Question 1

Public choice theory suggests that politicians will be most likely to favor redistribution of income from

Accepted Answer

A)  the rich to the poor. 
B)  unorganized taxpayers to well-organized interest groups. 
C)  well-organized business groups to consumers. 
D)  none of the above. 
A)  the rich to the poor. 
B)  unorganized taxpayers to well-organized interest groups. 
C)  well-organized business groups to consumers. 
D)  none of the above.

Question 2

Use the figure below to answer the following question(s).
Figure 6-2
 
Figure 6-2 illustrates the four possibilities of the structure of production and consumption for a good or service. In which case is the incentive of producers to be efficient and the incentive for consumers to economize the weakest?

Accepted Answer

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

Question 3

Use the figure below to answer the following question(s).
Figure 6-2
 
Figure 6-2 illustrates the four possibilities of the structure of production and consumption for a good or service. In which case is the incentive of producers to be efficient and the incentive for consumers to economize the weakest?

Accepted Answer

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

Question 4

In which case is the political process most likely to result in the acceptance of productive programs and rejection of unproductive political activities?

Accepted Answer

A)  when the benefits are highly concentrated and costs widespread among voters 
B)  when the costs are highly concentrated and the benefits widespread among voters 
C)  when both the benefits and costs are widespread among voters 
D)  when the benefits accrue primarily in the future, whereas the costs are more visible during the current period 
A)  when the benefits are highly concentrated and costs widespread among voters 
B)  when the costs are highly concentrated and the benefits widespread among voters 
C)  when both the benefits and costs are widespread among voters 
D)  when the benefits accrue primarily in the future, whereas the costs are more visible during the current period

Question 5

Combined federal, state, and local government expenditures in the United States were approximately 9 percent of the gross domestic product (GDP) in 1930. How large were government expenditures as a share of GDP in 2010?

Accepted Answer

A)  approximately 10 percent 
B)  approximately 20 percent 
C)  approximately 30 percent 
D)  approximately 40 percent 
A)  approximately 10 percent 
B)  approximately 20 percent 
C)  approximately 30 percent 
D)  approximately 40 percent

Question 6

Producers tend to be better represented in lobbying efforts and other elements of the political process than consumers because

Accepted Answer

A)  producers are generally more intelligent and, therefore, better informed. 
B)  producers are generally better organized than consumers. 
C)  producers are better educated than consumers. 
D)  the number of producers affected by the outcome of a particular political issue is usually greater than the number of consumers affected. 
A)  producers are generally more intelligent and, therefore, better informed. 
B)  producers are generally better organized than consumers. 
C)  producers are better educated than consumers. 
D)  the number of producers affected by the outcome of a particular political issue is usually greater than the number of consumers affected.

Question 7

At the most basic level, the distinguishing characteristic of government that makes it different from private firms is

Accepted Answer

A)  the difference in incentive structure motivating economic activity. 
B)  its ability to direct resources in a manner that is more economically efficient. 
C)  its ability to produce goods and services that people value. 
D)  its ability to use coercive force against people to modify their behavior or force them to pay for a good or service whether they benefit from it or not. 
A)  the difference in incentive structure motivating economic activity. 
B)  its ability to direct resources in a manner that is more economically efficient. 
C)  its ability to produce goods and services that people value. 
D)  its ability to use coercive force against people to modify their behavior or force them to pay for a good or service whether they benefit from it or not.

Question 8

The shortsightedness effect suggests that

Accepted Answer

A)  politicians have a strong incentive to support projects that yield immediate and easily recognized benefits, especially when the costs of the projects are difficult to identify and are observable only in the distant future. 
B)  politicians have a strong incentive to support projects that yield benefits in the distant future, especially when the costs of the project must be paid for in the current period. 
C)  voters will tend to weigh future costs and benefits more heavily than current costs and benefits. 
D)  legislators will be unwilling to trade votes on issues, especially when those issues benefit only special interest groups. 
A)  politicians have a strong incentive to support projects that yield immediate and easily recognized benefits, especially when the costs of the projects are difficult to identify and are observable only in the distant future. 
B)  politicians have a strong incentive to support projects that yield benefits in the distant future, especially when the costs of the project must be paid for in the current period. 
C)  voters will tend to weigh future costs and benefits more heavily than current costs and benefits. 
D)  legislators will be unwilling to trade votes on issues, especially when those issues benefit only special interest groups.

Question 9

Which of the following factors weakens the case for private-sector provision of goods and services as opposed to public-sector provision?

Accepted Answer

A)  weak incentives for operational efficiency 
B)  rent-seeking 
C)  the shortsightedness effect 
D)  externalities 
A)  weak incentives for operational efficiency 
B)  rent-seeking 
C)  the shortsightedness effect 
D)  externalities

Question 10

Which of the following factors weakens the case for private-sector provision of goods and services relative to public-sector provision?

Accepted Answer

A)  constitutional rules 
B)  the shortsightedness effect 
C)  the special-interest effect 
D)  public goods 
A)  constitutional rules 
B)  the shortsightedness effect 
C)  the special-interest effect 
D)  public goods

Question 11

Economic theory indicates that the behavior of

Accepted Answer

A)  government employees differs from the behavior of employees in the private sector because government employees generally disregard their own personal self-interest when making decisions. 
B)  elected public officials differs from the behavior of all other individuals in society because they are not influenced by private interests. 
C)  individuals when they make decisions about who to vote for is very different from the behavior of these same individuals when they make other types of choices. 
D)  voters, government employees, and public officials is best understood by applying the same basic principle we use to predict the behavior of people in the private sector--that incentives matter. 
A)  government employees differs from the behavior of employees in the private sector because government employees generally disregard their own personal self-interest when making decisions. 
B)  elected public officials differs from the behavior of all other individuals in society because they are not influenced by private interests. 
C)  individuals when they make decisions about who to vote for is very different from the behavior of these same individuals when they make other types of choices. 
D)  voters, government employees, and public officials is best understood by applying the same basic principle we use to predict the behavior of people in the private sector--that incentives matter.

Question 12

Scenario 6-1 The quotation below relates to the following question(s).
"The ideal policy, from the viewpoint of the state, is one with identifiable beneficiaries, each of whom is helped appreciably, at the cost of many unidentifiable persons, none of whom is hurt very much." (George Stigler, A Dialogue on the Proper Economic Role of the State )
Which of the following groups does the quotation in Scenario 6-1 suggest would have the most influence on public sector action?

Accepted Answer

A)  taxpayers 
B)  nonunion workers 
C)  special interest groups 
D)  consumers 
A)  taxpayers 
B)  nonunion workers 
C)  special interest groups 
D)  consumers

Question 13

Economics indicates that government funding of special interest projects and favoritism of some business firms relative to others will lead to

Accepted Answer

A)  efficient allocation of resources because the government action will correct the failures of the market. 
B)  the funding of productive projects that will improve the well-being of most citizens. 
C)  economic inefficiency because the funding will be driven by political rather than economic considerations. 
D)  a decline in political contributions and a reduction in the quality of the candidates willing to run for political office. 
A)  efficient allocation of resources because the government action will correct the failures of the market. 
B)  the funding of productive projects that will improve the well-being of most citizens. 
C)  economic inefficiency because the funding will be driven by political rather than economic considerations. 
D)  a decline in political contributions and a reduction in the quality of the candidates willing to run for political office.

Question 14

John Smith is a typical citizen. Economic theory suggests that he is likely to make a more informed choice when he buys a personal computer than when he votes for a congressional candidate. This view is

Accepted Answer

A)  false because the actions of legislators will exert a greater impact on Smith's welfare than will the purchase of the computer. 
B)  false; Smith will tend to choose more carefully when he makes public choices than when he makes private choices. 
C)  uncertain; it would be true if, and only if, Smith's spending on personal computers exceeds his tax bill. 
D)  true; since Smith can decide what computer to buy, but his individual vote is very unlikely to decide the outcome of a congressional election, he has more incentive to inform himself about the computer than the congressional election. 
A)  false because the actions of legislators will exert a greater impact on Smith's welfare than will the purchase of the computer. 
B)  false; Smith will tend to choose more carefully when he makes public choices than when he makes private choices. 
C)  uncertain; it would be true if, and only if, Smith's spending on personal computers exceeds his tax bill. 
D)  true; since Smith can decide what computer to buy, but his individual vote is very unlikely to decide the outcome of a congressional election, he has more incentive to inform himself about the computer than the congressional election.

Question 15

When the tax to fund a government project is allocated among voters in proportion to the benefits they receive from the project,

Accepted Answer

A)  productive (efficient) projects will tend to be opposed by a majority of voters. 
B)  counterproductive (inefficient) projects will often be favored by a majority of voters. 
C)  projects that are productive (efficient) will tend to be favored by an overwhelming majority of voters. 
D)  democratic political decision making can be expected to work poorly. 
A)  productive (efficient) projects will tend to be opposed by a majority of voters. 
B)  counterproductive (inefficient) projects will often be favored by a majority of voters. 
C)  projects that are productive (efficient) will tend to be favored by an overwhelming majority of voters. 
D)  democratic political decision making can be expected to work poorly.

Question 16

Which of the following increases the political power of special interest groups and makes counterproductive government action more likely?

Accepted Answer

A)  logrolling and pork barrel legislation 
B)  the rational-ignorance effect 
C)  public goods 
D)  both a and b, but not c 
A)  logrolling and pork barrel legislation 
B)  the rational-ignorance effect 
C)  public goods 
D)  both a and b, but not c

Question 17

As methods of economic organization, the market and the public sector are similar in which of the following ways?

Accepted Answer

A)  Income and power are distributed equally in both sectors. 
B)  In both sectors, economic activity is undertaken only when it satisfies the criterion for economic efficiency. 
C)  In both sectors, economic exchange is completely voluntary. 
D)  Someone must cover the cost associated with the provision of scarce goods in both sectors. 
A)  Income and power are distributed equally in both sectors. 
B)  In both sectors, economic activity is undertaken only when it satisfies the criterion for economic efficiency. 
C)  In both sectors, economic exchange is completely voluntary. 
D)  Someone must cover the cost associated with the provision of scarce goods in both sectors.

Question 18

With a strong and active federal government, why do we need state and local governments?

Accepted Answer

Our model of government is one of fiscal

Question 19

Government decisions tend to be biased against actions that have

Accepted Answer

A)  current costs and future benefits that are both easily observable. 
B)  future costs that are difficult to identify and current benefits that are easily observable. 
C)  future costs and future benefits that are both difficult to identify. 
D)  current costs that are easily observable and future benefits that are difficult to identify. 
A)  current costs and future benefits that are both easily observable. 
B)  future costs that are difficult to identify and current benefits that are easily observable. 
C)  future costs and future benefits that are both difficult to identify. 
D)  current costs that are easily observable and future benefits that are difficult to identify.

Question 20

Economists use the term shortsightedness effect to describe which one of the following phenomena?

Accepted Answer

A)  Politicians tend to support actions that have immediate and easily recognized current benefits. 
B)  Individuals are apt to spend their income on goods that bring immediate personal benefits. 
C)  Voters elect politicians on the basis of campaign promises, regardless of what they may do once they are in office. 
D)  Politicians support the programs of special interest groups in order to get elected; however, special interest support may be detrimental later, costing politicians popularity after the programs are implemented. 
A)  Politicians tend to support actions that have immediate and easily recognized current benefits. 
B)  Individuals are apt to spend their income on goods that bring immediate personal benefits. 
C)  Voters elect politicians on the basis of campaign promises, regardless of what they may do once they are in office. 
D)  Politicians support the programs of special interest groups in order to get elected; however, special interest support may be detrimental later, costing politicians popularity after the programs are implemented.

Public choice theory suggests that politicians will be most likely to favor redistribution of income from

In which case is the political process most likely to result in the acceptance of productive programs and rejection of unproductive political activities?

Combined federal, state, and local government expenditures in the United States were approximately 9 percent of the gross domestic product (GDP) in 1930. How large were government expenditures as a share of GDP in 2010?

Producers tend to be better represented in lobbying efforts and other elements of the political process than consumers because

At the most basic level, the distinguishing characteristic of government that makes it different from private firms is

The shortsightedness effect suggests that

Which of the following factors weakens the case for private-sector provision of goods and services as opposed to public-sector provision?

Which of the following factors weakens the case for private-sector provision of goods and services relative to public-sector provision?

Economic theory indicates that the behavior of

Economics indicates that government funding of special interest projects and favoritism of some business firms relative to others will lead to

John Smith is a typical citizen. Economic theory suggests that he is likely to make a more informed choice when he buys a personal computer than when he votes for a congressional candidate. This view is

When the tax to fund a government project is allocated among voters in proportion to the benefits they receive from the project,

Which of the following increases the political power of special interest groups and makes counterproductive government action more likely?

As methods of economic organization, the market and the public sector are similar in which of the following ways?

With a strong and active federal government, why do we need state and local governments?

Government decisions tend to be biased against actions that have

Economists use the term shortsightedness effect to describe which one of the following phenomena?

The Economic Approach

Some Tools of the Economist

Demand, Supply, and the Market Process

Supply and Demand: Applications and Extensions

Difficult Cases for the Market, and the Role of Government

Consumer Choice and Elasticity

Costs and the Supply of Goods

Price Takers and the Competitive Process

Price-Searcher Markets With Low Entry Barriers

Price-Searcher Markets With High Entry Barriers

The Supply of and Demand for Productive Resources

Earnings, Productivity, and the Job Market

Investment, the Capital Market, and the Wealth of Nations

Income Inequality and Poverty

Applying the Basics: Special Topics in Economics

Filters

Exam 6: The Economics of Political Action

Public choice theory suggests that politicians will be most likely to favor redistribution of income from

In which case is the political process most likely to result in the acceptance of productive programs and rejection of unproductive political activities?

Combined federal, state, and local government expenditures in the United States were approximately 9 percent of the gross domestic product (GDP) in 1930. How large were government expenditures as a share of GDP in 2010?

Producers tend to be better represented in lobbying efforts and other elements of the political process than consumers because

At the most basic level, the distinguishing characteristic of government that makes it different from private firms is

The shortsightedness effect suggests that

Which of the following factors weakens the case for private-sector provision of goods and services as opposed to public-sector provision?

Which of the following factors weakens the case for private-sector provision of goods and services relative to public-sector provision?

Economic theory indicates that the behavior of

Economics indicates that government funding of special interest projects and favoritism of some business firms relative to others will lead to

John Smith is a typical citizen. Economic theory suggests that he is likely to make a more informed choice when he buys a personal computer than when he votes for a congressional candidate. This view is

When the tax to fund a government project is allocated among voters in proportion to the benefits they receive from the project,

Which of the following increases the political power of special interest groups and makes counterproductive government action more likely?

As methods of economic organization, the market and the public sector are similar in which of the following ways?

With a strong and active federal government, why do we need state and local governments?

Government decisions tend to be biased against actions that have

Economists use the term shortsightedness effect to describe which one of the following phenomena?

The Economic Approach

Some Tools of the Economist

Demand, Supply, and the Market Process

Supply and Demand: Applications and Extensions

Difficult Cases for the Market, and the Role of Government

Consumer Choice and Elasticity

Costs and the Supply of Goods

Price Takers and the Competitive Process

Price-Searcher Markets With Low Entry Barriers

Price-Searcher Markets With High Entry Barriers

The Supply of and Demand for Productive Resources

Earnings, Productivity, and the Job Market

Investment, the Capital Market, and the Wealth of Nations

Income Inequality and Poverty

Applying the Basics: Special Topics in Economics

Filters