Question 1

Cost-beneﬁt analysis attempts to

Accepted Answer

A)  compare the real worth, rather than the market values, of various goods and services. 
B)  compare the relative desirability of alternative distributions of income. 
C)  determine whether it is better to cut government expenditures or reduce taxes. 
D)  compare the beneﬁts and costs associated with any economic project or activity. 
A)  compare the real worth, rather than the market values, of various goods and services. 
B)  compare the relative desirability of alternative distributions of income. 
C)  determine whether it is better to cut government expenditures or reduce taxes. 
D)  compare the beneﬁts and costs associated with any economic project or activity.

Question 2

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 3

It is observed that the person representing the middle position on an issue will most likely determine the outcome of an election. This view is most closely associated with the

Accepted Answer

A)  fallacy of limited decisions. 
B)  special-interest effect. 
C)  paradox of voting. 
D)  median-voter model. 
A)  fallacy of limited decisions. 
B)  special-interest effect. 
C)  paradox of voting. 
D)  median-voter model.

Question 4

(Consider This) Government loan subsidies for mohair production illustrate

Accepted Answer

A)  why special-interest effects are often characterized by concentrated beneﬁts and diffuse costs. 
B)  why special-interest effects are often characterized by concentrated costs and diffuse beneﬁts. 
C)  that larger groups carry greater political weight than smaller groups. 
D)  the moral hazard problem. 
A)  why special-interest effects are often characterized by concentrated beneﬁts and diffuse costs. 
B)  why special-interest effects are often characterized by concentrated costs and diffuse beneﬁts. 
C)  that larger groups carry greater political weight than smaller groups. 
D)  the moral hazard problem.

Question 5

A demand curve for a public good is determined by

Accepted Answer

A)  summing vertically the individual demand curves for the public good. 
B)  summing horizontally the individual demand curves for the public good. 
C)  combining the amounts of the public good that the individual members of society demand at each price. 
D)  multiplying the per-unit cost of the public good by the quantity made available. 
A)  summing vertically the individual demand curves for the public good. 
B)  summing horizontally the individual demand curves for the public good. 
C)  combining the amounts of the public good that the individual members of society demand at each price. 
D)  multiplying the per-unit cost of the public good by the quantity made available.

Question 6

For which one of the following goods would we need to sum individual demand curves vertically to obtain the total demand curve?

Accepted Answer

A)  frozen yogurt 
B)  bubble gum 
C)  microwave popcorn 
D)  courts of law 
A)  frozen yogurt 
B)  bubble gum 
C)  microwave popcorn 
D)  courts of law

Question 7

Senator A agrees to vote for Senator K's state project in exchange for Senator K voting for Senator A's state project. This is an example of

Accepted Answer

A)  logrolling. 
B)  the paradox of voting. 
C)  the principal-agent problem. 
D)  the median voter model. 
A)  logrolling. 
B)  the paradox of voting. 
C)  the principal-agent problem. 
D)  the median voter model.

Question 8

Political corruption occurs in the following instances, except when

Accepted Answer

A)  government oﬃcials use their powers for personal gain. 
B)  people pay a government oﬃcial to do what she should be doing. 
C)  people pay a bureaucrat to do something that he should not be doing. 
D)  businesses pay property taxes and license fees. 
A)  government oﬃcials use their powers for personal gain. 
B)  people pay a government oﬃcial to do what she should be doing. 
C)  people pay a bureaucrat to do something that he should not be doing. 
D)  businesses pay property taxes and license fees.

Question 9

Refer to the graphs which show demand curves reﬂecting the prices Alvin and Elmer are willing to pay for a public good, rather than do without it. If the marginal cost of the optimal quantity of this public good is $10, the
Optimal quantity must be

Accepted Answer

A)  1 unit. 
B)  2 units. 
C)  3 units. 
D)  4 units. 
A)  1 unit. 
B)  2 units. 
C)  3 units. 
D)  4 units.

Question 10

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, four in favor and one against. 
B)  defeated, one in favor and four against. 
C)  accepted, three in favor and two against. 
D)  defeated, two in favor and three against. 
A)  accepted, four in favor and one against. 
B)  defeated, one in favor and four against. 
C)  accepted, three in favor and two against. 
D)  defeated, two in favor and three against.

Question 11

Even in a democratic government, elected oﬃcials may end up pursuing policies that go against the preferences of the people due to the following reasons, except

Accepted Answer

A)  the special-interest effect. 
B)  the invisible hand of the market. 
C)  limited and bundled choice in elections. 
D)  the majority voting system. 
A)  the special-interest effect. 
B)  the invisible hand of the market. 
C)  limited and bundled choice in elections. 
D)  the majority voting system.

Question 12

Public choice economists

Accepted Answer

A)  analyze the incidence of taxes. 
B)  are also known as Keynesian economists. 
C)  use the tools of economics to analyze decision making, politics, and elections in the public sector. 
D)  are, by deﬁnition, economists employed by federal, state, and local governments. 
A)  analyze the incidence of taxes. 
B)  are also known as Keynesian economists. 
C)  use the tools of economics to analyze decision making, politics, and elections in the public sector. 
D)  are, by deﬁnition, economists employed by federal, state, and local governments.

Question 13

A public good

Accepted Answer

A)  can be proﬁtably produced by private ﬁrms. 
B)  is characterized by rivalry and excludability. 
C)  produces no positive or negative externalities. 
D)  is available to all and cannot be denied to anyone. 
A)  can be proﬁtably produced by private ﬁrms. 
B)  is characterized by rivalry and excludability. 
C)  produces no positive or negative externalities. 
D)  is available to all and cannot be denied to anyone.

Question 14

(Consider This) Mohair loan subsidies, provided to Angora goat farmers, are an example of regulatory capture.

Accepted Answer

A) True 
 B)False

Question 15

In a sporting goods store, you can buy the equipment you want and forgo the rest. But in an election you "buy" the entire range of the candidate's positions, including some you may not agree with. This difference

Accepted Answer

A)  reﬂects limited and bundled choices in the public sector. 
B)  describes the paradox of voting. 
C)  describes the principal-agent problem in the public sector. 
D)  creates bureaucratic ineﬃciency in the public sector. 
A)  reﬂects limited and bundled choices in the public sector. 
B)  describes the paradox of voting. 
C)  describes the principal-agent problem in the public sector. 
D)  creates bureaucratic ineﬃciency in the public sector.

Question 16

Economists consider governments to be "wasteful"

Accepted Answer

A)  whenever they over- or underallocate resources to a project. 
B)  only when they overallocate resources to a project. 
C)  only when they underallocate resources to a project. 
D)  whenever they attempt to correct a market failure. 
A)  whenever they over- or underallocate resources to a project. 
B)  only when they overallocate resources to a project. 
C)  only when they underallocate resources to a project. 
D)  whenever they attempt to correct a market failure.

Question 17

A government is considering undertaking a construction project of an increasing scale (ranging from 1, 2, 3, to 4). The estimated marginal costs and marginal bene?ts of each successive scale of the project are given in the
Table below.
$$\begin{array} { | c | c | c | } 
\hline \text { Project } & \begin{array} { c } 
\text { Marginal Cost } \
\text { (in millions) }
\end{array} & \begin{array} { c } 
\text { Marginal Benefit } \
\text { (in millions) }
\end{array} \
\hline 1 & \$ 8 & \$ 11 \
\hline 2 & 11 & 13 \
\hline 3 & 18 & 17 \
\hline 4 & 28 & 23 \
\hline
\end{array}$$ What is the total cost and total bene?t of the scale-3 project?

Accepted Answer

A)  Total cost is $18 million, and total bene?t is $19 million. 
B)  Total cost is $24 million, and total bene?t is $27 million. 
C)  Total cost is $37 million, and total bene?t is $41 million. 
D)  Total cost is $65 million, and total bene?t is $66 million. 
A)  Total cost is $18 million, and total bene?t is $19 million. 
B)  Total cost is $24 million, and total bene?t is $27 million. 
C)  Total cost is $37 million, and total bene?t is $41 million. 
D)  Total cost is $65 million, and total bene?t is $66 million.

Question 18

Describe the two characteristics of public goods.

Accepted Answer

The two characteristics of public goods

Question 19

Majority voting may produce economically ineﬃcient outcomes because it

Accepted Answer

A)  does not always lead to fair results. 
B)  requires everyone to vote and bear the costs. 
C)  does not consider the strength of individual voters' preferences. 
D)  does not provide beneﬁts to everyone. 
A)  does not always lead to fair results. 
B)  requires everyone to vote and bear the costs. 
C)  does not consider the strength of individual voters' preferences. 
D)  does not provide beneﬁts to everyone.

Question 20

One primary reason why regulatory capture may occur in an industry is that

Accepted Answer

A)  the government designates unelected oﬃcials to head the various regulatory agencies of different industries. 
B)  there is a lot of bribery and corruption going on in all major industries that the government seeks to regulate. 
C)  the industry's leaders are the ones who pushed for the government to impose supervision and regulation over their industry. 
D)  people who are qualiﬁed to supervise and regulate the industry often come from the industry itself. 
A)  the government designates unelected oﬃcials to head the various regulatory agencies of different industries. 
B)  there is a lot of bribery and corruption going on in all major industries that the government seeks to regulate. 
C)  the industry's leaders are the ones who pushed for the government to impose supervision and regulation over their industry. 
D)  people who are qualiﬁed to supervise and regulate the industry often come from the industry itself.

Cost-beneﬁt analysis attempts to

Regulatory capture often occurs because of which of the following?

It is observed that the person representing the middle position on an issue will most likely determine the outcome of an election. This view is most closely associated with the

(Consider This) Government loan subsidies for mohair production illustrate

A demand curve for a public good is determined by

For which one of the following goods would we need to sum individual demand curves vertically to obtain the total demand curve?

Senator A agrees to vote for Senator K's state project in exchange for Senator K voting for Senator A's state project. This is an example of

Political corruption occurs in the following instances, except when

Refer to the graphs which show demand curves reﬂecting the prices Alvin and Elmer are willing to pay for a public good, rather than do without it. If the marginal cost of the optimal quantity of this public good is $10, the Optimal quantity must be

Even in a democratic government, elected oﬃcials may end up pursuing policies that go against the preferences of the people due to the following reasons, except

Public choice economists

A public good

(Consider This) Mohair loan subsidies, provided to Angora goat farmers, are an example of regulatory capture.

In a sporting goods store, you can buy the equipment you want and forgo the rest. But in an election you "buy" the entire range of the candidate's positions, including some you may not agree with. This difference

Economists consider governments to be "wasteful"

Describe the two characteristics of public goods.

Majority voting may produce economically ineﬃcient outcomes because it

One primary reason why regulatory capture may occur in an industry is that

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

Cost-beneﬁt analysis attempts to

Regulatory capture often occurs because of which of the following?

It is observed that the person representing the middle position on an issue will most likely determine the outcome of an election. This view is most closely associated with the

(Consider This) Government loan subsidies for mohair production illustrate

A demand curve for a public good is determined by

For which one of the following goods would we need to sum individual demand curves vertically to obtain the total demand curve?

Senator A agrees to vote for Senator K's state project in exchange for Senator K voting for Senator A's state project. This is an example of

Political corruption occurs in the following instances, except when

Refer to the graphs which show demand curves reﬂecting the prices Alvin and Elmer are willing to pay for a public good, rather than do without it. If the marginal cost of the optimal quantity of this public good is $10, the Optimal quantity must be

Even in a democratic government, elected oﬃcials may end up pursuing policies that go against the preferences of the people due to the following reasons, except

Public choice economists

A public good

(Consider This) Mohair loan subsidies, provided to Angora goat farmers, are an example of regulatory capture.

In a sporting goods store, you can buy the equipment you want and forgo the rest. But in an election you "buy" the entire range of the candidate's positions, including some you may not agree with. This difference

Economists consider governments to be "wasteful"

Describe the two characteristics of public goods.

Majority voting may produce economically ineﬃcient outcomes because it

One primary reason why regulatory capture may occur in an industry is that

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