Question 1

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

Accepted Answer

A)  monopoly 
B)  externalities 
C)  public goods 
D)  the special-interest effect 
A)  monopoly 
B)  externalities 
C)  public goods 
D)  the special-interest effect

Question 2

Transfer payments are

Accepted Answer

A)  payments made to individuals who are employed by the government. 
B)  payments made to individuals who provide goods and services to the government. 
C)  transfers of income from taxpayers to recipients who do not provide current goods and services for the payments. 
D)  omitted from the government expenditure figures. 
A)  payments made to individuals who are employed by the government. 
B)  payments made to individuals who provide goods and services to the government. 
C)  transfers of income from taxpayers to recipients who do not provide current goods and services for the payments. 
D)  omitted from the government expenditure figures.

Question 3

According to the economic way of thinking, personal benefits and costs influence the actions of

Accepted Answer

A)  consumers in the private sector but not voters in the public sector. 
B)  producers in the private sector but not politicians in the public sector. 
C)  taxpayers but not recipients of government-provided goods and services. 
D)  consumers, producers, voters, and politicians in both the private and the public sectors. 
A)  consumers in the private sector but not voters in the public sector. 
B)  producers in the private sector but not politicians in the public sector. 
C)  taxpayers but not recipients of government-provided goods and services. 
D)  consumers, producers, voters, and politicians in both the private and the public sectors.

Question 4

Suppose domestic automobiles were allocated in the United States the way public education is allocated. Describe how this system might work.

Accepted Answer

The country would be divided into thirds

Question 5

From the standpoint of society as a whole, rent seeking is

Accepted Answer

A)  counterproductive because it takes resources away from the creation of wealth in the private sector. 
B)  counterproductive because it fails to alter public policy. 
C)  productive because each interest group gains more than they spend on rent-seeking activities. 
D)  productive because the resources used in rent seeking have no opportunity cost to society. 
A)  counterproductive because it takes resources away from the creation of wealth in the private sector. 
B)  counterproductive because it fails to alter public policy. 
C)  productive because each interest group gains more than they spend on rent-seeking activities. 
D)  productive because the resources used in rent seeking have no opportunity cost to society.

Question 6

Which of the following factors explains why managers of government agencies (the public sector) have little incentive to operate efficiently?

Accepted Answer

A)  It is relatively easy for voters to detect operational inefficiency in the public sector and do something to correct it. 
B)  Public-sector managers face fierce competition. 
C)  Public-sector managers have no fear of losses and bankruptcy when operational efficiency is not achieved. 
D)  All of the above explain why government agencies have little incentive to be efficient. 
A)  It is relatively easy for voters to detect operational inefficiency in the public sector and do something to correct it. 
B)  Public-sector managers face fierce competition. 
C)  Public-sector managers have no fear of losses and bankruptcy when operational efficiency is not achieved. 
D)  All of the above explain why government agencies have little incentive to be efficient.

Question 7

Crony capitalism is present when

Accepted Answer

A)  businesses are either implicitly or explicitly prohibited from making donations to political candidates. 
B)  businesses either implicitly or explicitly provide political decision-makers with contributions and other forms of political support in "exchange" for government favors that will improve their profitability. 
C)  rule of law is present and government officials treat all citizens alike. 
D)  government officials spend taxpayer funds only on productive projects. 
A)  businesses are either implicitly or explicitly prohibited from making donations to political candidates. 
B)  businesses either implicitly or explicitly provide political decision-makers with contributions and other forms of political support in "exchange" for government favors that will improve their profitability. 
C)  rule of law is present and government officials treat all citizens alike. 
D)  government officials spend taxpayer funds only on productive projects.

Question 8

Joella is a third-grade public school teacher who doesn't own a car and uses public transportation. According to public choice theory, which of the following four politicians for a public office would Joella be most likely to vote for in the upcoming election?

Accepted Answer

A)  Politician A proposes increasing the property tax on personal automobiles and using the money to increase teacher salaries by 10 percent. 
B)  Politician B proposes an across-the-board increase in state income tax rates and using the money to increase the benefits paid to unemployed workers. 
C)  Politician C proposes increasing the property tax on personal automobiles and using the money to increase the benefits paid to unemployed workers. 
D)  Politician D proposes an across-the-board increase in state income tax rates and using the money to improve the highway system. 
A)  Politician A proposes increasing the property tax on personal automobiles and using the money to increase teacher salaries by 10 percent. 
B)  Politician B proposes an across-the-board increase in state income tax rates and using the money to increase the benefits paid to unemployed workers. 
C)  Politician C proposes increasing the property tax on personal automobiles and using the money to increase the benefits paid to unemployed workers. 
D)  Politician D proposes an across-the-board increase in state income tax rates and using the money to improve the highway system.

Question 9

The park in Hammerhead, Florida, built to honor the city's founding father, General Hammerhead, is starting to deteriorate. It would take about $5,000 to restore the General's statue, repair the benches, and repair the fountain, but the city budget is tight. Also, the deterioration is not that noticeable. Mayor Grouper suggests delaying the repair until after the election, three years away. City Councilwoman Halibut notes that by then the park will be dilapidated, and repairs will cost $25,000. From a public choice perspective, what is the likely outcome of this debate?

Accepted Answer

The shortsightedness effect would sugges

Question 10

Economic theory leads us to expect that the typical voter will be uninformed on many issues because

Accepted Answer

A)  most issues are so complex that voters will be unable to understand them. 
B)  even though information is free, most voters do not care. 
C)  information is costly, and the individual voter casting a well-informed vote can expect negligible personal benefit. 
D)  citizen apathy about political matters is inevitable, except when decisions are made by referendum. 
A)  most issues are so complex that voters will be unable to understand them. 
B)  even though information is free, most voters do not care. 
C)  information is costly, and the individual voter casting a well-informed vote can expect negligible personal benefit. 
D)  citizen apathy about political matters is inevitable, except when decisions are made by referendum.

Question 11

A local government operates a city water system and finances it through fees that it charges to water consumers. This type of financing is an example of a

Accepted Answer

A)  head tax. 
B)  excise fee. 
C)  progressive tax. 
D)  user charge. 
A)  head tax. 
B)  excise fee. 
C)  progressive tax. 
D)  user charge.

Question 12

Subsidizing coal mining and orange growing have both been found to be economically inefficient in that the costs outweigh the benefits. However, a subsidy on coal mining would help the coal producers in West Virginia and a subsidy on orange growing would help the orange farmers in Florida. So the senator from West Virginia approaches the senator from Florida and says that he will vote for the orange subsidy if the Florida senator votes for the coal-mining subsidy. The Florida senator agrees. Which term best describes what just happened?

Accepted Answer

A)  the shortsightedness effect 
B)  logrolling 
C)  the use of user charges 
D)  the political voter theory 
A)  the shortsightedness effect 
B)  logrolling 
C)  the use of user charges 
D)  the political voter theory

Question 13

Which of the following is the most likely explanation for the imposition of a price floor in the market for corn?

Accepted Answer

A)  Policymakers have studied the effects of the price floor carefully and they recognize that the price floor will improve the efficiency of resource use. 
B)  Buyers and sellers of corn have agreed that the price floor is good for both of them and have therefore pressured policy makers into enacting the price floor. 
C)  Buyers of corn, recognizing that the price floor is good for them, have pressured policy makers into enacting the price floor. 
D)  Sellers of corn, recognizing that the price floor is good for them, have pressured policy makers into enacting the price floor. 
A)  Policymakers have studied the effects of the price floor carefully and they recognize that the price floor will improve the efficiency of resource use. 
B)  Buyers and sellers of corn have agreed that the price floor is good for both of them and have therefore pressured policy makers into enacting the price floor. 
C)  Buyers of corn, recognizing that the price floor is good for them, have pressured policy makers into enacting the price floor. 
D)  Sellers of corn, recognizing that the price floor is good for them, have pressured policy makers into enacting the price floor.

Question 14

Government decisions tend to be biased toward actions that have

Accepted Answer

A)  current benefits that are easily observable and future costs that are difficult to identify. 
B)  current benefits and future costs that are both difficult to identify. 
C)  future costs that are easily observable. 
D)  clear benefits to the poor at no costs to the wealthy. 
A)  current benefits that are easily observable and future costs that are difficult to identify. 
B)  current benefits and future costs that are both difficult to identify. 
C)  future costs that are easily observable. 
D)  clear benefits to the poor at no costs to the wealthy.

Question 15

Other things constant, if both the benefits and costs of a public-sector activity are widespread among voters, the political process will generally result in the

Accepted Answer

A)  rejection of productive activities and acceptance of unproductive activities. 
B)  acceptance of both productive and unproductive activities. 
C)  rejection of both productive and unproductive activities. 
D)  acceptance of productive activities and rejection of unproductive activities. 
A)  rejection of productive activities and acceptance of unproductive activities. 
B)  acceptance of both productive and unproductive activities. 
C)  rejection of both productive and unproductive activities. 
D)  acceptance of productive activities and rejection of unproductive activities.

Question 16

Ginny is the owner of a small business, and she is 35 years old. She doesn't smoke cigarettes, and she often spends her weekends with her family camping at the local Greentree state park. According to public choice theory, which of the following four politicians for a public office would Ginny be most likely to vote for in the upcoming election?

Accepted Answer

A)  Politician A proposes increasing the tax on small businesses and using the money to provide additional benefits for the elderly. 
B)  Politician B proposes increasing the tax on small businesses and using the money to improve the camping facilities at Greentree state park. 
C)  Politician C proposes increasing the excise tax on cigarettes and using the money to improve the camping facilities at Greentree state park. 
D)  Politician D proposes increasing the excise tax on cigarettes and using the money to provide additional benefits for the elderly. 
A)  Politician A proposes increasing the tax on small businesses and using the money to provide additional benefits for the elderly. 
B)  Politician B proposes increasing the tax on small businesses and using the money to improve the camping facilities at Greentree state park. 
C)  Politician C proposes increasing the excise tax on cigarettes and using the money to improve the camping facilities at Greentree state park. 
D)  Politician D proposes increasing the excise tax on cigarettes and using the money to provide additional benefits for the elderly.

Question 17

A special-interest issue is one that

Accepted Answer

A)  allocates the cost of the activity in accordance with the benefits received. 
B)  benefits a small, well-organized interest group at the expense of taxpayers or consumers. 
C)  benefits everyone and imposes a cost on everyone. 
D)  benefits a small, well-organized interest group but makes that group pay for the cost of the program. 
A)  allocates the cost of the activity in accordance with the benefits received. 
B)  benefits a small, well-organized interest group at the expense of taxpayers or consumers. 
C)  benefits everyone and imposes a cost on everyone. 
D)  benefits a small, well-organized interest group but makes that group pay for the cost of the program.

Question 18

For activities in which the benefits are concentrated and the costs widespread, governments are likely to undertake

Accepted Answer

A)  too little of these activities relative to what would be efficient. 
B)  too much of these activities relative to what would be efficient. 
C)  exactly the amount of these activities that would be efficient. 
D)  none of these activities. 
A)  too little of these activities relative to what would be efficient. 
B)  too much of these activities relative to what would be efficient. 
C)  exactly the amount of these activities that would be efficient. 
D)  none of these activities.

Question 19

If a federal agency requested funds to build a dam on an Idaho river to irrigate nearby farmland used for growing potatoes, the most active support for the project probably would come from

Accepted Answer

A)  potato farmers who own land that wouldn't be irrigated by the project. 
B)  taxpayers who would pay for the project. 
C)  consumers of potatoes who might benefit from an expansion in supply and slightly lower potato prices. 
D)  potato farmers who own the land to be irrigated. 
A)  potato farmers who own land that wouldn't be irrigated by the project. 
B)  taxpayers who would pay for the project. 
C)  consumers of potatoes who might benefit from an expansion in supply and slightly lower potato prices. 
D)  potato farmers who own the land to be irrigated.

Question 20

Which of the following is an example of political action that reflects the shortsightedness effect?

Accepted Answer

A)  budget surpluses 
B)  the promise of future benefits without providing for their funding 
C)  spending on roads and highways 
D)  spending on programs that transfer income from the rich to the poor 
A)  budget surpluses 
B)  the promise of future benefits without providing for their funding 
C)  spending on roads and highways 
D)  spending on programs that transfer income from the rich to the poor

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

Transfer payments are

According to the economic way of thinking, personal benefits and costs influence the actions of

Suppose domestic automobiles were allocated in the United States the way public education is allocated. Describe how this system might work.

From the standpoint of society as a whole, rent seeking is

Which of the following factors explains why managers of government agencies (the public sector) have little incentive to operate efficiently?

Crony capitalism is present when

Joella is a third-grade public school teacher who doesn't own a car and uses public transportation. According to public choice theory, which of the following four politicians for a public office would Joella be most likely to vote for in the upcoming election?

Economic theory leads us to expect that the typical voter will be uninformed on many issues because

A local government operates a city water system and finances it through fees that it charges to water consumers. This type of financing is an example of a

Which of the following is the most likely explanation for the imposition of a price floor in the market for corn?

Government decisions tend to be biased toward actions that have

Other things constant, if both the benefits and costs of a public-sector activity are widespread among voters, the political process will generally result in the

A special-interest issue is one that

For activities in which the benefits are concentrated and the costs widespread, governments are likely to undertake

If a federal agency requested funds to build a dam on an Idaho river to irrigate nearby farmland used for growing potatoes, the most active support for the project probably would come from

Which of the following is an example of political action that reflects the shortsightedness effect?

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

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

Transfer payments are

According to the economic way of thinking, personal benefits and costs influence the actions of

Suppose domestic automobiles were allocated in the United States the way public education is allocated. Describe how this system might work.

From the standpoint of society as a whole, rent seeking is

Which of the following factors explains why managers of government agencies (the public sector) have little incentive to operate efficiently?

Crony capitalism is present when

Joella is a third-grade public school teacher who doesn't own a car and uses public transportation. According to public choice theory, which of the following four politicians for a public office would Joella be most likely to vote for in the upcoming election?

Economic theory leads us to expect that the typical voter will be uninformed on many issues because

A local government operates a city water system and finances it through fees that it charges to water consumers. This type of financing is an example of a

Which of the following is the most likely explanation for the imposition of a price floor in the market for corn?

Government decisions tend to be biased toward actions that have

Other things constant, if both the benefits and costs of a public-sector activity are widespread among voters, the political process will generally result in the

A special-interest issue is one that

For activities in which the benefits are concentrated and the costs widespread, governments are likely to undertake

If a federal agency requested funds to build a dam on an Idaho river to irrigate nearby farmland used for growing potatoes, the most active support for the project probably would come from

Which of the following is an example of political action that reflects the shortsightedness effect?

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