when decisions are made in the marketplace, but competition is absent when choices are made collectively. 
C) Scarcity constrains output when decisions are made in the market sector, but scarcity is absent when goods are provided by the government. 
D) In the market sector, there is generally a one-to-one link between payment and consumption; this link is often absent in the government sector.

Payments that users (consumers) are required to make if they want to receive certain services provided by the government are called

Economic theory indicates that the behavior of

Government action will often result in the counterproductive use of resources because

Government decisions tend to be biased toward actions that have

When goods are produced privately, but the cost of their purchase is paid for by the taxpayer or some other third party,

Economic analysis suggests that bureaucrats and public-sector managers have a strong incentive to

At the most basic level, the distinguishing characteristic of government that makes it different from private firms is

From the standpoint of society as a whole, rent seeking is

If a federal agency requested funds to build a dam on an Idaho river to irrigate nearby farmland used for growing potatoes, the most active support for the project probably would come from

Public choice theory assumes voters, politicians, and other individuals in the public sector are largely motivated by

Producers tend to be better represented in lobbying efforts and other elements of the political process than consumers because

Economic theory implies that the incentive for a manager of a publicly operated firm (for example, a state university or the post office) to promote internal efficiency of their operations would be

Which of the following is a predictable side effect of increased government activity (for example, taxes and subsidies) designed to redistribute income among citizens?

Which of the following provides the most reasonable explanation for why agricultural interests lobby for higher farm subsidies and price supports?

People who spend more time and effort investigating the advantages and disadvantages of different automobile models when they go to purchase one than they do investigating the strengths and weaknesses of presidential candidates are saying, in effect, that

According to public choice theory, which of the following groups will likely benefit the most from government income transfers under a system of representative democracy?

Public choice theory indicates someone who spends more time evaluating which tennis racket to buy than deciding which U.S. Senate candidate to support

Which of the following is the most likely explanation for the imposition of a price floor in the market for corn?

Under democratic representative government, spending on a government program will likely be larger than the amount consistent with economic efficiency when

Which one of the following is a major difference between market and collective action through government?

The Economic Approach

Some Tools of the Economist

Demand, Supply, and the Market Process

Supply and Demand: Applications and Extensions

Difficult Cases for the Market, and the Role of Government

Taking the Nations Economic Pulse

Economic Fluctuations, Unemployment, and Inflation

An Introduction to Basic Macroeconomic Markets

Dynamic Change, Economic Fluctuations, and the Ad-As Model

Fiscal Policy: the Keynesian View and the Historical Development of Macroeconomics

Fiscal Policy, Incentives, and Secondary Effects

Money and the Banking System

Modern Macroeconomics and Monetary Policy

Stabilization Policy, Output, and Employment

Creating an Environment for Growth and Prosperity

Institutions, Policies, and Cross-Country Differences in Income and Growth

Gaining From International Trade

International Finance and the Foreign Exchange Market

Filters

Exam 6: The Economics of Political Action

Payments that users (consumers) are required to make if they want to receive certain services provided by the government are called

Economic theory indicates that the behavior of

Government action will often result in the counterproductive use of resources because

Government decisions tend to be biased toward actions that have

When goods are produced privately, but the cost of their purchase is paid for by the taxpayer or some other third party,

Economic analysis suggests that bureaucrats and public-sector managers have a strong incentive to

At the most basic level, the distinguishing characteristic of government that makes it different from private firms is

From the standpoint of society as a whole, rent seeking is

If a federal agency requested funds to build a dam on an Idaho river to irrigate nearby farmland used for growing potatoes, the most active support for the project probably would come from

Public choice theory assumes voters, politicians, and other individuals in the public sector are largely motivated by

Producers tend to be better represented in lobbying efforts and other elements of the political process than consumers because

Economic theory implies that the incentive for a manager of a publicly operated firm (for example, a state university or the post office) to promote internal efficiency of their operations would be

Which of the following is a predictable side effect of increased government activity (for example, taxes and subsidies) designed to redistribute income among citizens?

Which of the following provides the most reasonable explanation for why agricultural interests lobby for higher farm subsidies and price supports?

People who spend more time and effort investigating the advantages and disadvantages of different automobile models when they go to purchase one than they do investigating the strengths and weaknesses of presidential candidates are saying, in effect, that

According to public choice theory, which of the following groups will likely benefit the most from government income transfers under a system of representative democracy?

Public choice theory indicates someone who spends more time evaluating which tennis racket to buy than deciding which U.S. Senate candidate to support

Which of the following is the most likely explanation for the imposition of a price floor in the market for corn?

Under democratic representative government, spending on a government program will likely be larger than the amount consistent with economic efficiency when

Which one of the following is a major difference between market and collective action through government?

The Economic Approach

Some Tools of the Economist

Demand, Supply, and the Market Process

Supply and Demand: Applications and Extensions

Difficult Cases for the Market, and the Role of Government

Taking the Nations Economic Pulse

Economic Fluctuations, Unemployment, and Inflation

An Introduction to Basic Macroeconomic Markets

Dynamic Change, Economic Fluctuations, and the Ad-As Model

Fiscal Policy: the Keynesian View and the Historical Development of Macroeconomics

Fiscal Policy, Incentives, and Secondary Effects

Money and the Banking System

Modern Macroeconomics and Monetary Policy

Stabilization Policy, Output, and Employment

Creating an Environment for Growth and Prosperity

Institutions, Policies, and Cross-Country Differences in Income and Growth

Gaining From International Trade

International Finance and the Foreign Exchange Market

Filters