Question 1

Analysis of the Great Depression indicates that

Accepted Answer

A)  even though monetary and fiscal policies were highly expansionary, they were unable to offset the economic plunge. 
B)  even though monetary policy was expansionary, restrictive fiscal policy dominated during the 1930s. 
C)  a reduction in tax rates could not prevent the economic downturn from spiraling into a depression. 
D)  the severity of the economic decline, if not its onset, was the result of perverse monetary, fiscal and regulatory policies. 
A)  even though monetary and fiscal policies were highly expansionary, they were unable to offset the economic plunge. 
B)  even though monetary policy was expansionary, restrictive fiscal policy dominated during the 1930s. 
C)  a reduction in tax rates could not prevent the economic downturn from spiraling into a depression. 
D)  the severity of the economic decline, if not its onset, was the result of perverse monetary, fiscal and regulatory policies. D

Question 2

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. B

Question 3

In which of the following situations is the political process likely to result in the inefficient and wasteful use of resources?

Accepted Answer

A)  when the benefits are concentrated and the costs are concentrated 
B)  when the benefits are concentrated and the costs widespread 
C)  when the benefits are widespread and the costs are concentrated 
D)  when the benefits are widespread and the costs are widespread 
A)  when the benefits are concentrated and the costs are concentrated 
B)  when the benefits are concentrated and the costs widespread 
C)  when the benefits are widespread and the costs are concentrated 
D)  when the benefits are widespread and the costs are widespread B

Question 4

Market allocation and the political process differ in that

Accepted Answer

A)  competition is present in the market sector but not in the political sector. 
B)  scarcity is a constraint in the market sector but not the political sector. 
C)  there is a one-to-one link between payment for and receipt of a good in the market sector, but this is often not true in the political sector. 
D)  in the political sector, voters have a strong incentive to acquire information that will help them make better decisions, but in the market sector, consumers do not have much incentive to acquire information. 
A)  competition is present in the market sector but not in the political sector. 
B)  scarcity is a constraint in the market sector but not the political sector. 
C)  there is a one-to-one link between payment for and receipt of a good in the market sector, but this is often not true in the political sector. 
D)  in the political sector, voters have a strong incentive to acquire information that will help them make better decisions, but in the market sector, consumers do not have much incentive to acquire information.

Question 5

Is calling a voter rationally ignorant the same as calling her irrational? Explain.

Accepted Answer

These are clearly not the same. To be ir

Question 6

Which of the following is most likely to result in an increase in crony capitalism?

Accepted Answer

A)  a reduction in entry barriers and an increase in the competitiveness of markets. 
B)  an increase in government spending and growth of government regulation 
C)  a reduction in the size of government 
D)  an increase in the share of the population voting in elections 
A)  a reduction in entry barriers and an increase in the competitiveness of markets. 
B)  an increase in government spending and growth of government regulation 
C)  a reduction in the size of government 
D)  an increase in the share of the population voting in elections

Question 7

Economics indicates that government funding of special interest projects and favoritism of some business firms relative to others will lead to

Accepted Answer

A)  efficient allocation of resources because the government action will correct the failures of the market. 
B)  the funding of productive projects that will improve the well-being of most citizens. 
C)  economic inefficiency because the funding will be driven by political rather than economic considerations. 
D)  a decline in political contributions and a reduction in the quality of the candidates willing to run for political office. 
A)  efficient allocation of resources because the government action will correct the failures of the market. 
B)  the funding of productive projects that will improve the well-being of most citizens. 
C)  economic inefficiency because the funding will be driven by political rather than economic considerations. 
D)  a decline in political contributions and a reduction in the quality of the candidates willing to run for political office.

Question 8

Which of the following is a distinguishing characteristic of a user charge?

Accepted Answer

A)  Persons pay roughly in proportion to the extent that they use the good or service. 
B)  Persons with high incomes pay a larger amount than persons with lower incomes for the same good or service. 
C)  Persons with high incomes pay a larger percentage of their income than persons with lower incomes for the same good or service. 
D)  Persons with high incomes pay a smaller percentage of their income than persons with lower incomes for the same good or service. 
A)  Persons pay roughly in proportion to the extent that they use the good or service. 
B)  Persons with high incomes pay a larger amount than persons with lower incomes for the same good or service. 
C)  Persons with high incomes pay a larger percentage of their income than persons with lower incomes for the same good or service. 
D)  Persons with high incomes pay a smaller percentage of their income than persons with lower incomes for the same good or service.

Question 9

Legislation that offers immediate and easily recognized benefits, at the expense of costs that are observable only in the distant future, is often enacted, even when economic inefficiency results. In economics this is referred to as the

Accepted Answer

A)  long-term effect. 
B)  political-fallacy effect. 
C)  shortsightedness effect. 
D)  inefficiency effect. 
A)  long-term effect. 
B)  political-fallacy effect. 
C)  shortsightedness effect. 
D)  inefficiency effect.

Question 10

Despite being a college graduate, Ethan cannot name any of his representatives in Congress and he has no idea which issues are being debated and voted on this week in Congress. According to public choice analysis, Ethan is

Accepted Answer

A)  irrational. 
B)  considering only the welfare of society and not his own personal interests. 
C)  not intelligent enough to understand the issues. 
D)  making a rational personal choice because knowing these things gives him little personal benefit. 
A)  irrational. 
B)  considering only the welfare of society and not his own personal interests. 
C)  not intelligent enough to understand the issues. 
D)  making a rational personal choice because knowing these things gives him little personal benefit.

Question 11

Sound economic policy is policy that is consistent with

Accepted Answer

A)  good intentions. 
B)  quick action and frequent policy changes until positive results are achieved. 
C)  monetary stability, free trade, and low tax rates. 
D)  saving jobs, protecting domestic industry, and increasing tax revenue. 
A)  good intentions. 
B)  quick action and frequent policy changes until positive results are achieved. 
C)  monetary stability, free trade, and low tax rates. 
D)  saving jobs, protecting domestic industry, and increasing tax revenue.

Question 12

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 13

Pork-barrel legislation typically bundles the pet projects of several special interest groups. Such legislation

Accepted Answer

A)  is frequently enacted, even though the overall benefits to society are less than the overall costs to society. 
B)  seldom benefits special interest groups. 
C)  usually, if successful, helps the majority of taxpayers. 
D)  seldom passes because social benefits are far smaller than social costs. 
A)  is frequently enacted, even though the overall benefits to society are less than the overall costs to society. 
B)  seldom benefits special interest groups. 
C)  usually, if successful, helps the majority of taxpayers. 
D)  seldom passes because social benefits are far smaller than social costs.

Question 14

An issue that generates substantial benefits to a small group of individuals while imposing a small cost on many others is called a

Accepted Answer

A)  special-interest issue. 
B)  minority application. 
C)  commons policy. 
D)  national service. 
A)  special-interest issue. 
B)  minority application. 
C)  commons policy. 
D)  national service.

Question 15

John Smith is a typical citizen. Economic theory suggests that he is likely to make a more informed choice when he buys a personal computer than when he votes for a congressional candidate. This view is

Accepted Answer

A)  false because the actions of legislators will exert a greater impact on Smith's welfare than will the purchase of the computer. 
B)  false; Smith will tend to choose more carefully when he makes public choices than when he makes private choices. 
C)  uncertain; it would be true if, and only if, Smith's spending on personal computers exceeds his tax bill. 
D)  true; since Smith can decide what computer to buy, but his individual vote is very unlikely to decide the outcome of a congressional election, he has more incentive to inform himself about the computer than the congressional election. 
A)  false because the actions of legislators will exert a greater impact on Smith's welfare than will the purchase of the computer. 
B)  false; Smith will tend to choose more carefully when he makes public choices than when he makes private choices. 
C)  uncertain; it would be true if, and only if, Smith's spending on personal computers exceeds his tax bill. 
D)  true; since Smith can decide what computer to buy, but his individual vote is very unlikely to decide the outcome of a congressional election, he has more incentive to inform himself about the computer than the congressional election.

Question 16

Which of the following provides the best summary of the basic idea of public choice analysis?

Accepted Answer

A)  Public choice analysis applies the principles of economics to political science topics. 
B)  Public choice analysis takes the principles of political science and applies them to the traditional topics of economics. 
C)  Public choice analysis uses the principle of majority rule to determine the efficiency of an action. 
D)  Public choice analysis indicates there is a sharp distinction between economic and political topics. 
A)  Public choice analysis applies the principles of economics to political science topics. 
B)  Public choice analysis takes the principles of political science and applies them to the traditional topics of economics. 
C)  Public choice analysis uses the principle of majority rule to determine the efficiency of an action. 
D)  Public choice analysis indicates there is a sharp distinction between economic and political topics.

Question 17

When governments become more heavily involved in taxing one group in order to provide benefits to other groups, which of the following will be encouraged?

Accepted Answer

A)  rapid economic growth 
B)  rent-seeking activity 
C)  an improvement in the efficiency of government bureaucracies 
D)  competitive private markets 
A)  rapid economic growth 
B)  rent-seeking activity 
C)  an improvement in the efficiency of government bureaucracies 
D)  competitive private markets

Question 18

The Agriculture Adjustment Act of the Roosevelt Administration attempted to boost prices of agriculture products by

Accepted Answer

A)  increasing the money supply from year to year at a constant rate. 
B)  decreasing the money supply through a policy of monetary contraction. 
C)  increasing demand through lower taxes and budget deficits. 
D)  reducing supply through the planned destruction of agricultural crops and livestock. 
A)  increasing the money supply from year to year at a constant rate. 
B)  decreasing the money supply through a policy of monetary contraction. 
C)  increasing demand through lower taxes and budget deficits. 
D)  reducing supply through the planned destruction of agricultural crops and livestock.

Question 19

Public choice analysis suggests that the primary motivating factor for politicians will be finding the policies that are most likely to

Accepted Answer

A)  get them reelected. 
B)  improve economic efficiency. 
C)  improve the welfare of society as a whole. 
D)  anger the interest groups that provide substantial contributions to their campaigns. 
A)  get them reelected. 
B)  improve economic efficiency. 
C)  improve the welfare of society as a whole. 
D)  anger the interest groups that provide substantial contributions to their campaigns.

Question 20

Which of the following best describes the impact of fiscal policy during the Great Depression?

Accepted Answer

A)  Despite the large increases in government spending as a share of GDP when the New Deal policies were initiated, the expansionary fiscal policy failed to stimulate demand. 
B)  Fiscal policy was focused on monetary expansion, when it should have focused on maintaining a balanced budget. 
C)  It is difficult to link expansionary fiscal policy with economic recovery because government spending and budget deficits were a relatively small portion of GDP prior to the beginning of World War II. 
D)  There is a direct correlation between increases in government spending as a share of GDP and increases in output and employment. 
A)  Despite the large increases in government spending as a share of GDP when the New Deal policies were initiated, the expansionary fiscal policy failed to stimulate demand. 
B)  Fiscal policy was focused on monetary expansion, when it should have focused on maintaining a balanced budget. 
C)  It is difficult to link expansionary fiscal policy with economic recovery because government spending and budget deficits were a relatively small portion of GDP prior to the beginning of World War II. 
D)  There is a direct correlation between increases in government spending as a share of GDP and increases in output and employment.

Analysis of the Great Depression indicates that

Government decisions tend to be biased toward actions that have

In which of the following situations is the political process likely to result in the inefficient and wasteful use of resources?

Market allocation and the political process differ in that

Is calling a voter rationally ignorant the same as calling her irrational? Explain.

Which of the following is most likely to result in an increase in crony capitalism?

Economics indicates that government funding of special interest projects and favoritism of some business firms relative to others will lead to

Which of the following is a distinguishing characteristic of a user charge?

Legislation that offers immediate and easily recognized benefits, at the expense of costs that are observable only in the distant future, is often enacted, even when economic inefficiency results. In economics this is referred to as the

Despite being a college graduate, Ethan cannot name any of his representatives in Congress and he has no idea which issues are being debated and voted on this week in Congress. According to public choice analysis, Ethan is

Sound economic policy is policy that is consistent with

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

Pork-barrel legislation typically bundles the pet projects of several special interest groups. Such legislation

An issue that generates substantial benefits to a small group of individuals while imposing a small cost on many others is called a

John Smith is a typical citizen. Economic theory suggests that he is likely to make a more informed choice when he buys a personal computer than when he votes for a congressional candidate. This view is

Which of the following provides the best summary of the basic idea of public choice analysis?

When governments become more heavily involved in taxing one group in order to provide benefits to other groups, which of the following will be encouraged?

The Agriculture Adjustment Act of the Roosevelt Administration attempted to boost prices of agriculture products by

Public choice analysis suggests that the primary motivating factor for politicians will be finding the policies that are most likely to

Which of the following best describes the impact of fiscal policy during the Great Depression?

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

Consumer Choice and Elasticity

Costs and the Supply of Goods

Price Takers and the Competitive Process

Price-Searcher Markets With Low Entry Barriers

Price-Searcher Markets With High Entry Barriers

The Supply of and Demand for Productive Resources

Earnings, Productivity, and the Job Market

Investment, the Capital Market, and the Wealth of Nations

Income Inequality and Poverty

Gaining From International Trade

Filters

Exam 6: The Economics of Political Action

Analysis of the Great Depression indicates that

Government decisions tend to be biased toward actions that have

In which of the following situations is the political process likely to result in the inefficient and wasteful use of resources?

Market allocation and the political process differ in that

Is calling a voter rationally ignorant the same as calling her irrational? Explain.

Which of the following is most likely to result in an increase in crony capitalism?

Economics indicates that government funding of special interest projects and favoritism of some business firms relative to others will lead to

Which of the following is a distinguishing characteristic of a user charge?

Legislation that offers immediate and easily recognized benefits, at the expense of costs that are observable only in the distant future, is often enacted, even when economic inefficiency results. In economics this is referred to as the

Despite being a college graduate, Ethan cannot name any of his representatives in Congress and he has no idea which issues are being debated and voted on this week in Congress. According to public choice analysis, Ethan is

Sound economic policy is policy that is consistent with

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

Pork-barrel legislation typically bundles the pet projects of several special interest groups. Such legislation

An issue that generates substantial benefits to a small group of individuals while imposing a small cost on many others is called a

John Smith is a typical citizen. Economic theory suggests that he is likely to make a more informed choice when he buys a personal computer than when he votes for a congressional candidate. This view is

Which of the following provides the best summary of the basic idea of public choice analysis?

When governments become more heavily involved in taxing one group in order to provide benefits to other groups, which of the following will be encouraged?

The Agriculture Adjustment Act of the Roosevelt Administration attempted to boost prices of agriculture products by

Public choice analysis suggests that the primary motivating factor for politicians will be finding the policies that are most likely to

Which of the following best describes the impact of fiscal policy during the Great Depression?

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

Consumer Choice and Elasticity

Costs and the Supply of Goods

Price Takers and the Competitive Process

Price-Searcher Markets With Low Entry Barriers

Price-Searcher Markets With High Entry Barriers

The Supply of and Demand for Productive Resources

Earnings, Productivity, and the Job Market

Investment, the Capital Market, and the Wealth of Nations

Income Inequality and Poverty

Gaining From International Trade

Filters