Question 1

The government's subsidized loan program used with Angora goat farmers today

Accepted Answer

A) has persisted well beyond its original purpose in the 1940s. 
B) is an example of the "special-interest effect." 
C) can be attributed to the principal-agent problem. 
D) is hard to stop because of the "concentrated benefit and diffuse costs" problem. 
E) All of these choices are correct. 
A) has persisted well beyond its original purpose in the 1940s. 
B) is an example of the "special-interest effect." 
C) can be attributed to the principal-agent problem. 
D) is hard to stop because of the "concentrated benefit and diffuse costs" problem. 
E) All of these choices are correct.

Question 2

Which statement best describes the special-interest effect?

Accepted Answer

A) It is a program or policy that is adopted during a special session of Congress or a state legislature. 
B) It is a policy issue in which both the supporters and opponents employ paid lobbyists to represent their interests. 
C) It is a program or policy which one political party strongly supports and other political parties strongly oppose. 
D) It is a program or policy in which a large number of people will suffer small costs, while a small number will receive large gains. 
A) It is a program or policy that is adopted during a special session of Congress or a state legislature. 
B) It is a policy issue in which both the supporters and opponents employ paid lobbyists to represent their interests. 
C) It is a program or policy which one political party strongly supports and other political parties strongly oppose. 
D) It is a program or policy in which a large number of people will suffer small costs, while a small number will receive large gains.

Question 3

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 benefits of each of the four projects are given in the table below.   Which project should the government select to achieve the maximum net benefit?

Accepted Answer

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

Question 4

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 5

Answer the question on the basis of this table showing the marginal benefit that a particular public project will provide to each of the three members of a community. No vote trading is allowed.   If the tax cost of this proposed project is $300 per person, a majority vote will

Accepted Answer

A) defeat this project and resources will be underallocated to it. 
B) pass this project and resources will be allocated efficiently. 
C) pass this project and resources will be underallocated to it. 
D) defeat this project and resources will be overallocated to it. 
A) defeat this project and resources will be underallocated to it. 
B) pass this project and resources will be allocated efficiently. 
C) pass this project and resources will be underallocated to it. 
D) defeat this project and resources will be overallocated to it.

Question 6

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

Accepted Answer

A) True 
 B)False

Question 7

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 benefits of each of the four projects are given in the table below.   Refer to the provided table and information. What is the net benefit of project D?

Accepted Answer

A) $1 billion 
B) $15 billion 
C) $5 billion 
D) $20 billion 
A) $1 billion 
B) $15 billion 
C) $5 billion 
D) $20 billion

Question 8

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 9

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 10

Government in a market system can increase economic efficiency by collecting taxes in order to subsidize the production of

Accepted Answer

A) goods with negative externalities. 
B) public and quasi-public goods. 
C) private sector goods. 
D) complementary goods. 
A) goods with negative externalities. 
B) public and quasi-public goods. 
C) private sector goods. 
D) complementary goods.

Question 11

In corporations, owners are __________________ and managers are ________________.

Accepted Answer

A) agents; principals 
B) stockholders; bondholders 
C) agents; employees 
D) principals; agents 
A) agents; principals 
B) stockholders; bondholders 
C) agents; employees 
D) principals; agents

Question 12

The situation where politicians make decisions that will raise their chances of reelection, even if those decisions are detrimental to the general public, is referred to as the

Accepted Answer

A) moral hazard problem. 
B) principal-agent problem. 
C) adverse selection problem. 
D) common good problem. 
A) moral hazard problem. 
B) principal-agent problem. 
C) adverse selection problem. 
D) common good problem.

Question 13

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 14

Which of the following would be an avenue for resolving the inefficiencies associated with majority voting?

Accepted Answer

A) political logrolling 
B) progressive taxation 
C) proportional taxation 
D) the paradox of voting 
A) political logrolling 
B) progressive taxation 
C) proportional taxation 
D) the paradox of voting

Question 15

Should government subsidize corporate relocations?

Accepted Answer

No, research indicates that location sub

Question 16

Majority voting on whether or not a public good should be produced could lead to a result where a public good whose costs are bigger than the benefits would end up getting approved by the voters.

Accepted Answer

A) True 
 B)False

Question 17

A 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 18

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 19

Why would private business be considered more efficient than public agencies?

Accepted Answer

Some economists contend that public agen

Question 20

In representative democracy, voters are ____________ and politicians are ______________.

Accepted Answer

A) agents; principals 
B) logrollers; principals 
C) agents; employees 
D) principals; agents 
A) agents; principals 
B) logrollers; principals 
C) agents; employees 
D) principals; agents

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

The government's subsidized loan program used with Angora goat farmers today

Which statement best describes the special-interest effect?

Regulatory capture often occurs because of which of the following?

Answer the question on the basis of this table showing the marginal benefit that a particular public project will provide to each of the three members of a community. No vote trading is allowed. If the tax cost of this proposed project is $300 per person, a majority vote will

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

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.

Government in a market system can increase economic efficiency by collecting taxes in order to subsidize the production of

In corporations, owners are __________________ and managers are ________________.

The situation where politicians make decisions that will raise their chances of reelection, even if those decisions are detrimental to the general public, is referred to as the

Public choice economists contend public bureaucracies are inefficient primarily because

Which of the following would be an avenue for resolving the inefficiencies associated with majority voting?

Should government subsidize corporate relocations?

Majority voting on whether or not a public good should be produced could lead to a result where a public good whose costs are bigger than the benefits would end up getting approved by the voters.

A 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

Economists consider governments to be "wasteful"

Why would private business be considered more efficient than public agencies?

In representative democracy, voters are ____________ and politicians are ______________.

Limits, Alternatives, and Choices

The Market System and the Circular Flow

Demand, Supply, and Market Equilibrium

Market Failures Caused by Externalities Asymmetric Information

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

International Trade

The Balance of Payments, Exchange Rates, and Trade Deficits

The Economics of Developing Countries

Filters

In corporations, owners are __ and managers are .

In representative democracy, voters are and politicians are __.