Question 1

Because majority voting fails to incorporate the strength of the preferences of individual voters, it

Accepted Answer

A)  creates negative externalities. 
B)  under some circumstances produces economically inefficient outcomes. 
C)  leads to market failure. 
D)  leads to politics dominated by special-interest groups. 
A)  creates negative externalities. 
B)  under some circumstances produces economically inefficient outcomes. 
C)  leads to market failure. 
D)  leads to politics dominated by special-interest groups.

Question 2

A special-interest issue is one whose passage yields

Accepted Answer

A)  private benefits equal to external benefits. 
B)  large external benefits compared to private benefits. 
C)  small economic losses to a small number of people and large economic losses to a large number of people. 
D)  large economic gains to a small number of people and small economic losses to a large number of people. 
A)  private benefits equal to external benefits. 
B)  large external benefits compared to private benefits. 
C)  small economic losses to a small number of people and large economic losses to a large number of people. 
D)  large economic gains to a small number of people and small economic losses to a large number of people.

Question 3

Voters' preference for having government programs serve them is inherently in conflict with their preference to pay no taxes.

Accepted Answer

A) True 
 B)False

Question 4

The political tendency to favor spending priorities with immediate benefits but deferred costs results in

Accepted Answer

A)  chronic budget deficits. 
B)  misdirection of stabilization policy. 
C)  unfunded liabilities. 
D)  all of these. 
A)  chronic budget deficits. 
B)  misdirection of stabilization policy. 
C)  unfunded liabilities. 
D)  all of these.

Question 5

When congressional representatives vote on an appropriations bill, they must vote yea or nay, taking the bad with the good. This statement best reflects the

Accepted Answer

A)  paradox of voting. 
B)  regulatory capture effect. 
C)  benefits-received principle. 
D)  concept of limited and bundled choices. 
A)  paradox of voting. 
B)  regulatory capture effect. 
C)  benefits-received principle. 
D)  concept of limited and bundled choices.

Question 6

Only politicians, not the voters, are to blame for the problem of chronic budget deficits that many nations face.

Accepted Answer

A) True 
 B)False

Question 7

The "principal-agent problem" often arises in public choice when politicians pursue the best interests of their constituents.

Accepted Answer

A) True 
 B)False

Question 8

Public choice economists contend public bureaucracies are inefficient primarily because

Accepted Answer

A)  the value of public goods is more easily measured than is the value of private goods. 
B)  of the absence of competitive market pressures. 
C)  public sector workers are more security-conscious than are private sector workers. 
D)  relatively low pay in government attracts workers of lesser quality. 
A)  the value of public goods is more easily measured than is the value of private goods. 
B)  of the absence of competitive market pressures. 
C)  public sector workers are more security-conscious than are private sector workers. 
D)  relatively low pay in government attracts workers of lesser quality.

Question 9

Loan guarantees provided by the government for specific private-sector investments tend to

Accepted Answer

A)  generate high positive returns for the government. 
B)  increase the financial risk faced by the private investors. 
C)  attract private investors into the specific project. 
D)  eliminate the moral hazard problem among investors. 
A)  generate high positive returns for the government. 
B)  increase the financial risk faced by the private investors. 
C)  attract private investors into the specific project. 
D)  eliminate the moral hazard problem among investors.

Question 10

In 2015, U.S. federal government legislation authorized

Accepted Answer

A)  152 earmarks, totaling $3.3 billion. 
B)  105 earmarks, totaling $4.2 billion. 
C)  1,160 earmarks, totaling $19.6 billion. 
D)  11,700 earmarks, totaling $16.9 billion. 
A)  152 earmarks, totaling $3.3 billion. 
B)  105 earmarks, totaling $4.2 billion. 
C)  1,160 earmarks, totaling $19.6 billion. 
D)  11,700 earmarks, totaling $16.9 billion.

Question 11

Problems with collective decision making and policy making in government are subjects that are studied in an area of economics called public

Accepted Answer

A)  finance. 
B)  choice. 
C)  policy. 
D)  interest. 
A)  finance. 
B)  choice. 
C)  policy. 
D)  interest.

Question 12

Assume that Matt, Joe, and Teresa are the only citizens in a community. A proposed public good has a total cost of $1,000. All three citizens will share an equal portion of this cost in taxes. The benefit of the public good is $500 for Matt, $280 for Joe, and $260 for Teresa. 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 13

Suppose three roommates cannot agree on the size of a pizza to order. Domino argues for a medium pizza, Godfather contends a large pizza will be needed, and Little Caesar wants a super-large pizza. Assuming no paradox of voting, majority voting will result in a decision to order

Accepted Answer

A)  a medium pizza. 
B)  a large pizza. 
C)  a super-large pizza. 
D)  two medium pizzas. 
A)  a medium pizza. 
B)  a large pizza. 
C)  a super-large pizza. 
D)  two medium pizzas.

Question 14

Under what circumstances would government loan guarantees be socially beneficial?

Accepted Answer

A)  when the guarantees socialize losses and privatize gains 
B)  when the guarantees stimulate production of goods generating significant spillover costs 
C)  when the guarantees promote production of goods otherwise underproduced by the private sector 
D)  when the guarantees increase company profits 
A)  when the guarantees socialize losses and privatize gains 
B)  when the guarantees stimulate production of goods generating significant spillover costs 
C)  when the guarantees promote production of goods otherwise underproduced by the private sector 
D)  when the guarantees increase company profits

Question 15

Suppose that Steve and Susie each perceive $200 of marginal benefit from a proposed new park, whereas Elizabeth perceives $800. If the proposed tax levied on each for the park would be $300, a majority vote will

Accepted Answer

A)  defeat this project and resources will be underallocated to it. 
B)  defeat this project and resources will be efficiently allocated. 
C)  pass this project and resources will be underallocated to it. 
D)  pass this project and resources will be overallocated to it. 
A)  defeat this project and resources will be underallocated to it. 
B)  defeat this project and resources will be efficiently allocated. 
C)  pass this project and resources will be underallocated to it. 
D)  pass this project and resources will be overallocated to it.

Question 16

The median-voter model indicates that political parties will

Accepted Answer

A)  target only those voters who can be influenced by rent seeking. 
B)  direct their work to voters who can be influenced by special interests. 
C)  campaign at one end of the distribution of voter sentiments. 
D)  try to appeal to the sentiments of the voter holding the middle position. 
A)  target only those voters who can be influenced by rent seeking. 
B)  direct their work to voters who can be influenced by special interests. 
C)  campaign at one end of the distribution of voter sentiments. 
D)  try to appeal to the sentiments of the voter holding the middle position.

Question 17

Majority voting fails to incorporate the strength of the preferences of individual voters and therefore

Accepted Answer

A)  reduces the power of the median voter. 
B)  is the primary reason for public sector failure. 
C)  may produce economically inefficient outcomes. 
D)  creates the opportunity for the fallacy of limited decisions. 
A)  reduces the power of the median voter. 
B)  is the primary reason for public sector failure. 
C)  may produce economically inefficient outcomes. 
D)  creates the opportunity for the fallacy of limited decisions.

Question 18

The collective action problem makes it hard for voters to counter the influence of special-interest groups.

Accepted Answer

A) True 
 B)False

Question 19

When voters have different opinions about an issue, the position that is most likely to be adopted is that of the

Accepted Answer

A)  lobbyist. 
B)  logroller. 
C)  rent seeker. 
D)  median voter. 
A)  lobbyist. 
B)  logroller. 
C)  rent seeker. 
D)  median voter.

Question 20

(Consider This) Suppose voters pass laws that restrict immigration, which results in lower national output and higher prices for consumer goods. This would be an example of

Accepted Answer

A)  the paradox of voting. 
B)  voter failure. 
C)  logrolling. 
D)  adverse selection. 
A)  the paradox of voting. 
B)  voter failure. 
C)  logrolling. 
D)  adverse selection.

Exam 5: Governments Role and Government Failure

Because majority voting fails to incorporate the strength of the preferences of individual voters, it

A special-interest issue is one whose passage yields

Voters' preference for having government programs serve them is inherently in conflict with their preference to pay no taxes.

The political tendency to favor spending priorities with immediate benefits but deferred costs results in

When congressional representatives vote on an appropriations bill, they must vote yea or nay, taking the bad with the good. This statement best reflects the

Only politicians, not the voters, are to blame for the problem of chronic budget deficits that many nations face.

The "principal-agent problem" often arises in public choice when politicians pursue the best interests of their constituents.

Public choice economists contend public bureaucracies are inefficient primarily because

Loan guarantees provided by the government for specific private-sector investments tend to

In 2015, U.S. federal government legislation authorized

Problems with collective decision making and policy making in government are subjects that are studied in an area of economics called public

Suppose three roommates cannot agree on the size of a pizza to order. Domino argues for a medium pizza, Godfather contends a large pizza will be needed, and Little Caesar wants a super-large pizza. Assuming no paradox of voting, majority voting will result in a decision to order

Under what circumstances would government loan guarantees be socially beneficial?

Suppose that Steve and Susie each perceive $200 of marginal benefit from a proposed new park, whereas Elizabeth perceives $800. If the proposed tax levied on each for the park would be $300, a majority vote will

The median-voter model indicates that political parties will

Majority voting fails to incorporate the strength of the preferences of individual voters and therefore

The collective action problem makes it hard for voters to counter the influence of special-interest groups.

When voters have different opinions about an issue, the position that is most likely to be adopted is that of the

(Consider This) Suppose voters pass laws that restrict immigration, which results in lower national output and higher prices for consumer goods. This would be an example of

Limits, Alternatives, and Choices

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