Question 1

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 2

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 3

How does a voting structure that relies on unanimity for an action guarantee that no one will be adversely affected? Why isn't this type of decision making used more frequently?

Accepted Answer

Since everyone must agree for a decision

Question 4

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 5

Use the figure below to answer the following question(s).
Figure 6-1
  
-Figure 6-1 illustrates the four possibilities of the distribution of costs and benefits among voters for a government project. Programs that give subsidies to a small group of producers at general taxpayer expense would be considered

Accepted Answer

A) type A projects, and the government would be likely to undertake these projects if they were efficient and to reject them if they were inefficient. 
B) type B projects, and the government would be likely to undertake many of these projects even when they were counterproductive (inefficient). 
C) type C projects, and the government would be likely to fail to undertake many of these projects even when they were productive (efficient). 
D) type D projects, and the government would be likely to undertake these projects if they were efficient and to reject them if they were inefficient. 
A) type A projects, and the government would be likely to undertake these projects if they were efficient and to reject them if they were inefficient. 
B) type B projects, and the government would be likely to undertake many of these projects even when they were counterproductive (inefficient). 
C) type C projects, and the government would be likely to fail to undertake many of these projects even when they were productive (efficient). 
D) type D projects, and the government would be likely to undertake these projects if they were efficient and to reject them if they were inefficient.

Question 6

Public choice theory suggests 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) middle-income taxpayers to both the rich and the poor. 
D) well-organized businesses and labor groups to consumers. 
A) the rich to the poor. 
B) unorganized taxpayers to well-organized interest groups. 
C) middle-income taxpayers to both the rich and the poor. 
D) well-organized businesses and labor groups to consumers.

Question 7

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

Question 8

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

Accepted Answer

A) use coercive force against adults to modify their behavior or force them to pay for a good or service. 
B) direct resources in a manner that serves the public interest rather than the private interest of individuals. 
C) produce goods and services that people value. 
D) escape the constraints imposed by scarcity. 
A) use coercive force against adults to modify their behavior or force them to pay for a good or service. 
B) direct resources in a manner that serves the public interest rather than the private interest of individuals. 
C) produce goods and services that people value. 
D) escape the constraints imposed by scarcity.

Question 9

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 10

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 11

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 12

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) disorganized individuals to well-organized special interest groups. 
C) middle-income taxpayers to both the rich and the poor. 
D) well-organized business and labor groups to consumers. 
A) the rich to the poor. 
B) disorganized individuals to well-organized special interest groups. 
C) middle-income taxpayers to both the rich and the poor. 
D) well-organized business and labor groups to consumers.

Question 13

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 14

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 15

Most income transfer programs in the United States

Accepted Answer

A) are means-tested programs that transfer income to the poor. 
B) allocate income to small businesses and small farmers. 
C) are designed to help those with very little economic and political power. 
D) allocate income to concentrated interest groups, such as the elderly, large farmers, and business interests. 
A) are means-tested programs that transfer income to the poor. 
B) allocate income to small businesses and small farmers. 
C) are designed to help those with very little economic and political power. 
D) allocate income to concentrated interest groups, such as the elderly, large farmers, and business interests.

Question 16

The term logrolling describes

Accepted Answer

A) government spending programs financed with user charges. 
B) the exchange between legislators of their votes on issues. 
C) the actions of legislators who are willing to trade their political votes for campaign contributions from special interest groups. 
D) government spending programs that primarily benefit loggers and other forest workers. 
A) government spending programs financed with user charges. 
B) the exchange between legislators of their votes on issues. 
C) the actions of legislators who are willing to trade their political votes for campaign contributions from special interest groups. 
D) government spending programs that primarily benefit loggers and other forest workers.

Question 17

Between 1930 and 1980, government expenditures as a percent of GDP in the United States

Accepted Answer

A) more than tripled. 
B) remained constant at 10 percent. 
C) declined from 30 percent to 20 percent. 
D) increased from 30 percent to 40 percent. 
A) more than tripled. 
B) remained constant at 10 percent. 
C) declined from 30 percent to 20 percent. 
D) increased from 30 percent to 40 percent.

Question 18

Pork-barrel legislation typically bundles the pet projects of several special interest groups. Such legislation

Accepted Answer

A) is frequently enacted, even though the overall benefits to society are less than the overall costs to society. 
B) seldom benefits special interest groups. 
C) usually, if successful, helps the majority of taxpayers. 
D) seldom passes because social benefits are far smaller than social costs. 
A) is frequently enacted, even though the overall benefits to society are less than the overall costs to society. 
B) seldom benefits special interest groups. 
C) usually, if successful, helps the majority of taxpayers. 
D) seldom passes because social benefits are far smaller than social costs.

Question 19

Which of the following is true?

Accepted Answer

A) When the government undertakes an activity, we can be assured that all voters will gain. 
B) If a government activity is favored by most citizens, it must be productive. 
C) If most voters oppose a government activity, it must be counterproductive. 
D) When voters pay in proportion to benefits received, all voters will gain if the government activity is productive. 
A) When the government undertakes an activity, we can be assured that all voters will gain. 
B) If a government activity is favored by most citizens, it must be productive. 
C) If most voters oppose a government activity, it must be counterproductive. 
D) When voters pay in proportion to benefits received, all voters will gain if the government activity is productive.

Question 20

People who spend more time and effort investigating the advantages and disadvantages of different automobile models when they go to purchase one than they do investigating the strengths and weaknesses of presidential candidates are saying, in effect, that

Accepted Answer

A) a good car is more important to their well-being than a good president. 
B) they expect to use the information on the merits of alternative cars to greater personal advantage than they could information on the merits of alternative presidential candidates. 
C) they are irrational, because the choice of a president is obviously far more important than the choice of a car. 
D) they do not think it matters who is elected president. 
A) a good car is more important to their well-being than a good president. 
B) they expect to use the information on the merits of alternative cars to greater personal advantage than they could information on the merits of alternative presidential candidates. 
C) they are irrational, because the choice of a president is obviously far more important than the choice of a car. 
D) they do not think it matters who is elected president.

Exam 6: The Economics of Collective Decision-Making

Transfer payments are

The shortsightedness effect suggests that

How does a voting structure that relies on unanimity for an action guarantee that no one will be adversely affected? Why isn't this type of decision making used more frequently?

Government decisions tend to be biased against actions that have

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

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

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

Public choice analysis indicates

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

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

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

Economic theory indicates that the behavior of

Most income transfer programs in the United States

The term logrolling describes

Between 1930 and 1980, government expenditures as a percent of GDP in the United States

Pork-barrel legislation typically bundles the pet projects of several special interest groups. Such legislation

Which of the following is true?

People who spend more time and effort investigating the advantages and disadvantages of different automobile models when they go to purchase one than they do investigating the strengths and weaknesses of presidential candidates are saying, in effect, that

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

Filters