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

Esteban, Mariko, and Greta are the only three people in a community. Esteban is willing to pay $20 for the fifth unit of a public good; Mariko, $15; and Greta, $25. Government should produce the fifth unit of the public good If the marginal cost is less than or equal to

Because of the free-rider problem,

Factors that impede the attainment of economic efficiency in the public sector are called

Suppose lawyers seek legislation to limit the use of computer software that enables people to use their personal computers to self-prepare their own wills, trusts, and other legal documents. This is an example of

Deregulation can solve the problem of regulatory capture and increase economic efficiency

A public good

List the five major sources of government failure.

The median-voter model implies that a political office seeker will

One prediction of the median-voter model is that during elections, candidates will tend to become "centrists."

Evaluate deregulation of an industry as an alternative to regulation.

In the median-voter model, half the voters have stronger or more positive preferences than the median voter, while half of the voters have weaker or more negative preferences.

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

The free-rider problem refers to the local government's problem of finding funds to provide free bus rides in the city.

Even if a majority of the population wants a law and the law is passed, the outcome may still be economically inefficient.

Assume that Abby, Ben, and Clara 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 $400 each to Abby, Ben, and Clara. In a majority vote, this proposal will most likely be

Economists (particularly public choice theorists) point out that the political process

Assume there is no way to prevent someone from using an interstate highway, regardless of whether or not he or she helps pay for it. This characteristic is called

Economists widely support deregulation of industries that tend toward monopoly or generate substantial negative externalities.

The "principal-agent problem" often arises in public choice when politicians pursue the best interests of their constituents.

What is meant by the term government failure as described in this chapter?