Question 1

Measured as a share of national income, government expenditures on income transfers during the last 70 years have

Accepted Answer

A) grown rapidly. 
B) declined substantially. 
C) been virtually unchanged. 
D) increased throughout much of that period, but they have declined substantially since 1980. 
A) grown rapidly. 
B) declined substantially. 
C) been virtually unchanged. 
D) increased throughout much of that period, but they have declined substantially since 1980.

Question 2

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 3

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 4

Giving local governments more power is less dangerous than giving the same power to the national government because

Accepted Answer

A) local governments generally have more strict constitutional rules they must operate under. 
B) it is easier to vote in local elections than national elections. 
C) only national-level governments are allowed to use coercive force. 
D) higher exit options exist at the local level--it is easier for people to move away from a bad local government. 
A) local governments generally have more strict constitutional rules they must operate under. 
B) it is easier to vote in local elections than national elections. 
C) only national-level governments are allowed to use coercive force. 
D) higher exit options exist at the local level--it is easier for people to move away from a bad local government.

Question 5

Economic analysis suggests that bureaucrats and public-sector managers have a strong incentive to

Accepted Answer

A) make sure that their budgets are as small as possible so more funds will be available for other government programs. 
B) expand their budgets to sizes beyond what would be considered economically efficient. 
C) ensure that their budgets are exactly the size that would be considered economically efficient. 
D) economize on their spending and return unspent funds to the general treasury. 
A) make sure that their budgets are as small as possible so more funds will be available for other government programs. 
B) expand their budgets to sizes beyond what would be considered economically efficient. 
C) ensure that their budgets are exactly the size that would be considered economically efficient. 
D) economize on their spending and return unspent funds to the general treasury.

Question 6

Special-interest legislation is characterized by

Accepted Answer

A) concentrated costs and concentrated benefits 
B) concentrated benefits and widespread costs 
C) widespread benefits and widespread costs 
D) widespread benefits and concentrated costs 
E) zero costs 
A) concentrated costs and concentrated benefits 
B) concentrated benefits and widespread costs 
C) widespread benefits and widespread costs 
D) widespread benefits and concentrated costs 
E) zero costs

Question 7

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 8

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. A tariff on imported steel to protect jobs in the domestic steel industry that raises the cost of many products for consumers would be considered which type of project?

Accepted Answer

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

Question 9

When the government both provides a service and covers its costs through taxation,

Accepted Answer

A) the government has a strong incentive to supply consumers with desired goods at a low cost. 
B) consumers are in a weak position to either discipline the suppliers or alter the quantity or quality of the service provided. 
C) the invisible hand will direct decision makers toward the most efficient level of output. 
D) Consumers have strong incentive to be cost conscious. 
A) the government has a strong incentive to supply consumers with desired goods at a low cost. 
B) consumers are in a weak position to either discipline the suppliers or alter the quantity or quality of the service provided. 
C) the invisible hand will direct decision makers toward the most efficient level of output. 
D) Consumers have strong incentive to be cost conscious.

Question 10

Public choice theory indicates that the behavior of people in government

Accepted Answer

A) differs from the behavior of people in the private sector because they are motivated by the public interest rather than their own personal self-interest. 
B) differs from the behavior of people in the private sector because public sector decision roles do not allow people to pursue their own self-interests. 
C) is the same as people in the private sector only if decisions are made by majority vote. 
D) is best understood by applying the same principles we use to predict the behavior of people in the private sector. 
A) differs from the behavior of people in the private sector because they are motivated by the public interest rather than their own personal self-interest. 
B) differs from the behavior of people in the private sector because public sector decision roles do not allow people to pursue their own self-interests. 
C) is the same as people in the private sector only if decisions are made by majority vote. 
D) is best understood by applying the same principles we use to predict the behavior of people in the private sector.

Question 11

Public choice analysis suggests that bureaucrats and public-sector managers have a strong incentive to

Accepted Answer

A) economize on their spending so more funds will be available for other government programs. 
B) ensure that their budget is exactly the size that would be considered economically efficient. 
C) expand their budgets to sizes beyond what would be considered economically efficient. 
D) keep individual legislators fully informed as to every expenditure. 
A) economize on their spending so more funds will be available for other government programs. 
B) ensure that their budget is exactly the size that would be considered economically efficient. 
C) expand their budgets to sizes beyond what would be considered economically efficient. 
D) keep individual legislators fully informed as to every expenditure.

Question 12

Government decisions tend to be biased toward 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 13

Which of the following provides the best summary of the basic idea of public choice analysis?

Accepted Answer

A) Public choice analysis applies the principles of economics to political science topics. 
B) Public choice analysis takes the principles of political science and applies them to the traditional topics of economics. 
C) Public choice analysis uses the principle of majority rule to determine the efficiency of an action. 
D) Public choice analysis indicates there is a sharp distinction between economic and political topics. 
A) Public choice analysis applies the principles of economics to political science topics. 
B) Public choice analysis takes the principles of political science and applies them to the traditional topics of economics. 
C) Public choice analysis uses the principle of majority rule to determine the efficiency of an action. 
D) Public choice analysis indicates there is a sharp distinction between economic and political topics.

Question 14

Current tax rates are insufficient to finance the benefits promised by both the Social Security and Medicare programs. Are these unfunded promises surprising according to economic theory?

Accepted Answer

A) Yes, political representatives have a strong incentive to levy taxes that are sufficient to cover the cost of all programs they favor. 
B) No, the unfunded promises reflect the shortsighted nature of the political process. 
C) Yes, political representatives generally favor balancing the government budget because this is best for the economy. 
D) No, even though debt financing often makes sense, politicians are reluctant to use it because it will damage their chances of being reelected. 
A) Yes, political representatives have a strong incentive to levy taxes that are sufficient to cover the cost of all programs they favor. 
B) No, the unfunded promises reflect the shortsighted nature of the political process. 
C) Yes, political representatives generally favor balancing the government budget because this is best for the economy. 
D) No, even though debt financing often makes sense, politicians are reluctant to use it because it will damage their chances of being reelected.

Question 15

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 16

Public choice theory assumes voters, politicians, and other individuals in the public sector are largely motivated by

Accepted Answer

A) a desire to promote the general welfare. 
B) a desire to meet the conditions of economic efficiency for the economy as a whole. 
C) altruism or the good of the public as a whole. 
D) personal self-interest. 
A) a desire to promote the general welfare. 
B) a desire to meet the conditions of economic efficiency for the economy as a whole. 
C) altruism or the good of the public as a whole. 
D) personal self-interest.

Question 17

According to public choice theory, which of the following groups will likely benefit the most from government income transfers under a system of representative democracy?

Accepted Answer

A) the poor 
B) consumers 
C) small businesses 
D) concentrated interest groups 
A) the poor 
B) consumers 
C) small businesses 
D) concentrated interest groups

Question 18

Which of the following is a predictable side effect of increased government activity (e.g., 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 19

Public choice theory indicates someone who spends more time evaluating which tennis racket to buy than deciding which U.S. Senate candidate to support

Accepted Answer

A) is behaving irrationally. 
B) is behaving rationally, given the structure of incentives confronted. 
C) will likely be responsible for electing the wrong senator. 
D) is failing to maximize his own personal utility. 
A) is behaving irrationally. 
B) is behaving rationally, given the structure of incentives confronted. 
C) will likely be responsible for electing the wrong senator. 
D) is failing to maximize his own personal utility.

Question 20

A local government operates a city recreation center with a pool and tennis courts. The center is financed through $50 annual membership fees (required for members to use it). This type of financing is an example of a

Accepted Answer

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

Exam 6: The Economics of Collective Decision-Making

Measured as a share of national income, government expenditures on income transfers during the last 70 years have

Public choice analysis indicates

Giving local governments more power is less dangerous than giving the same power to the national government because

Economic analysis suggests that bureaucrats and public-sector managers have a strong incentive to

Special-interest legislation is characterized by

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

When the government both provides a service and covers its costs through taxation,

Public choice theory indicates that the behavior of people in government

Public choice analysis suggests that bureaucrats and public-sector managers have a strong incentive to

Government decisions tend to be biased toward actions that have

Which of the following provides the best summary of the basic idea of public choice analysis?

Current tax rates are insufficient to finance the benefits promised by both the Social Security and Medicare programs. Are these unfunded promises surprising according to economic theory?

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

Public choice theory assumes voters, politicians, and other individuals in the public sector are largely motivated by

According to public choice theory, which of the following groups will likely benefit the most from government income transfers under a system of representative democracy?

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

Public choice theory indicates someone who spends more time evaluating which tennis racket to buy than deciding which U.S. Senate candidate to support

A local government operates a city recreation center with a pool and tennis courts. The center is financed through $50 annual membership fees (required for members to use it). This type of financing is an example of a

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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