Question 1

Which of the following factors explains why managers of government agencies have little incentive to achieve operational efficiency?

Accepted Answer

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

Question 2

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 3

Suppose we coupled the pay of Congress with the federal budget,so that for every billion dollars of deficit spending,a lawmaker's pay would be reduced $1,000.How would this affect fiscal policy?

Accepted Answer

If personal income matters to a majority

Question 4

Public choice theory indicates that competitive forces between candidates in elections provide a politician with a strong incentive to offer voters a bundle of political goods that she believes

Accepted Answer

A) is best for the economic and political situations the country faces. 
B) will most likely clear the legislative process. 
C) will increase the welfare of society. 
D) will increase her chances of winning elections. 
A) is best for the economic and political situations the country faces. 
B) will most likely clear the legislative process. 
C) will increase the welfare of society. 
D) will increase her chances of winning elections.

Question 5

Young John recently took a job with the U.S.Department of Agriculture.His supervisor gave him an assignment and a two-week deadline.He finished the job in three days and turned it in.Now his coworkers are mad at John.Why?

Accepted Answer

Since there is little incentive for inte

Question 6

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 7

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 8

In which of the following situations is representative democracy most likely to lead to the adoption of an inefficient government program?

Accepted Answer

A) The program provides substantial benefits to a small interest group,and the costs are widespread among voters. 
B) Both the benefits and costs of the program are widespread among voters. 
C) The program is financed by a user charge that makes the individuals who benefit from the program pay for its cost. 
D) The program provides widespread benefits to all voters and imposes a significant cost on a small interest group. 
A) The program provides substantial benefits to a small interest group,and the costs are widespread among voters. 
B) Both the benefits and costs of the program are widespread among voters. 
C) The program is financed by a user charge that makes the individuals who benefit from the program pay for its cost. 
D) The program provides widespread benefits to all voters and imposes a significant cost on a small interest group.

Question 9

Logrolling refers to

Accepted Answer

A) vote trading among legislators. 
B) the tendency of voters to free-ride on the payment for public goods. 
C) the power of well-organized interest groups. 
D) the tendency of legislators to favor the interests of the timber (logging)industry. 
A) vote trading among legislators. 
B) the tendency of voters to free-ride on the payment for public goods. 
C) the power of well-organized interest groups. 
D) the tendency of legislators to favor the interests of the timber (logging)industry.

Question 10

As both the budget and regulatory powers of government grow,public choice analysis indicates that individuals and groups will find it in their interest to

Accepted Answer

A) increase their efforts devoted toward market production. 
B) spend less time attempting to secure redistribution through government. 
C) spend more time informing themselves about political issues,so they can cast a well-informed vote. 
D) spend more time rent seeking. 
A) increase their efforts devoted toward market production. 
B) spend less time attempting to secure redistribution through government. 
C) spend more time informing themselves about political issues,so they can cast a well-informed vote. 
D) spend more time rent seeking.

Question 11

Which of the following is true?

Accepted Answer

A) The incentives to engage in rent-seeking activities increase with the ease with which the political process can provide personal gain at the expense of others. 
B) The amount of resources devoted toward rent seeking generally has no impact on the economic prosperity of a nation. 
C) Income transfers directed toward the poor constitute about half of all income transfers in the United States. 
D) All of the above are correct. 
A) The incentives to engage in rent-seeking activities increase with the ease with which the political process can provide personal gain at the expense of others. 
B) The amount of resources devoted toward rent seeking generally has no impact on the economic prosperity of a nation. 
C) Income transfers directed toward the poor constitute about half of all income transfers in the United States. 
D) All of the above are correct.

Question 12

Public choice analysis indicates

Accepted Answer

A) politicians under representative democracy are led as if by an invisible hand to adopt legislation that enhances the wealth of a nation. 
B) political structures consistent with economic efficiency tend to emerge naturally from the ordinary political process. 
C) constitutional rules establishing procedures and limiting the ability of the political process to engage in redistributive activities can improve the economic efficiency of government. 
D) all of the above are correct. 
A) politicians under representative democracy are led as if by an invisible hand to adopt legislation that enhances the wealth of a nation. 
B) political structures consistent with economic efficiency tend to emerge naturally from the ordinary political process. 
C) constitutional rules establishing procedures and limiting the ability of the political process to engage in redistributive activities can improve the economic efficiency of government. 
D) all of the above are correct.

Question 13

When voters pay taxes in proportion to the benefits they receive from government projects,

Accepted Answer

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

Question 14

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 15

Which one of the following is a major difference between market and collective action through government?

Accepted Answer

A) Individuals are motivated by personal interests when making market choices,but they will be motivated primarily by the public interest when making collective choices. 
B) Competitive behavior is present when decisions are made in the marketplace,but competition is absent when choices are made collectively. 
C) Scarcity constrains output when decisions are made in the market sector,but scarcity is absent when goods are provided by the government. 
D) In the market sector,there is generally a one-to-one link between payment and consumption;this link is often absent in the government sector. 
A) Individuals are motivated by personal interests when making market choices,but they will be motivated primarily by the public interest when making collective choices. 
B) Competitive behavior is present when decisions are made in the marketplace,but competition is absent when choices are made collectively. 
C) Scarcity constrains output when decisions are made in the market sector,but scarcity is absent when goods are provided by the government. 
D) In the market sector,there is generally a one-to-one link between payment and consumption;this link is often absent in the government sector.

Question 16

Public choice analysis indicates

Accepted Answer

A) most income transfers will be directed toward the poor. 
B) rent-seeking activities will improve the efficiency of resource allocation and promote economic growth. 
C) rent seeking will be less attractive if the nation's legal (or constitutional)structure makes it difficult to use the political process to take the property or income of others. 
D) politicians will consistently oppose programs favored by rent seekers if those programs reduce the welfare of society. 
A) most income transfers will be directed toward the poor. 
B) rent-seeking activities will improve the efficiency of resource allocation and promote economic growth. 
C) rent seeking will be less attractive if the nation's legal (or constitutional)structure makes it difficult to use the political process to take the property or income of others. 
D) politicians will consistently oppose programs favored by rent seekers if those programs reduce the welfare of society.

Question 17

Economic studies have concluded that a new bill lowering the trade restrictions on the importation of sugar would be good for the economy.President Sweet Tooth highlights the results of this study in his state of the union address and sends the "Sweet Tooth" bill to Congress.Another economic study declares that 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 when the "Sweet Tooth" bill makes its way through congress the senators from West Virginia and Florida will only vote for it if they have their coal-mining and orange-growing subsidies attached to it.The bill gets to President Sweet Tooth with these and other economically inefficient subsidies attached to it,and he passes the bill in its entirety.Which term best describes what just happened?

Accepted Answer

A) pork-barrel legislation 
B) public good provision 
C) rational-ignorance effect 
D) the political voter theory 
A) pork-barrel legislation 
B) public good provision 
C) rational-ignorance effect 
D) the political voter theory

Question 18

Legislation that offers immediate and easily recognized benefits,at the expense of uncertain costs that are in the distant future (such as financing by government debt),is often enacted even when economic inefficiency results.This can be expected because of

Accepted Answer

A) a lack of incentive for operational efficiency in the public sector. 
B) market failure. 
C) the special-interest effect. 
D) the shortsightedness effect. 
A) a lack of incentive for operational efficiency in the public sector. 
B) market failure. 
C) the special-interest effect. 
D) the shortsightedness effect.

Question 19

Which of the following represents why private production tends to be more efficient then government production?

Accepted Answer

A) Politicians have a strong incentive to support projects that have immediate and easily recognized benefits and distant and unidentifiable costs,even if the total costs outweigh the total benefits. 
B) Politicians have a strong incentive to support programs where the benefits are highly concentrated on special interest groups and the costs are widely dispersed among voters,even if the total costs outweigh the benefits. 
C) Private companies face a profit motive that keeps them operating efficiently,government bureaucracies use taxpayer money and,therefore,do not face this profit motive. 
D) All of the above are reasons why private production tends to be more efficient then government production. 
A) Politicians have a strong incentive to support projects that have immediate and easily recognized benefits and distant and unidentifiable costs,even if the total costs outweigh the total benefits. 
B) Politicians have a strong incentive to support programs where the benefits are highly concentrated on special interest groups and the costs are widely dispersed among voters,even if the total costs outweigh the benefits. 
C) Private companies face a profit motive that keeps them operating efficiently,government bureaucracies use taxpayer money and,therefore,do not face this profit motive. 
D) All of the above are reasons why private production tends to be more efficient then government production.

Question 20

Which of the following is a predictable side effect of increased government activity (for example,taxes and subsidies)designed to redistribute income among citizens?

Accepted Answer

A) improvement in the operational efficiency of government agencies 
B) rapid economic growth 
C) a reduction in the amount of lobbying 
D) an increase in rent-seeking activity 
A) improvement in the operational efficiency of government agencies 
B) rapid economic growth 
C) a reduction in the amount of lobbying 
D) an increase in rent-seeking activity

Exam 6: The Economics of Collective Decision-Making

Which of the following factors explains why managers of government agencies have little incentive to achieve operational efficiency?

Crony capitalism is present when

Suppose we coupled the pay of Congress with the federal budget,so that for every billion dollars of deficit spending,a lawmaker's pay would be reduced $1,000.How would this affect fiscal policy?

Public choice theory indicates that competitive forces between candidates in elections provide a politician with a strong incentive to offer voters a bundle of political goods that she believes

Young John recently took a job with the U.S.Department of Agriculture.His supervisor gave him an assignment and a two-week deadline.He finished the job in three days and turned it in.Now his coworkers are mad at John.Why?

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?

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

In which of the following situations is representative democracy most likely to lead to the adoption of an inefficient government program?

Logrolling refers to

As both the budget and regulatory powers of government grow,public choice analysis indicates that individuals and groups will find it in their interest to

Which of the following is true?

Public choice analysis indicates

When voters pay taxes in proportion to the benefits they receive from government projects,

Which one of the following is a major difference between market and collective action through government?

Public choice analysis indicates

Legislation that offers immediate and easily recognized benefits,at the expense of uncertain costs that are in the distant future (such as financing by government debt),is often enacted even when economic inefficiency results.This can be expected because of

Which of the following represents why private production tends to be more efficient then government production?

Which of the following is a predictable side effect of increased government activity (for example,taxes and subsidies)designed to redistribute income among citizens?

The Economic Approach

Asome Tools of the Economist

Asupply,demand,and the Market Process

Asupply and Demand: Applications and Extensions

Difficult Cases for the Market and the Role of Government

Ataking the Nations Economic Pulse

Economic Fluctuations, unemployment, and Inflation

Aan Introduction to Basic Macroeconomic Markets

Dynamic Change, economic Fluctuations, and the Ad-As Model

Fiscal Policy: the Keynesian View and Historical Perspective

Fiscal Policy, incentives, and Secondary Effects

Amoney and the Banking System

Modern Macroeconomics and Monetary Policy

Stabilization Policy, output, and Employment

Creating an Environment for Growth and Prosperity

Institutions,policies,and Cross-Country Differences in Income and Growth

Gaining From International Trade

International Finance and the Foreign Exchange Market

Consumer Choice and Elasticity

Acosts and the Supply of Goods

Aprice Takers and the Competitive Process

Price-Searcher Markets With Low Entry Barriers

Aprice-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

Government Spending and Taxation

The Economics of Social Security

The Stock Market: Its Function, Performance, and Potential As an Investment Opportunity

Great Debates in Economics: Keynes Versus Hayek

The Crisis of 2008: Causes and Lessons for the Future

Lessons From the Great Depression

Lessons From Japan and Canada

The Federal Budget and the National Debt

The Economics of Healthcare

Education: Problems and Performance

Earnings Differences Between Men and Women

Do Labor Unions Increase the Wages of Workers

The Question of Resource Exhaustion

Difficult Environmental Cases and the Role of Government

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