Question 1

Private ﬁrms can hardly produce a public good proﬁtably because of

Accepted Answer

A)  liability rules and lawsuits. 
B)  the free-rider problem. 
C)  shortages and surpluses. 
D)  moral hazard and adverse selection. 
A)  liability rules and lawsuits. 
B)  the free-rider problem. 
C)  shortages and surpluses. 
D)  moral hazard and adverse selection.

Question 2

Refer to the table. In a choice between the highway and the lighthouse,

Accepted Answer

A)  a majority of voters favor the lighthouse. 
B)  a majority of voters favor the highway. 
C)  the voters are indifferent between the two. 
D)  no voter decision is possible. 
A)  a majority of voters favor the lighthouse. 
B)  a majority of voters favor the highway. 
C)  the voters are indifferent between the two. 
D)  no voter decision is possible.

Question 3

The "pork" in pork-barrel politics refers to government projects that politicians try to secure in favor of the
common good for the whole nation.

Accepted Answer

A) True 
 B)False

Question 4

Refer to the provided table, which shows the ranked preferences of voters for three alternative projects, with "1" being the top preference. In a paired-choice vote between a jail and a stadium,

Accepted Answer

A)  a majority of the voters would favor the jail, 2 to 1. 
B)  a majority of the voters would favor the stadium, 2 to 1. 
C)  a majority of the voters would favor the jail, 3 to 0. 
D)  a majority of the voters would favor the stadium, 3 to 0. 
A)  a majority of the voters would favor the jail, 2 to 1. 
B)  a majority of the voters would favor the stadium, 2 to 1. 
C)  a majority of the voters would favor the jail, 3 to 0. 
D)  a majority of the voters would favor the stadium, 3 to 0.

Question 5

Nonexcludability describes a condition where

Accepted Answer

A)  one person's consumption of a good does not prevent consumption of the good by others. 
B)  there is no effective way to keep people from using a good once it comes into being. 
C)  sellers can withhold the beneﬁts of a good from those unwilling to pay for it. 
D)  there is no potential for free-riding behavior. 
A)  one person's consumption of a good does not prevent consumption of the good by others. 
B)  there is no effective way to keep people from using a good once it comes into being. 
C)  sellers can withhold the beneﬁts of a good from those unwilling to pay for it. 
D)  there is no potential for free-riding behavior.

Question 6

Which one of the following topics would be of the most interest to a public choice economist?

Accepted Answer

A)  the theory of comparative advantage 
B)  the law of increasing opportunity cost 
C)  inﬂation and unemployment 
D)  rent-seeking behavior 
A)  the theory of comparative advantage 
B)  the law of increasing opportunity cost 
C)  inﬂation and unemployment 
D)  rent-seeking behavior

Question 7

Because of the so-called "bundled choice" problem, voters often vote for candidates that they are not entirely
happy with.

Accepted Answer

A) True 
 B)False

Question 8

In which of the following cases has political corruption deﬁnitely occurred?

Accepted Answer

A)  Political candidates accept campaign contributions from people. 
B)  Government agencies impose ﬁnes for such things as traﬃc violations. 
C)  A bureaucrat allows someone to look at conﬁdential documents for an informal fee. 
D)  A government agency receives donations for distribution to charity. 
A)  Political candidates accept campaign contributions from people. 
B)  Government agencies impose ﬁnes for such things as traﬃc violations. 
C)  A bureaucrat allows someone to look at conﬁdential documents for an informal fee. 
D)  A government agency receives donations for distribution to charity.

Question 9

One consequence of the paradox of voting is that whoever sets the agenda of a vote could practically
predetermine the results of the vote.

Accepted Answer

A) True 
 B)False

Question 10

It is generally believed that, because of the election process, the incentives and pressures for internal
eﬃciency are stronger in the public sector than in the private sector.

Accepted Answer

A) True 
 B)False

Question 11

Interest groups result when people

Accepted Answer

A)  in a certain zip code vote together. 
B)  who share strong preferences on a choice band together. 
C)  do not all vote in elections. 
D)  do not have strong preferences on the issues to be voted on. 
A)  in a certain zip code vote together. 
B)  who share strong preferences on a choice band together. 
C)  do not all vote in elections. 
D)  do not have strong preferences on the issues to be voted on.

Question 12

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 13

The concept of limited and bundled choice, as used in public choice theory, refers to the fact that

Accepted Answer

A)  politicians may not be objective in evaluating economic policy programs due to their individual biases. 
B)  because of the importance of television and other modern communication media, the best and brightest candidates may not be the ones elected by voters. 
C)  in an election, each voter must select a candidate who has various preferences (in a wide array of issues) that do not exactly match the preferences of the voter. 
D)  the most economically eﬃcient public policy programs may not be selected because political leaders do not know enough about economics. 
A)  politicians may not be objective in evaluating economic policy programs due to their individual biases. 
B)  because of the importance of television and other modern communication media, the best and brightest candidates may not be the ones elected by voters. 
C)  in an election, each voter must select a candidate who has various preferences (in a wide array of issues) that do not exactly match the preferences of the voter. 
D)  the most economically eﬃcient public policy programs may not be selected because political leaders do not know enough about economics.

Question 14

Suppose the U.S. House of Representatives is debating a bill to fund construction and maintenance for the nation's highway system. Representative Sandy Shady adds a provision to the bill that would fund a new public
Art museum in her district. The authorization of expenditure for the museum would be an example of

Accepted Answer

A)  an earmark. 
B)  an unfunded liability. 
C)  a collective action problem. 
D)  a principal-agent problem. 
A)  an earmark. 
B)  an unfunded liability. 
C)  a collective action problem. 
D)  a principal-agent problem.

Question 15

Excludability means that when someone is consuming a good, then others are excluded from using the good
anymore.

Accepted Answer

A) True 
 B)False

Question 16

The unlawful misdirection of governmental resources for personal gain is known as

Accepted Answer

A)  political corruption. 
B)  logrolling. 
C)  adverse selection. 
D)  the special-interest effect. 
A)  political corruption. 
B)  logrolling. 
C)  adverse selection. 
D)  the special-interest effect.

Question 17

What is regulatory capture?

Accepted Answer

Regulatory capture is the situ

Question 18

The special-interest effect in government is the reason why ﬁrms in some industries are willing to pay huge
amounts of money to lobbyists.

Accepted Answer

A) True 
 B)False

Question 19

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 20

Assume that a government is considering a new social program and may choose to include in this program one of four progressively larger projects. The marginal cost and the marginal bene?ts of each of the four
Projects are given in the table below.
$$\begin{array} { | c | c | c | } 
\hline \text { Project } & \text { Marginal Cost } & \text { Marginal Benefit } \
\hline A & \$ 1 \text { Billion } & \$ 2 \text { Billion } \
\hline B & 2 \text { Billion } & 3 \text { Billion } \
\hline C & 5 \text { Billion } & 7 \text { Billion } \
\hline D & 7 \text { Billion } & 8 \text { Billion } \
\hline
\end{array}$$ Which project should the government select to achieve the maximum net bene?t?

Accepted Answer

A)  A 
B)  B 
C)  C 
D)  D 
A)  A 
B)  B 
C)  C 
D)  D

Private ﬁrms can hardly produce a public good proﬁtably because of

Refer to the table. In a choice between the highway and the lighthouse,

The "pork" in pork-barrel politics refers to government projects that politicians try to secure in favor of the common good for the whole nation.

Refer to the provided table, which shows the ranked preferences of voters for three alternative projects, with "1" being the top preference. In a paired-choice vote between a jail and a stadium,

Nonexcludability describes a condition where

Which one of the following topics would be of the most interest to a public choice economist?

Because of the so-called "bundled choice" problem, voters often vote for candidates that they are not entirely happy with.

In which of the following cases has political corruption deﬁnitely occurred?

One consequence of the paradox of voting is that whoever sets the agenda of a vote could practically predetermine the results of the vote.

It is generally believed that, because of the election process, the incentives and pressures for internal eﬃciency are stronger in the public sector than in the private sector.

Interest groups result when people

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.

The concept of limited and bundled choice, as used in public choice theory, refers to the fact that

Excludability means that when someone is consuming a good, then others are excluded from using the good anymore.

The unlawful misdirection of governmental resources for personal gain is known as

What is regulatory capture?

The special-interest effect in government is the reason why ﬁrms in some industries are willing to pay huge amounts of money to lobbyists.

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

The Market System and the Circular Flow

Demand, Supply, and Market Equilibrium

Market Failures Caused by Externalities Asymmetric Information

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

Filters

Exam 5: Public Goods, Public Choice, and Government Failure

Private ﬁrms can hardly produce a public good proﬁtably because of

Refer to the table. In a choice between the highway and the lighthouse,

The "pork" in pork-barrel politics refers to government projects that politicians try to secure in favor of the common good for the whole nation.

Refer to the provided table, which shows the ranked preferences of voters for three alternative projects, with "1" being the top preference. In a paired-choice vote between a jail and a stadium,

Nonexcludability describes a condition where

Which one of the following topics would be of the most interest to a public choice economist?

Because of the so-called "bundled choice" problem, voters often vote for candidates that they are not entirely happy with.

In which of the following cases has political corruption deﬁnitely occurred?

One consequence of the paradox of voting is that whoever sets the agenda of a vote could practically predetermine the results of the vote.

It is generally believed that, because of the election process, the incentives and pressures for internal eﬃciency are stronger in the public sector than in the private sector.

Interest groups result when people

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.

The concept of limited and bundled choice, as used in public choice theory, refers to the fact that

Excludability means that when someone is consuming a good, then others are excluded from using the good anymore.

The unlawful misdirection of governmental resources for personal gain is known as

What is regulatory capture?

The special-interest effect in government is the reason why ﬁrms in some industries are willing to pay huge amounts of money to lobbyists.

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

The Market System and the Circular Flow

Demand, Supply, and Market Equilibrium

Market Failures Caused by Externalities Asymmetric Information

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

Filters