Question 1

Economists (particularly public choice theorists) point out that the political process

Accepted Answer

A)  differs from the marketplace in that voters and congressional representatives often face limited and bundled choices. 
B)  is less prone to failure than is the marketplace. 
C)  is a much fairer way to allocate society's scarce resources than is the impersonal marketplace, which is dominated by high-income consumers. 
D)  involves logrolling, which is always inefficient. 
A)  differs from the marketplace in that voters and congressional representatives often face limited and bundled choices. 
B)  is less prone to failure than is the marketplace. 
C)  is a much fairer way to allocate society's scarce resources than is the impersonal marketplace, which is dominated by high-income consumers. 
D)  involves logrolling, which is always inefficient.

Question 2

The invisible hand guides government's economic activity just as it does with private economic activity.

Accepted Answer

A) True 
 B)False

Question 3

The special-interest effect in government is the reason why firms in some industries are willing to pay huge amounts of money to lobbyists.

Accepted Answer

A) True 
 B)False

Question 4

The field of economics that analyzes government decision making, politics, and elections is called

Accepted Answer

A)  public finance. 
B)  public choice theory. 
C)  collective economics. 
D)  political economy. 
A)  public finance. 
B)  public choice theory. 
C)  collective economics. 
D)  political economy.

Question 5

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. Who are likely to vote in favor of this proposal?

Accepted Answer

A)  Abby, Ben, Clara, and Joe 
B)  Ben, Clara, Joe, and Matt 
C)  Ben, Clara, and Joe 
D)  Abby, Ben, and Clara 
A)  Abby, Ben, Clara, and Joe 
B)  Ben, Clara, Joe, and Matt 
C)  Ben, Clara, and Joe 
D)  Abby, Ben, and Clara

Question 6

In the corporate world of business, the principal-agent problem arises between

Accepted Answer

A)  workers and managers. 
B)  managers and stockholders. 
C)  stockholders and bondholders. 
D)  corporations and their banks. 
A)  workers and managers. 
B)  managers and stockholders. 
C)  stockholders and bondholders. 
D)  corporations and their banks.

Question 7

Making blackmail, extortion, and other forms of private coercion illegal is one way that government

Accepted Answer

A)  reduces private-sector economic risk. 
B)  increases private-sector economic risk. 
C)  reduces the market's economic efficiency. 
D)  increases the economy's deadweight losses. 
A)  reduces private-sector economic risk. 
B)  increases private-sector economic risk. 
C)  reduces the market's economic efficiency. 
D)  increases the economy's deadweight losses.

Question 8

To curb the problem of voters wanting immediate benefits and deferred costs, many state governments in the United States have

Accepted Answer

A)  made unfunded liabilities illegal. 
B)  resorted to greater use of monetary policy. 
C)  passed laws requiring balanced budgets. 
D)  stopped using fiscal policy. 
A)  made unfunded liabilities illegal. 
B)  resorted to greater use of monetary policy. 
C)  passed laws requiring balanced budgets. 
D)  stopped using fiscal policy.

Question 9

In which of the following cases has political corruption definitely occurred?

Accepted Answer

A)  Political candidates accept campaign contributions from people. 
B)  Government agencies impose fines for such things as traffic violations. 
C)  A bureaucrat allows someone to look at confidential documents for an informal fee. 
D)  A government agency receives donations for distribution to charity. 
A)  Political candidates accept campaign contributions from people. 
B)  Government agencies impose fines for such things as traffic violations. 
C)  A bureaucrat allows someone to look at confidential documents for an informal fee. 
D)  A government agency receives donations for distribution to charity.

Question 10

The study of public choice theory involves the economic analysis of the following, except

Accepted Answer

A)  government decision making. 
B)  actions by elected officials. 
C)  the impact of budget deficits on the public debt. 
D)  voting and elections. 
A)  government decision making. 
B)  actions by elected officials. 
C)  the impact of budget deficits on the public debt. 
D)  voting and elections.

Question 11

Which of the following is a source of government failure?

Accepted Answer

A)  the invisible hand 
B)  the lack of bureaucracy in government 
C)  the enormous size and scope of government 
D)  excessive flexibility 
A)  the invisible hand 
B)  the lack of bureaucracy in government 
C)  the enormous size and scope of government 
D)  excessive flexibility

Question 12

Fiscal policy is more susceptible to politicization than monetary policy.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following is related to the special-interest effect?

Accepted Answer

A)  pork-barrel politics 
B)  earmarks 
C)  logrolling 
D)  all of these 
A)  pork-barrel politics 
B)  earmarks 
C)  logrolling 
D)  all of these

Question 14

Political logrolling, or vote trading, can turn a potentially inefficient voting outcome into an efficient one.

Accepted Answer

A) True 
 B)False

Question 15

"Informal payments" or "under-the table fees" are a common form of corruption.

Accepted Answer

A) True 
 B)False

Question 16

Logrolling can either increase or diminish economic efficiency.

Accepted Answer

A) True 
 B)False

Question 17

The Road Runner Club contributes money to Senator Sly's reelection campaign fund, and Senator Sly helps pass legislation to add more jogging paths across the state. From this we can definitively conclude

Accepted Answer

A)  that political corruption has occurred. 
B)  that logrolling has occurred. 
C)  that a principal-agent problem has occurred. 
D)  nothing; the Road Runner Club may have donated to Senator Sly because he already supported the jogging paths. 
A)  that political corruption has occurred. 
B)  that logrolling has occurred. 
C)  that a principal-agent problem has occurred. 
D)  nothing; the Road Runner Club may have donated to Senator Sly because he already supported the jogging paths.

Question 18

Suppose that friends Jennifer, Stephanie, and Megan cannot agree on how much to spend for a bouquet of flowers to send to a person who allowed them to use her beach house for the weekend. Jennifer wants to buy a moderately priced bouquet, Stephanie wants to buy an expensive bouquet, and Megan wants to buy a very expensive bouquet. Assuming no paradox of voting, majority voting will result in the decision to buy

Accepted Answer

A)  an inexpensive bouquet. 
B)  a very expensive bouquet. 
C)  a moderately priced bouquet. 
D)  an expensive bouquet. 
A)  an inexpensive bouquet. 
B)  a very expensive bouquet. 
C)  a moderately priced bouquet. 
D)  an expensive bouquet.

Question 19

Even if individual voters have clear preferences, and they stay consistent in their preferences, we could still end up with the paradox of voting.

Accepted Answer

A) True 
 B)False

Question 20

The U.S. federal government's largest unfunded liability is

Accepted Answer

A)  Medicare. 
B)  national defense. 
C)  Social Security. 
D)  unemployment insurance. 
A)  Medicare. 
B)  national defense. 
C)  Social Security. 
D)  unemployment insurance.

Exam 5: Governments Role and Government Failure

Economists (particularly public choice theorists) point out that the political process

The invisible hand guides government's economic activity just as it does with private economic activity.

The special-interest effect in government is the reason why firms in some industries are willing to pay huge amounts of money to lobbyists.

The field of economics that analyzes government decision making, politics, and elections is called

In the corporate world of business, the principal-agent problem arises between

Making blackmail, extortion, and other forms of private coercion illegal is one way that government

To curb the problem of voters wanting immediate benefits and deferred costs, many state governments in the United States have

In which of the following cases has political corruption definitely occurred?

The study of public choice theory involves the economic analysis of the following, except

Which of the following is a source of government failure?

Fiscal policy is more susceptible to politicization than monetary policy.

Which of the following is related to the special-interest effect?

Political logrolling, or vote trading, can turn a potentially inefficient voting outcome into an efficient one.

"Informal payments" or "under-the table fees" are a common form of corruption.

Logrolling can either increase or diminish economic efficiency.

The Road Runner Club contributes money to Senator Sly's reelection campaign fund, and Senator Sly helps pass legislation to add more jogging paths across the state. From this we can definitively conclude

Even if individual voters have clear preferences, and they stay consistent in their preferences, we could still end up with the paradox of voting.

The U.S. federal government's largest unfunded liability is

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

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