Question 1

Government officials tend to make

Accepted Answer

A) better economic decisions than private individuals because of the wealth of information at their disposal. 
B) better economic decisions than private individuals because of the efficient processes and flexibility built into the government bureaucracy. 
C) inefficient choices because they lack the information necessary to accurately weigh marginal benefits and marginal costs. 
D) inefficient choices because the invisible hand directs them away from the resource allocation where marginal benefits equal marginal costs. 
A) better economic decisions than private individuals because of the wealth of information at their disposal. 
B) better economic decisions than private individuals because of the efficient processes and flexibility built into the government bureaucracy. 
C) inefficient choices because they lack the information necessary to accurately weigh marginal benefits and marginal costs. 
D) inefficient choices because the invisible hand directs them away from the resource allocation where marginal benefits equal marginal costs.

Question 2

Public choice economists contend public bureaucracies are inefficient primarily because

Accepted Answer

A) the value of public goods is more easily measured than is the value of private goods. 
B) of the absence of competitive market pressures. 
C) public sector workers are more security-conscious than are private sector workers. 
D) relatively low pay in government attracts workers of lesser quality. 
A) the value of public goods is more easily measured than is the value of private goods. 
B) of the absence of competitive market pressures. 
C) public sector workers are more security-conscious than are private sector workers. 
D) relatively low pay in government attracts workers of lesser quality.

Question 3

The reason why, under majority voting and consistent voter preferences, the median voter's choice will tend to predominate is because

Accepted Answer

A) the median voter has the strongest preferences compared to the other voters. 
B) most voters strongly prefer the median view. 
C) extreme voters on either side of the median would prefer the median over the opposite extreme. 
D) voters' preferences are bell-shaped, with most of them falling on the median. 
A) the median voter has the strongest preferences compared to the other voters. 
B) most voters strongly prefer the median view. 
C) extreme voters on either side of the median would prefer the median over the opposite extreme. 
D) voters' preferences are bell-shaped, with most of them falling on the median.

Question 4

Medicare is the U.S.government's largest unfunded liability.

Accepted Answer

A) True 
 B)False

Question 5

Budget deficit is another name for the public debt.

Accepted Answer

A) True 
 B)False

Question 6

Proponents of deregulation point to all of the following industries as examples of successful deregulation except for

Accepted Answer

A) airlines. 
B) pharmaceuticals. 
C) railroads. 
D) interstate trucking. 
A) airlines. 
B) pharmaceuticals. 
C) railroads. 
D) interstate trucking.

Question 7

Majority voting fails to incorporate the strength of the preferences of individual voters and therefore

Accepted Answer

A) reduces the power of the median voter. 
B) is the primary reason for public sector failure. 
C) may produce economically inefficient outcomes. 
D) creates the opportunity for the fallacy of limited decisions. 
A) reduces the power of the median voter. 
B) is the primary reason for public sector failure. 
C) may produce economically inefficient outcomes. 
D) creates the opportunity for the fallacy of limited decisions.

Question 8

Changes in tax rates are a form of monetary policy.

Accepted Answer

A) True 
 B)False

Question 9

Regulatory capture often occurs because of which of the following?

Accepted Answer

A) Government officials want stronger control over industry regulation. 
B) Nearly everyone with expertise works in the regulated industry. 
C) Patent law allows firms to gain monopoly power easily and therefore control a market. 
D) Consumer groups are effective at lobbying the government for industry regulation. 
A) Government officials want stronger control over industry regulation. 
B) Nearly everyone with expertise works in the regulated industry. 
C) Patent law allows firms to gain monopoly power easily and therefore control a market. 
D) Consumer groups are effective at lobbying the government for industry regulation.

Question 10

Refer to the provided table, which shows the ranked preferences of voters for three alternative projects, with "1" being the top preference.This situation illustrates the voting inconsistency where a majority of voters prefer the

Accepted Answer

A) stadium over the park, the park over the jail, and the jail over the stadium. 
B) park and jail over the stadium, and the jail over the park. 
C) stadium over the jail, the jail over the park, and the park over the stadium. 
D) stadium and jail over the park, and the park over the jail. 
A) stadium over the park, the park over the jail, and the jail over the stadium. 
B) park and jail over the stadium, and the jail over the park. 
C) stadium over the jail, the jail over the park, and the park over the stadium. 
D) stadium and jail over the park, and the park over the jail.

Question 11

Assume that Abby, Ben, Clara, Joe, and Matt are the only citizens in a community.A proposed public good has a total cost of $1,000.All five citizens will share an equal portion of this cost in taxes.The benefit of the public good is $220 to Abby, $210 to Ben, $210 to Clara, $180 to Joe, and $120 to Matt.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 12

A budget deficit will require the government to issue bonds to fill in the gap in the budget.

Accepted Answer

A) True 
 B)False

Question 13

If a public good provides social benefits that are greater than its costs, then the majority of voters would always vote in favor of producing the good.

Accepted Answer

A) True 
 B)False

Question 14

The principal-agent problem refers to the problem of

Accepted Answer

A) communication between sports and entertainment stars with their agents. 
B) how to split profits between labor and management. 
C) the interests of delegates deviating from the interests of the delegators. 
D) how stockholders of a corporation can elect a board of directors. 
A) communication between sports and entertainment stars with their agents. 
B) how to split profits between labor and management. 
C) the interests of delegates deviating from the interests of the delegators. 
D) how stockholders of a corporation can elect a board of directors.

Question 15

Majority voting assures that government will provide a public good if it yields total benefits in excess of total costs.

Accepted Answer

A) True 
 B)False

Question 16

In a market economy, the government's ability to coerce is beneficial in the following cases, except in

Accepted Answer

A) correcting for positive externalities. 
B) correcting for negative externalities. 
C) producing public goods. 
D) fixing resource prices. 
A) correcting for positive externalities. 
B) correcting for negative externalities. 
C) producing public goods. 
D) fixing resource prices.

Question 17

Lobbying actions that seek government legislation to provide tax breaks to specific organizations or industries would be an example of

Accepted Answer

A) how the median-voter model works. 
B) how political choices are bundled. 
C) rent-seeking behavior. 
D) the paradox of voting. 
A) how the median-voter model works. 
B) how political choices are bundled. 
C) rent-seeking behavior. 
D) the paradox of voting.

Question 18

One implication of the median-voter model, as applied to a vote regarding how much government involvement to have in the economy, is that most voters would find the resulting government involvement either too large or too small.

Accepted Answer

A) True 
 B)False

Question 19

To make up for a shortfall in its annual budget, the government must borrow money by

Accepted Answer

A) issuing government (Treasury) bonds. 
B) buying government (Treasury) bonds. 
C) reducing its total public debt. 
D) selling government stock. 
A) issuing government (Treasury) bonds. 
B) buying government (Treasury) bonds. 
C) reducing its total public debt. 
D) selling government stock.

Question 20

The government would be running a budget surplus if

Accepted Answer

A) government spending were lower than consumer spending. 
B) tax revenues were less than government spending. 
C) it imported less from abroad than it exported. 
D) government spent less than it collected in taxes. 
A) government spending were lower than consumer spending. 
B) tax revenues were less than government spending. 
C) it imported less from abroad than it exported. 
D) government spent less than it collected in taxes.

Exam 5: Governments Role and Government Failure

Government officials tend to make

Public choice economists contend public bureaucracies are inefficient primarily because

The reason why, under majority voting and consistent voter preferences, the median voter's choice will tend to predominate is because

Medicare is the U.S.government's largest unfunded liability.

Budget deficit is another name for the public debt.

Proponents of deregulation point to all of the following industries as examples of successful deregulation except for

Majority voting fails to incorporate the strength of the preferences of individual voters and therefore

Changes in tax rates are a form of monetary policy.

Regulatory capture often occurs because of which of the following?

Refer to the provided table, which shows the ranked preferences of voters for three alternative projects, with "1" being the top preference.This situation illustrates the voting inconsistency where a majority of voters prefer the

A budget deficit will require the government to issue bonds to fill in the gap in the budget.

If a public good provides social benefits that are greater than its costs, then the majority of voters would always vote in favor of producing the good.

The principal-agent problem refers to the problem of

Majority voting assures that government will provide a public good if it yields total benefits in excess of total costs.

In a market economy, the government's ability to coerce is beneficial in the following cases, except in

Lobbying actions that seek government legislation to provide tax breaks to specific organizations or industries would be an example of

One implication of the median-voter model, as applied to a vote regarding how much government involvement to have in the economy, is that most voters would find the resulting government involvement either too large or too small.

To make up for a shortfall in its annual budget, the government must borrow money by

The government would be running a budget surplus if

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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