Question 1

The appeal to government for special benefits at taxpayers' or someone else's expense is called the paradox of voting.

Accepted Answer

A) True 
 B)False

Question 2

A situation in which society may not be able to rank its preferences consistently through paired-choice majority voting is

Accepted Answer

A)  the fallacy of limited decisions. 
B)  the paradox of voting. 
C)  the median-voter model. 
D)  political logrolling. 
A)  the fallacy of limited decisions. 
B)  the paradox of voting. 
C)  the median-voter model. 
D)  political logrolling.

Question 3

Majority voting may produce economically inefficient outcomes because it

Accepted Answer

A)  does not always lead to fair results. 
B)  requires everyone to vote and bear the costs. 
C)  does not consider the strength of individual voters' preferences. 
D)  does not provide benefits to everyone. 
A)  does not always lead to fair results. 
B)  requires everyone to vote and bear the costs. 
C)  does not consider the strength of individual voters' preferences. 
D)  does not provide benefits to everyone.

Question 4

Factors that impede the attainment of economic efficiency in the public sector are called

Accepted Answer

A)  market failures. 
B)  externalities. 
C)  government failures. 
D)  voting irregularities. 
A)  market failures. 
B)  externalities. 
C)  government failures. 
D)  voting irregularities.

Question 5

Changes in tax rates are a form of monetary policy.

Accepted Answer

A) True 
 B)False

Question 6

Regulatory capture is said to have occurred when which of the following is true?

Accepted Answer

A)  Rules and enforcement in an industry are heavily influenced by the industry being regulated. 
B)  One firm controls an entire market, having captured customers away from other firms. 
C)  Government imposes excessive regulations in an industry, resulting in inefficiencies. 
D)  Consumers make all the rules for an industry, forcing firms into inefficient production methods. 
A)  Rules and enforcement in an industry are heavily influenced by the industry being regulated. 
B)  One firm controls an entire market, having captured customers away from other firms. 
C)  Government imposes excessive regulations in an industry, resulting in inefficiencies. 
D)  Consumers make all the rules for an industry, forcing firms into inefficient production methods.

Question 7

What is the main problem with government guarantees that socialize losses and privatize gains?

Accepted Answer

A)  They encourage overly risky investments by insulating private investors from any losses. 
B)  The investments that do occur never generate production of goods underproduced by the private sector. 
C)  They discourage private investment in worthwhile projects. 
D)  They tend to benefit foreign companies at the expense of domestic firms. 
A)  They encourage overly risky investments by insulating private investors from any losses. 
B)  The investments that do occur never generate production of goods underproduced by the private sector. 
C)  They discourage private investment in worthwhile projects. 
D)  They tend to benefit foreign companies at the expense of domestic firms.

Question 8

The ability to impose fines, revoke licenses, and put people into jail allows the government to

Accepted Answer

A)  ensure positive profits for its agencies. 
B)  maximize revenues from its operations. 
C)  enforce involuntary transactions. 
D)  set market prices for goods and services. 
A)  ensure positive profits for its agencies. 
B)  maximize revenues from its operations. 
C)  enforce involuntary transactions. 
D)  set market prices for goods and services.

Question 9

Assume that Abby, Ben, Clara, Joe, and Matt are the only citizens in a community. A proposed public good has a total cost of $1,000. All five citizens will share an equal portion of this cost in taxes. The benefit of the public good is $220 to Abby, $210 to Ben, $210 to Clara, $180 to Joe, and $120 to Matt. In a majority vote, this proposal will most likely be

Accepted Answer

A)  accepted; the public good is produced, even though it is economically inefficient. 
B)  defeated; the public good is not produced, even though it would have been efficient to do so. 
C)  accepted; the public good is produced, which is economically efficient. 
D)  defeated; the public good is not produced, which is the proper outcome. 
A)  accepted; the public good is produced, even though it is economically inefficient. 
B)  defeated; the public good is not produced, even though it would have been efficient to do so. 
C)  accepted; the public good is produced, which is economically efficient. 
D)  defeated; the public good is not produced, which is the proper outcome.

Question 10

The median-voter model implies that

Accepted Answer

A)  political voting will be as economically efficient as "dollar voting" in competitive markets. 
B)  all voters have about the same preferences for various public goods and services. 
C)  many people will be dissatisfied with the size of government in the economy. 
D)  with majority voting, there can never be a consistent ordering of public good preferences. 
A)  political voting will be as economically efficient as "dollar voting" in competitive markets. 
B)  all voters have about the same preferences for various public goods and services. 
C)  many people will be dissatisfied with the size of government in the economy. 
D)  with majority voting, there can never be a consistent ordering of public good preferences.

Question 11

"Pork-barrel" legislation that contains funding for hundreds of earmarks throughout numerous states often reflects

Accepted Answer

A)  the paradox of voting. 
B)  logrolling. 
C)  the benefits-received principle. 
D)  adverse selection. 
A)  the paradox of voting. 
B)  logrolling. 
C)  the benefits-received principle. 
D)  adverse selection.

Question 12

One key difference between government activities and private transactions is that

Accepted Answer

A)  government can enforce involuntary transactions, whereas private transactions are mostly voluntary. 
B)  government can produce only services, whereas private producers can produce both goods and services. 
C)  government does not run any production operations, whereas private firms have the main purpose of running production operations. 
D)  government does not earn revenues from its activities, whereas private firms aim to earn revenues and profits. 
A)  government can enforce involuntary transactions, whereas private transactions are mostly voluntary. 
B)  government can produce only services, whereas private producers can produce both goods and services. 
C)  government does not run any production operations, whereas private firms have the main purpose of running production operations. 
D)  government does not earn revenues from its activities, whereas private firms aim to earn revenues and profits.

Question 13

Majority voting on whether or not a public good should be produced could lead to a result where a public good whose costs are bigger than the benefits would end up getting approved by the voters.

Accepted Answer

A) True 
 B)False

Question 14

The term government failure refers to the

Accepted Answer

A)  large losses suffered by publicly owned water, gas, and electric companies. 
B)  large number of bankruptcies that have occurred recently among local governments. 
C)  economically inefficient outcomes caused by voting problems or incentive structures in government. 
D)  inability of government agencies to provide adequate police protection in low-income neighborhoods. 
A)  large losses suffered by publicly owned water, gas, and electric companies. 
B)  large number of bankruptcies that have occurred recently among local governments. 
C)  economically inefficient outcomes caused by voting problems or incentive structures in government. 
D)  inability of government agencies to provide adequate police protection in low-income neighborhoods.

Question 15

Government's ability to enforce laws and contracts increases private-sector economic risks.

Accepted Answer

A) True 
 B)False

Question 16

Public choice theorists contend that

Accepted Answer

A)  government can efficiently correct instances of market system failure. 
B)  the existence of cost-benefit analysis has brought about the efficient use of resources in the public sector. 
C)  public bureaucracies are inherently more efficient than private enterprises. 
D)  public bureaucracies are inherently less efficient than private enterprises. 
A)  government can efficiently correct instances of market system failure. 
B)  the existence of cost-benefit analysis has brought about the efficient use of resources in the public sector. 
C)  public bureaucracies are inherently more efficient than private enterprises. 
D)  public bureaucracies are inherently less efficient than private enterprises.

Question 17

If the government implements regulations and policies in the economy, it tends to replace the function of the invisible hand.

Accepted Answer

A) True 
 B)False

Question 18

The principal-agent problem is a problem for the private sector but does not apply to political decision making.

Accepted Answer

A) True 
 B)False

Question 19

As voters "vote with their feet" and move to political districts where the median voter's preference is closer to their own, the median voter's preference will

Accepted Answer

A)  strengthen. 
B)  weaken. 
C)  shift. 
D)  stagnate. 
A)  strengthen. 
B)  weaken. 
C)  shift. 
D)  stagnate.

Question 20

The Securities and Exchange Commission's supervision of Wall Street financial firms is a possible example of regulatory capture.

Accepted Answer

A) True 
 B)False

Exam 5: Governments Role and Government Failure

The appeal to government for special benefits at taxpayers' or someone else's expense is called the paradox of voting.

A situation in which society may not be able to rank its preferences consistently through paired-choice majority voting is

Majority voting may produce economically inefficient outcomes because it

Factors that impede the attainment of economic efficiency in the public sector are called

Changes in tax rates are a form of monetary policy.

Regulatory capture is said to have occurred when which of the following is true?

What is the main problem with government guarantees that socialize losses and privatize gains?

The ability to impose fines, revoke licenses, and put people into jail allows the government to

The median-voter model implies that

"Pork-barrel" legislation that contains funding for hundreds of earmarks throughout numerous states often reflects

One key difference between government activities and private transactions is that

Majority voting on whether or not a public good should be produced could lead to a result where a public good whose costs are bigger than the benefits would end up getting approved by the voters.

The term government failure refers to the

Government's ability to enforce laws and contracts increases private-sector economic risks.

Public choice theorists contend that

If the government implements regulations and policies in the economy, it tends to replace the function of the invisible hand.

The principal-agent problem is a problem for the private sector but does not apply to political decision making.

As voters "vote with their feet" and move to political districts where the median voter's preference is closer to their own, the median voter's preference will

The Securities and Exchange Commission's supervision of Wall Street financial firms is a possible example of regulatory capture.

Limits, Alternatives, and Choices

The Market System and the Circular Flow

Demand, Supply, and Market Equilibrium

Market Failures: Public Goods and Externalities

Elasticity

Utility Maximization

Behavioral Economics

Businesses and the Costs of Production

Pure Competition in the Short Run

Pure Competition in the Long Run

Pure Monopoly

Monopolistic Competition

Oligopoly and Strategic Behavior

Technology, Rd, and Efficiency

The Demand for Resources

Wage Determination

Rent, Interest, and Profit

Natural Resource and Energy Economics

Public Finance: Expenditures and Taxes

Antitrust Policy and Regulation

Agriculture: Economics and Policy

Income Inequality, Poverty, and Discrimination

Health Care

Immigration

International Trade

The Balance of Payments, Exchange Rates, and Trade Deficits

The Economics of Developing Countries

Filters