Question 1

In which case is the political process most likely to result in the acceptance of efficient projects and rejection of inefficient projects?

Accepted Answer

A) The benefits are highly concentrated, and costs are widespread among voters. 
B) The costs are highly concentrated, and the benefits are widespread among voters. 
C) Both the benefits and costs are widespread among voters. 
D) The benefits accrue primarily in the future, while the costs are more visible during the current period. 
A) The benefits are highly concentrated, and costs are widespread among voters. 
B) The costs are highly concentrated, and the benefits are widespread among voters. 
C) Both the benefits and costs are widespread among voters. 
D) The benefits accrue primarily in the future, while the costs are more visible during the current period.

Question 2

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 3

Assume that you are a member of the U.S. House of Representatives from your home state and district. Which of the following best explains why you have a strong incentive to get the federal government to finance pork-barrel projects in your district?

Accepted Answer

A) Most of the benefits of pork-barrel projects within your district will accrue to your constituents, while most of the costs will be imposed on voters from other districts. 
B) Most of the costs of pork-barrel projects within your district will be imposed on your constituents, while most of the benefits will accrue to voters from other districts. 
C) Pork producers are a powerful political lobby that will influence the actions of legislators in all districts. 
D) This is a trick question; in a representative democracy, there is little incentive for legislators to support pork-barrel projects. 
A) Most of the benefits of pork-barrel projects within your district will accrue to your constituents, while most of the costs will be imposed on voters from other districts. 
B) Most of the costs of pork-barrel projects within your district will be imposed on your constituents, while most of the benefits will accrue to voters from other districts. 
C) Pork producers are a powerful political lobby that will influence the actions of legislators in all districts. 
D) This is a trick question; in a representative democracy, there is little incentive for legislators to support pork-barrel projects.

Question 4

When the tax to fund a government project is allocated among voters in proportion to the benefits they receive from the project,

Accepted Answer

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

Question 5

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

Accepted Answer

A) Public-sector managers need not fear bankruptcy when operational efficiency is not achieved. 
B) Public-sector managers seldom receive personal benefits if they find ways to improve the efficiency of their operations. 
C) Public-sector agencies typically do not face competition. 
D) All of the above explain why government agencies have little incentive to be efficient. 
A) Public-sector managers need not fear bankruptcy when operational efficiency is not achieved. 
B) Public-sector managers seldom receive personal benefits if they find ways to improve the efficiency of their operations. 
C) Public-sector agencies typically do not face competition. 
D) All of the above explain why government agencies have little incentive to be efficient.

Question 6

Public choice theory assumes each voter will tend to support the political candidate who offers

Accepted Answer

A) programs with the largest benefits to society. 
B) the highest potential for being a good leader in times of war. 
C) programs that create the most equal distribution of income. 
D) to provide the voter with the most personal benefits at the least personal cost. 
A) programs with the largest benefits to society. 
B) the highest potential for being a good leader in times of war. 
C) programs that create the most equal distribution of income. 
D) to provide the voter with the most personal benefits at the least personal cost.

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

In 2010, government income transfers redistributed what percentage of national income?

Accepted Answer

A) 1.5 percent 
B) 9.5 percent 
C) 19.5 percent 
D) 25.5 percent 
A) 1.5 percent 
B) 9.5 percent 
C) 19.5 percent 
D) 25.5 percent

Question 9

An issue that generates substantial benefits to a small group of individuals while imposing a small cost on many others is called a

Accepted Answer

A) special-interest issue. 
B) minority application. 
C) commons policy. 
D) national service. 
A) special-interest issue. 
B) minority application. 
C) commons policy. 
D) national service.

Question 10

When analyzing public sector decision making, economic theory assumes that voters, politicians, and government officials will

Accepted Answer

A) respond to changes in personal benefits and costs when making public sector choices. 
B) pursue the public interest even when it conflicts with their private interests. 
C) pursue primarily public interests because competition is less intense in the public sector. 
D) do none of the above. 
A) respond to changes in personal benefits and costs when making public sector choices. 
B) pursue the public interest even when it conflicts with their private interests. 
C) pursue primarily public interests because competition is less intense in the public sector. 
D) do none of the above.

Question 11

When governments become more heavily involved in taxing one group in order to provide benefits to other groups, which of the following will be encouraged?

Accepted Answer

A) rapid economic growth 
B) rent-seeking activity 
C) an improvement in the efficiency of government bureaucracies 
D) competitive private markets 
A) rapid economic growth 
B) rent-seeking activity 
C) an improvement in the efficiency of government bureaucracies 
D) competitive private markets

Question 12

The theory of public choice

Accepted Answer

A) analyzes the likelihood that various public sector alternatives will be instituted. 
B) assumes that economic incentives influence the choices of voters. 
C) applies the tools of economics to the collective decision-making process. 
D) is all of the above. 
A) analyzes the likelihood that various public sector alternatives will be instituted. 
B) assumes that economic incentives influence the choices of voters. 
C) applies the tools of economics to the collective decision-making process. 
D) is all of the above.

Question 13

Senator Dogood is pushing for the construction of a new military base in his state even though, from the standpoint of national security, it is clear that there are better places to locate the new military base. Economic theory would suggest that Senator Dogood is

Accepted Answer

A) acting irrationally; he must not know that the base would be better located in a different state. 
B) acting rationally; he realizes that constructing the base in his state will increase his chances of getting reelected. 
C) acting rationally if the country is currently at war but is acting irrationally if the country is not at war. 
D) trying to do what is best for the country. 
A) acting irrationally; he must not know that the base would be better located in a different state. 
B) acting rationally; he realizes that constructing the base in his state will increase his chances of getting reelected. 
C) acting rationally if the country is currently at war but is acting irrationally if the country is not at war. 
D) trying to do what is best for the country.

Question 14

Economic theory implies that the incentive for a manager of a publicly operated firm (for example, a state university or the post office) to promote internal efficiency of their operations would be

Accepted Answer

A) strong because inefficiency is easily detected and leads to the loss of voter support. 
B) strong because public officials are unconcerned about personal gain. 
C) weak because government employees are less educated than employees who work in the private sector. 
D) weak because it is difficult for voters to detect inefficiency and for public officials to gain from actions that would improve the efficiency of government. 
A) strong because inefficiency is easily detected and leads to the loss of voter support. 
B) strong because public officials are unconcerned about personal gain. 
C) weak because government employees are less educated than employees who work in the private sector. 
D) weak because it is difficult for voters to detect inefficiency and for public officials to gain from actions that would improve the efficiency of government.

Question 15

Economists refer to the lack of incentive that voters have to search for and obtain information to help make better political choices as the

Accepted Answer

A) shortsightedness effect. 
B) public-interest effect. 
C) free rider problem. 
D) rational-ignorance effect. 
A) shortsightedness effect. 
B) public-interest effect. 
C) free rider problem. 
D) rational-ignorance effect.

Question 16

When politicians support policies that benefit small interest groups, such as farmers, at the expense of unorganized, widely dispersed groups, for example, taxpayers or consumers, this is a reflection of the

Accepted Answer

A) tragedy of interest. 
B) special-interest effect. 
C) unorganized interest effect. 
D) shortsightedness effect. 
A) tragedy of interest. 
B) special-interest effect. 
C) unorganized interest effect. 
D) shortsightedness effect.

Question 17

Despite being a college graduate, Jack Adams cannot name any of his representatives in Congress and he has no idea which issues are being debated and voted on this week in Congress. According to public choice analysis, Jack is

Accepted Answer

A) irrational. 
B) considering only the welfare of society and not his own personal interests. 
C) not intelligent enough to understand the issues. 
D) making a rational personal choice because knowing these things gives him little personal benefit. 
A) irrational. 
B) considering only the welfare of society and not his own personal interests. 
C) not intelligent enough to understand the issues. 
D) making a rational personal choice because knowing these things gives him little personal benefit.

Question 18

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 19

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 20

Despite many differences, the market and public sectors are similar in which one of the following respects?

Accepted Answer

A) In both sectors, income (or power) is distributed on the basis of the same criterion. 
B) Consumers in the market sector and voters in the public sector are equally well informed. 
C) Voluntary exchange, rather than compulsion, is characteristic of both sectors. 
D) It will be costly to use scarce goods, whether through the private or the public sector. 
A) In both sectors, income (or power) is distributed on the basis of the same criterion. 
B) Consumers in the market sector and voters in the public sector are equally well informed. 
C) Voluntary exchange, rather than compulsion, is characteristic of both sectors. 
D) It will be costly to use scarce goods, whether through the private or the public sector.

Exam 6: The Economics of Collective Decision-Making

In which case is the political process most likely to result in the acceptance of efficient projects and rejection of inefficient projects?

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

Assume that you are a member of the U.S. House of Representatives from your home state and district. Which of the following best explains why you have a strong incentive to get the federal government to finance pork-barrel projects in your district?

When the tax to fund a government project is allocated among voters in proportion to the benefits they receive from the project,

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

Public choice theory assumes each voter will tend to support the political candidate who offers

Crony capitalism is present when

In 2010, government income transfers redistributed what percentage of national income?

An issue that generates substantial benefits to a small group of individuals while imposing a small cost on many others is called a

When analyzing public sector decision making, economic theory assumes that voters, politicians, and government officials will

When governments become more heavily involved in taxing one group in order to provide benefits to other groups, which of the following will be encouraged?

The theory of public choice

Senator Dogood is pushing for the construction of a new military base in his state even though, from the standpoint of national security, it is clear that there are better places to locate the new military base. Economic theory would suggest that Senator Dogood is

Economic theory implies that the incentive for a manager of a publicly operated firm (for example, a state university or the post office) to promote internal efficiency of their operations would be

Economists refer to the lack of incentive that voters have to search for and obtain information to help make better political choices as the

When politicians support policies that benefit small interest groups, such as farmers, at the expense of unorganized, widely dispersed groups, for example, taxpayers or consumers, this is a reflection of the

Despite being a college graduate, Jack Adams cannot name any of his representatives in Congress and he has no idea which issues are being debated and voted on this week in Congress. According to public choice analysis, Jack is

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

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?

Despite many differences, the market and public sectors are similar in which one of the following respects?

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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