Question 1

A special-interest issue is one that

Accepted Answer

A) allocates the cost of the activity in accordance with the benefits received. 
B) benefits a small, well-organized interest group at the expense of taxpayers or consumers. 
C) benefits everyone and imposes a cost on everyone. 
D) benefits a small, well-organized interest group but makes that group pay for the cost of the program. 
A) allocates the cost of the activity in accordance with the benefits received. 
B) benefits a small, well-organized interest group at the expense of taxpayers or consumers. 
C) benefits everyone and imposes a cost on everyone. 
D) benefits a small, well-organized interest group but makes that group pay for the cost of the program.

Question 2

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 3

Economic theory leads us to expect that the typical voter will be uninformed on many issues because

Accepted Answer

A) most issues are so complex that voters will be unable to understand them. 
B) even though information is free, most voters do not care. 
C) information is costly, and the individual voter casting a well-informed vote can expect negligible personal benefit. 
D) citizen apathy about political matters is inevitable, except when decisions are made by referendum. 
A) most issues are so complex that voters will be unable to understand them. 
B) even though information is free, most voters do not care. 
C) information is costly, and the individual voter casting a well-informed vote can expect negligible personal benefit. 
D) citizen apathy about political matters is inevitable, except when decisions are made by referendum.

Question 4

Legislation that contains a number of projects benefiting local interests at the expense of the general taxpayer is called

Accepted Answer

A) balanced-budget legislation. 
B) pork-barrel legislation. 
C) voucher legislation. 
D) public-goods legislation. 
A) balanced-budget legislation. 
B) pork-barrel legislation. 
C) voucher legislation. 
D) public-goods legislation.

Question 5

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 6

Legislators often gain by bundling a number of projects benefiting local districts at the expense of general taxpayers. Such legislation is called

Accepted Answer

A) market failure legislation. 
B) the rational ignorance effect. 
C) public goods legislation. 
D) pork-barrel legislation. 
A) market failure legislation. 
B) the rational ignorance effect. 
C) public goods legislation. 
D) pork-barrel legislation.

Question 7

Legislators often gain by bundling a number of projects benefiting local districts at the expense of general taxpayers together on a single bill. Such legislation is called

Accepted Answer

A) market failure legislation. 
B) the rational-ignorance effect. 
C) public-goods legislation. 
D) pork-barrel legislation. 
A) market failure legislation. 
B) the rational-ignorance effect. 
C) public-goods legislation. 
D) pork-barrel legislation.

Question 8

Public choice analysis

Accepted Answer

A) assumes individuals in the public sector act in their own self-interests. 
B) assumes individuals seek to serve the public interest rather than their own personal interests. 
C) is the study of decision making in the formation and operation of private organizations. 
D) assumes the government is a corrective device that takes the necessary action to offset economic inefficiency arising from market failure. 
A) assumes individuals in the public sector act in their own self-interests. 
B) assumes individuals seek to serve the public interest rather than their own personal interests. 
C) is the study of decision making in the formation and operation of private organizations. 
D) assumes the government is a corrective device that takes the necessary action to offset economic inefficiency arising from market failure.

Question 9

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. For which type would the government most likely undertake many projects that would be considered inefficient or counterproductive (in other words, do too many of them relative to economic efficiency)?

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 10

Public choice analysis suggests that the primary motivating factor for politicians will be finding the policies that are most likely to

Accepted Answer

A) get them reelected. 
B) improve economic efficiency. 
C) improve the welfare of society as a whole. 
D) anger the interest groups that provide substantial contributions to their campaigns. 
A) get them reelected. 
B) improve economic efficiency. 
C) improve the welfare of society as a whole. 
D) anger the interest groups that provide substantial contributions to their campaigns.

Question 11

Under democratic representative government, spending on a government program will likely be larger than the amount consistent with economic efficiency when

Accepted Answer

A) tax costs are levied in direct proportion with the benefits received. 
B) both the costs and benefits are widespread among the voters. 
C) benefits of the program are highly concentrated, while the costs are widely dispersed among voters. 
D) costs of the program are highly concentrated, while the benefits are widely dispersed among voters. 
A) tax costs are levied in direct proportion with the benefits received. 
B) both the costs and benefits are widespread among the voters. 
C) benefits of the program are highly concentrated, while the costs are widely dispersed among voters. 
D) costs of the program are highly concentrated, while the benefits are widely dispersed among voters.

Question 12

When goods are produced privately, but the cost of their purchase is paid for by the taxpayer or some other third party,

Accepted Answer

A) consumers have a strong incentive to search out those firms offering them the best deal. 
B) private producers of such goods will have little incentive to control costs and provide them at low prices. 
C) goods and services will only be supplied if consumers are willing to pay an amount sufficient to cover their production costs. 
D) the invisible hand will direct consumers and producers toward an efficient level of output. 
A) consumers have a strong incentive to search out those firms offering them the best deal. 
B) private producers of such goods will have little incentive to control costs and provide them at low prices. 
C) goods and services will only be supplied if consumers are willing to pay an amount sufficient to cover their production costs. 
D) the invisible hand will direct consumers and producers toward an efficient level of output.

Question 13

According to economic theory, it is often rational for a politician to support special interest groups at the expense of unorganized, widely dispersed groups (for example, taxpayers or consumers)

Accepted Answer

A) only when the gains that accrue to the special interest group exceed the costs imposed on other voters. 
B) when nonspecial-interest voters are unconcerned or uninformed about the issue, and campaign funds are readily available from the special interest group. 
C) only if the government action is socially efficient. 
D) only if the government action will reduce the monopoly power of business or labor and, thereby, lead to an improvement in the general welfare of consumers. 
A) only when the gains that accrue to the special interest group exceed the costs imposed on other voters. 
B) when nonspecial-interest voters are unconcerned or uninformed about the issue, and campaign funds are readily available from the special interest group. 
C) only if the government action is socially efficient. 
D) only if the government action will reduce the monopoly power of business or labor and, thereby, lead to an improvement in the general welfare of consumers.

Question 14

Which of the following is legally permitted to use coercive force to modify the actions of adults against their will?

Accepted Answer

A) banks 
B) corporations 
C) governments 
D) all of the above 
A) banks 
B) corporations 
C) governments 
D) all of the above

Question 15

Which of the following is an example of a transfer payment?

Accepted Answer

A) wages paid to military personnel 
B) benefits paid to Social Security recipients 
C) purchase of aircraft by the Department of Defense 
D) payments made to a contractor for construction of a highway 
A) wages paid to military personnel 
B) benefits paid to Social Security recipients 
C) purchase of aircraft by the Department of Defense 
D) payments made to a contractor for construction of a highway

Question 16

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

Accepted Answer

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

Question 17

In a representative democracy, government action results from the

Accepted Answer

A) choices of voters. 
B) legislative decisions by politicians. 
C) political action of organized interest groups. 
D) complex interaction of all of the above. 
A) choices of voters. 
B) legislative decisions by politicians. 
C) political action of organized interest groups. 
D) complex interaction of all of the above.

Question 18

Which of the following is most likely to result in an increase in crony capitalism?

Accepted Answer

A) a reduction in entry barriers and an increase in the competitiveness of markets. 
B) an increase in government spending and growth of government regulation 
C) a reduction in the size of government 
D) an increase in the share of the population voting in elections 
A) a reduction in entry barriers and an increase in the competitiveness of markets. 
B) an increase in government spending and growth of government regulation 
C) a reduction in the size of government 
D) an increase in the share of the population voting in elections

Question 19

Of all government spending in the United States, what amount occurs at the federal level?

Accepted Answer

A) less than 10 percent 
B) about half 
C) about three-fifths 
D) more than 90 percent 
A) less than 10 percent 
B) about half 
C) about three-fifths 
D) more than 90 percent

Question 20

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.

Exam 6: The Economics of Collective Decision-Making

A special-interest issue is one that

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?

Economic theory leads us to expect that the typical voter will be uninformed on many issues because

Legislation that contains a number of projects benefiting local interests at the expense of the general taxpayer is called

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

Legislators often gain by bundling a number of projects benefiting local districts at the expense of general taxpayers. Such legislation is called

Legislators often gain by bundling a number of projects benefiting local districts at the expense of general taxpayers together on a single bill. Such legislation is called

Public choice analysis

Public choice analysis suggests that the primary motivating factor for politicians will be finding the policies that are most likely to

Under democratic representative government, spending on a government program will likely be larger than the amount consistent with economic efficiency when

When goods are produced privately, but the cost of their purchase is paid for by the taxpayer or some other third party,

According to economic theory, it is often rational for a politician to support special interest groups at the expense of unorganized, widely dispersed groups (for example, taxpayers or consumers)

Which of the following is legally permitted to use coercive force to modify the actions of adults against their will?

Which of the following is an example of a transfer payment?

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

In a representative democracy, government action results from the

Which of the following is most likely to result in an increase in crony capitalism?

Of all government spending in the United States, what amount occurs at the federal level?

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

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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