Question 1

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 2

Public choice analysis indicates that

Accepted Answer

A) because government action provides public goods, it always increases the wealth of the citizenry. 
B) unconstrained democratic governments often enact special-interest programs that waste resources and impair the standard of living. 
C) constitutional rules limiting public-sector activity generally lower the economic efficiency of the overall economy. 
D) Politicians and voters are better able to judge the public interest than their own private interest. 
A) because government action provides public goods, it always increases the wealth of the citizenry. 
B) unconstrained democratic governments often enact special-interest programs that waste resources and impair the standard of living. 
C) constitutional rules limiting public-sector activity generally lower the economic efficiency of the overall economy. 
D) Politicians and voters are better able to judge the public interest than their own private interest.

Question 3

Legislation that offers immediate and easily recognized benefits, at the expense of costs that are observable only in the distant future, 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 4

Which of the following is true about the market and public sectors?

Accepted Answer

A) Competitive behavior is present in both sectors. 
B) The public sector utilizes the price mechanism more than the private sector. 
C) In both sectors, individuals always pay for the goods and services they consume. 
D) There is more free choice for individual consumers in the public sector than in the private sector. 
A) Competitive behavior is present in both sectors. 
B) The public sector utilizes the price mechanism more than the private sector. 
C) In both sectors, individuals always pay for the goods and services they consume. 
D) There is more free choice for individual consumers in the public sector than in the private sector.

Question 5

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) budget surpluses 
C) reduction in the poverty rate 
D) an increase in rent-seeking activity 
A) improvement in the operational efficiency of government agencies 
B) budget surpluses 
C) reduction in the poverty rate 
D) an increase in rent-seeking activity

Question 6

Which of the following explains why elected representatives will find borrowing to be an attractive method of financing current government programs?

Accepted Answer

A) the shortsightedness effect 
B) pork-barrel politics 
C) the invisible hand principle 
D) the public goods argument for government spending programs 
A) the shortsightedness effect 
B) pork-barrel politics 
C) the invisible hand principle 
D) the public goods argument for government spending programs

Question 7

Which of the following is true?

Accepted Answer

A) Competitive behavior is present in the market sector but not in the public sector. 
B) Because candidates for public office represent a bundle of views, there is more ability for individuals to make their preferences count on specific issues than in the market sector. 
C) When decisions are made democratically, the economic and political power of all individuals will be equal unlike in the market sector. 
D) The reality of the aggregate consumption-aggregate payment link imposed by scarcity is present in both the market and public sectors. 
A) Competitive behavior is present in the market sector but not in the public sector. 
B) Because candidates for public office represent a bundle of views, there is more ability for individuals to make their preferences count on specific issues than in the market sector. 
C) When decisions are made democratically, the economic and political power of all individuals will be equal unlike in the market sector. 
D) The reality of the aggregate consumption-aggregate payment link imposed by scarcity is present in both the market and public sectors.

Question 8

Which of the following provides the most reasonable explanation for why agricultural interests lobby for higher farm subsidies and price supports?

Accepted Answer

A) Without the farm subsidies, food shortages would result. 
B) Subsidies promote the efficient use of agricultural resources. 
C) Agricultural interests seek a redistribution of income favoring themselves. 
D) The price support programs reduce food costs, which helps the poor. 
A) Without the farm subsidies, food shortages would result. 
B) Subsidies promote the efficient use of agricultural resources. 
C) Agricultural interests seek a redistribution of income favoring themselves. 
D) The price support programs reduce food costs, which helps the poor.

Question 9

Which of the following is accurate regarding government expenditures in the United States?

Accepted Answer

A) The federal government spends considerably more than state and local governments combined. 
B) The federal government spends more than local governments but less than state governments. 
C) Local governments spend more than state governments, which in turn, spend more than the federal government. 
D) Since 1930, total government expenditures as a share of GDP have declined. 
A) The federal government spends considerably more than state and local governments combined. 
B) The federal government spends more than local governments but less than state governments. 
C) Local governments spend more than state governments, which in turn, spend more than the federal government. 
D) Since 1930, total government expenditures as a share of GDP have declined.

Question 10

Which of the following refers to when legislators trade votes on legislation?

Accepted Answer

A) logrolling 
B) the special interest effect 
C) rational ignorance 
D) the shortsightedness effect 
A) logrolling 
B) the special interest effect 
C) rational ignorance 
D) the shortsightedness effect

Question 11

Which of the following is true?

Accepted Answer

A) To remain in office, a politician must try to enact policies that gain him votes for his reelection and increase the support coming from contributors. 
B) A politician always attempts to pursue policies that are good for society even if they are strongly opposed by many of her constituents or contributors. 
C) Politicians generally place more weight on how their decisions affect future costs and benefits than on how they affect present costs and benefits. 
D) The value of being in office is so low that most political candidates spend very little on campaigns to try to win (or keep) elected office. 
A) To remain in office, a politician must try to enact policies that gain him votes for his reelection and increase the support coming from contributors. 
B) A politician always attempts to pursue policies that are good for society even if they are strongly opposed by many of her constituents or contributors. 
C) Politicians generally place more weight on how their decisions affect future costs and benefits than on how they affect present costs and benefits. 
D) The value of being in office is so low that most political candidates spend very little on campaigns to try to win (or keep) elected office.

Question 12

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 and consumers to economize the strongest?

Accepted Answer

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

Question 13

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 14

Is calling a voter rationally ignorant the same as calling her irrational? Explain.

Accepted Answer

These are clearly not the same. To be ir

Question 15

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 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

In 2010, the combined expenditures of federal, state, and local governments in the United States were approximately 40 percent of gross domestic product (GDP). Approximately what percentage of GDP were government expenditures in 1930?

Accepted Answer

A) 9 percent 
B) 19 percent 
C) 29 percent 
D) 39 percent 
A) 9 percent 
B) 19 percent 
C) 29 percent 
D) 39 percent

Question 18

Which one of the following economists has played a central role in the development of the "economics of collective decision making," better known as public choice analysis?

Accepted Answer

A) Alfred Marshall 
B) John Maynard Keynes 
C) James Buchanan 
D) Milton Friedman 
A) Alfred Marshall 
B) John Maynard Keynes 
C) James Buchanan 
D) Milton Friedman

Question 19

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

Accepted Answer

A) externalities 
B) the rational-ignorance effect 
C) the shortsightedness effect 
D) well-informed consumers 
A) externalities 
B) the rational-ignorance effect 
C) the shortsightedness effect 
D) well-informed consumers

Question 20

Public choice theory indicates that representative government yields outcomes more consistent with economic efficiency when a close relationship exists between the benefits received and the costs borne by each voter. Which of the following methods of financing a government program will most likely result in a close relationship between voter benefits and costs?

Accepted Answer

A) progressive income tax 
B) retail sales tax 
C) property tax 
D) user charges 
A) progressive income tax 
B) retail sales tax 
C) property tax 
D) user charges

Exam 6: The Economics of Collective Decision-Making

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

Public choice analysis indicates that

Legislation that offers immediate and easily recognized benefits, at the expense of costs that are observable only in the distant future, is often enacted even when economic inefficiency results. This can be expected because of

Which of the following is true about the market and public sectors?

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

Which of the following explains why elected representatives will find borrowing to be an attractive method of financing current government programs?

Which of the following is true?

Which of the following provides the most reasonable explanation for why agricultural interests lobby for higher farm subsidies and price supports?

Which of the following is accurate regarding government expenditures in the United States?

Which of the following refers to when legislators trade votes on legislation?

Which of the following is true?

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 and consumers to economize the strongest?

Is calling a voter rationally ignorant the same as calling her irrational? Explain.

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

In 2010, the combined expenditures of federal, state, and local governments in the United States were approximately 40 percent of gross domestic product (GDP). Approximately what percentage of GDP were government expenditures in 1930?

Which one of the following economists has played a central role in the development of the "economics of collective decision making," better known as public choice analysis?

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

The Economic Approach

A: Some Tools of the Economist

B: Some Tools of the Economist

A: Supply, Demand, and the Market Process

B: Supply, Demand, and the Market Process

A: Supply and Demand: Applications and Extensions

B: Supply and Demand: Applications and Extensions

Difficult Cases for the Market and the Role of Government

Consumer Choice and Elasticity

A: Costs and the Supply of Goods

B: Costs and the Supply of Goods

A: Price Takers and the Competitive Process

B: Price Takers and the Competitive Process

Price-Searcher Markets With Low Entry Barriers

A: Price-Searcher Markets With High Entry Barriers

B: 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

Appendix: Government Spending and Taxation

Appendix: the Economics of Social Security

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

Appendix: Great Debates in Economics: Keynes Versus Hayek

Appendix: the Crisis of 2008: Causes and Lessons for the Future

Appendix: Lessons From the Great Depression

Appendix: the Economics of Healthcare

Appendix:education: Problems and Performance

Appendix: Earnings Differences Between Men and Women

Appendix: the Question of Resource Exhaustion

Appendix: Do Labor Unions Increase the Wages of Workers

Appendix: Difficult Environmental Cases and the Role of Government

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