Question 1

When a nation is in a debt crisis, the government's level of debt is so high that

Accepted Answer

A) monetary policy is ineffective. 
B) the government is unable to find willing lenders so it can continue borrowing. 
C) it can only be solved with a fiscal stimulus of lower taxes and more government spending. 
D) other countries will be unwilling to buy goods and services from the nation. 
A) monetary policy is ineffective. 
B) the government is unable to find willing lenders so it can continue borrowing. 
C) it can only be solved with a fiscal stimulus of lower taxes and more government spending. 
D) other countries will be unwilling to buy goods and services from the nation.

Question 2

What is a likely explanation for why the budget of a government agency might increase beyond its optimal size?

Accepted Answer

A) the paradox of voting 
B) the influence of the median voter 
C) the power of special-interest groups 
D) the allocative efficiency of government 
A) the paradox of voting 
B) the influence of the median voter 
C) the power of special-interest groups 
D) the allocative efficiency of government

Question 3

In what way, if any, does the invisible hand affect government resource allocation?

Accepted Answer

A) It enhances government efficiency by promoting competition for resources within government. 
B) It does not help resource allocation, as there are no competitive forces within government that automatically direct resources to their best uses. 
C) It rewards government bureaucrats who are most efficient at implementing public policies. 
D) It reduces government efficiency by sending market signals that interfere with government decision making. 
A) It enhances government efficiency by promoting competition for resources within government. 
B) It does not help resource allocation, as there are no competitive forces within government that automatically direct resources to their best uses. 
C) It rewards government bureaucrats who are most efficient at implementing public policies. 
D) It reduces government efficiency by sending market signals that interfere with government decision making.

Question 4

In 2015, U.S.federal government legislation authorized

Accepted Answer

A) 152 earmarks, totaling $3.3 billion. 
B) 105 earmarks, totaling $4.2 billion. 
C) 1,160 earmarks, totaling $19.6 billion. 
D) 11,700 earmarks, totaling $16.9 billion. 
A) 152 earmarks, totaling $3.3 billion. 
B) 105 earmarks, totaling $4.2 billion. 
C) 1,160 earmarks, totaling $19.6 billion. 
D) 11,700 earmarks, totaling $16.9 billion.

Question 5

Weak government enforcement of contracts and laws tends to

Accepted Answer

A) increase economic efficiency by minimizing government interference. 
B) stimulate innovation and investment. 
C) discourage economic activity by encouraging private-sector coercion such as blackmail and extortion. 
D) not affect economic activity, as incentives for theft and deception are low. 
A) increase economic efficiency by minimizing government interference. 
B) stimulate innovation and investment. 
C) discourage economic activity by encouraging private-sector coercion such as blackmail and extortion. 
D) not affect economic activity, as incentives for theft and deception are low.

Question 6

A 2015 study of hospitals, power plants, and water utilities found that government-owned and operated companies were more likely than private companies to violate health and safety laws.Possible explanations for this include the following, except

Accepted Answer

A) Government-owned companies may have difficulty getting taxpayers and politicians to approve the funding needed to improve their facilities. 
B) The health and safety laws appear to be applied much more leniently against government-owned companies than against private companies. 
C) Government-owned companies tend to be run by less qualified and less competent managers than the private companies. 
D) Government-owned companies are under less pressure to comply with the laws, because fines for violations are often delayed or even avoided. 
A) Government-owned companies may have difficulty getting taxpayers and politicians to approve the funding needed to improve their facilities. 
B) The health and safety laws appear to be applied much more leniently against government-owned companies than against private companies. 
C) Government-owned companies tend to be run by less qualified and less competent managers than the private companies. 
D) Government-owned companies are under less pressure to comply with the laws, because fines for violations are often delayed or even avoided.

Question 7

(Consider This) Voter failure describes the situation where

Accepted Answer

A) an insufficient number of voters turn out to express their preferences. 
B) voter preferences cannot be adequately captured because of a voting paradox. 
C) voters support policies that would reduce productive and allocative efficiency. 
D) government officials make poor decisions that contradict voter preferences. 
A) an insufficient number of voters turn out to express their preferences. 
B) voter preferences cannot be adequately captured because of a voting paradox. 
C) voters support policies that would reduce productive and allocative efficiency. 
D) government officials make poor decisions that contradict voter preferences.

Question 8

Which of the following is a source of government failure?

Accepted Answer

A) the invisible hand 
B) the lack of bureaucracy in government 
C) the enormous size and scope of government 
D) excessive flexibility 
A) the invisible hand 
B) the lack of bureaucracy in government 
C) the enormous size and scope of government 
D) excessive flexibility

Question 9

Critics of government contend that the market system creates incentives and pressures for internal efficiency that are absent in the public sector.

Accepted Answer

A) True 
 B)False

Question 10

Unfunded liabilities occur when the government considers long-term benefits and costs of projects, and approves only those with positive long-term net benefits.

Accepted Answer

A) True 
 B)False

Question 11

(Consider This) From an economist's perspective, when is government too big?

Accepted Answer

A) Government is always too big. 
B) when government activity exceeds 10 percent of gross domestic product 
C) when the marginal costs from additional government spending exceed marginal benefits 
D) when the marginal benefits from additional government spending exceed marginal costs 
A) Government is always too big. 
B) when government activity exceeds 10 percent of gross domestic product 
C) when the marginal costs from additional government spending exceed marginal benefits 
D) when the marginal benefits from additional government spending exceed marginal costs

Question 12

The ability to impose fines, revoke licenses, and put people into jail allows the government to

Accepted Answer

A) ensure positive profits for its agencies. 
B) maximize revenues from its operations. 
C) enforce involuntary transactions. 
D) set market prices for goods and services. 
A) ensure positive profits for its agencies. 
B) maximize revenues from its operations. 
C) enforce involuntary transactions. 
D) set market prices for goods and services.

Question 13

The median-voter model implies that

Accepted Answer

A) political voting will be as economically efficient as "dollar voting" in competitive markets. 
B) all voters have about the same preferences for various public goods and services. 
C) many people will be dissatisfied with the size of government in the economy. 
D) with majority voting, there can never be a consistent ordering of public good preferences. 
A) political voting will be as economically efficient as "dollar voting" in competitive markets. 
B) all voters have about the same preferences for various public goods and services. 
C) many people will be dissatisfied with the size of government in the economy. 
D) with majority voting, there can never be a consistent ordering of public good preferences.

Question 14

"Pork-barrel" legislation that contains funding for hundreds of earmarks throughout numerous states often reflects

Accepted Answer

A) the paradox of voting. 
B) logrolling. 
C) the benefits-received principle. 
D) adverse selection. 
A) the paradox of voting. 
B) logrolling. 
C) the benefits-received principle. 
D) adverse selection.

Question 15

Loan guarantees provided by the government for specific private-sector investments tend to

Accepted Answer

A) generate high positive returns for the government. 
B) increase the financial risk faced by the private investors. 
C) attract private investors into the specific project. 
D) eliminate the moral hazard problem among investors. 
A) generate high positive returns for the government. 
B) increase the financial risk faced by the private investors. 
C) attract private investors into the specific project. 
D) eliminate the moral hazard problem among investors.

Question 16

The U.S.is among the countries that have very low levels of political corruption, as reported in the Global Corruption Barometer of 2013.

Accepted Answer

A) True 
 B)False

Question 17

Assume that Matt, Joe, and Teresa are the only citizens in a community.A proposed public good has a total cost of $1,000.All three citizens will share an equal portion of this cost in taxes.The benefit of the public good is $ 380 for Matt, $ 360 for Joe, and $ 200 for Teresa.In a majority vote, this proposal will most likely be

Accepted Answer

A) accepted; the public good is produced, even though it is economically inefficient. 
B) defeated; the public good is not produced, even though it would have been efficient to do so. 
C) accepted; the public good is produced, which is economically efficient. 
D) defeated; the public good is not produced, which is the proper outcome. 
A) accepted; the public good is produced, even though it is economically inefficient. 
B) defeated; the public good is not produced, even though it would have been efficient to do so. 
C) accepted; the public good is produced, which is economically efficient. 
D) defeated; the public good is not produced, which is the proper outcome.

Question 18

"Unfunded liability" refers to a government commitment to

Accepted Answer

A) not pay the government bonds that are coming due. 
B) spend in the future without also committing to collect enough tax money to pay for it. 
C) support the retirement funds of businesses that have gone bankrupt. 
D) put money in specific mutual funds in order to vouch for the funds' liabilities. 
A) not pay the government bonds that are coming due. 
B) spend in the future without also committing to collect enough tax money to pay for it. 
C) support the retirement funds of businesses that have gone bankrupt. 
D) put money in specific mutual funds in order to vouch for the funds' liabilities.

Question 19

Inefficiencies associated with majority voting may get resolved through

Accepted Answer

A) using the median-voter model. 
B) bureaucratic inefficiency. 
C) the paradox of voting. 
D) political logrolling. 
A) using the median-voter model. 
B) bureaucratic inefficiency. 
C) the paradox of voting. 
D) political logrolling.

Question 20

Some economists contend that government agencies are generally less efficient than private businesses due to the following reasons, except

Accepted Answer

A) government bureaucracies do not face the profit motive, which is a major incentive that guides private firms 
B) government bureaucrats tend to deal with failing programs by putting more resources into the programs, rather than eliminating the program. 
C) incompetent workers gravitate toward government, while motivated workers gravitate toward the private sector. 
D) bureaucrats, along with the special-interest groups they serve, often gain enough political clout to keep their agencies going regardless of performance. 
A) government bureaucracies do not face the profit motive, which is a major incentive that guides private firms 
B) government bureaucrats tend to deal with failing programs by putting more resources into the programs, rather than eliminating the program. 
C) incompetent workers gravitate toward government, while motivated workers gravitate toward the private sector. 
D) bureaucrats, along with the special-interest groups they serve, often gain enough political clout to keep their agencies going regardless of performance.

Exam 5: Governments Role and Government Failure

When a nation is in a debt crisis, the government's level of debt is so high that

What is a likely explanation for why the budget of a government agency might increase beyond its optimal size?

In what way, if any, does the invisible hand affect government resource allocation?

In 2015, U.S.federal government legislation authorized

Weak government enforcement of contracts and laws tends to

A 2015 study of hospitals, power plants, and water utilities found that government-owned and operated companies were more likely than private companies to violate health and safety laws.Possible explanations for this include the following, except

(Consider This) Voter failure describes the situation where

Which of the following is a source of government failure?

Critics of government contend that the market system creates incentives and pressures for internal efficiency that are absent in the public sector.

Unfunded liabilities occur when the government considers long-term benefits and costs of projects, and approves only those with positive long-term net benefits.

(Consider This) From an economist's perspective, when is government too big?

The ability to impose fines, revoke licenses, and put people into jail allows the government to

The median-voter model implies that

"Pork-barrel" legislation that contains funding for hundreds of earmarks throughout numerous states often reflects

Loan guarantees provided by the government for specific private-sector investments tend to

The U.S.is among the countries that have very low levels of political corruption, as reported in the Global Corruption Barometer of 2013.

"Unfunded liability" refers to a government commitment to

Inefficiencies associated with majority voting may get resolved through

Some economists contend that government agencies are generally less efficient than private businesses due to the following reasons, except

Limits, Alternatives, and Choices

The Market System and the Circular Flow

Demand, Supply, and Market Equilibrium

Market Failures: Public Goods and Externalities

Elasticity

Utility Maximization

Behavioral Economics

Businesses and the Costs of Production

Pure Competition in the Short Run

Pure Competition in the Long Run

Pure Monopoly

Monopolistic Competition

Oligopoly and Strategic Behavior

Technology, Rd, and Efficiency

The Demand for Resources

Wage Determination

Rent, Interest, and Profit

Natural Resource and Energy Economics

Public Finance: Expenditures and Taxes

Antitrust Policy and Regulation

Agriculture: Economics and Policy

Income Inequality, Poverty, and Discrimination

Health Care

Immigration

An Introduction to Macroeconomics

Measuring Domestic Output and National Income

Economic Growth

Business Cycles, Unemployment, and Inflation

Basic Macroeconomic Relationships

The Aggregate Expenditures Model

Aggregate Demand and Aggregate Supply

Fiscal Policy, Deficits, and Debt

Money, Banking, and Financial Institutions

Money Creation

Interest Rates and Monetary Policy

Financial Economics

Extending the Analysis of Aggregate Supply

Current Issues in Macro Theory and Policy

International Trade

The Balance of Payments, Exchange Rates, and Trade Deficits

The Economics of Developing Countries

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