Question 1

Politicians seeking reelection tend to do the following, except

Accepted Answer

A)  inserting "earmarks" in legislation. 
B)  favoring projects with clear benefits and hidden costs. 
C)  favoring long-term projects over short-term ones. 
D)  engaging in pork-barrel politics. 
A)  inserting "earmarks" in legislation. 
B)  favoring projects with clear benefits and hidden costs. 
C)  favoring long-term projects over short-term ones. 
D)  engaging in pork-barrel politics.

Question 2

A debt crisis refers to how much government spending exceeds tax revenues in a given year.

Accepted Answer

A) True 
 B)False

Question 3

Economic analysis would focus on the size of the government, in order to assess whether or not it fosters economic efficiency.

Accepted Answer

A) True 
 B)False

Question 4

"Unfunded liability" refers to a government commitment to

Accepted Answer

A)  not pay the government bonds that are coming due. 
B)  spend in the future without also committing to collect enough tax money to pay for it. 
C)  support the retirement funds of businesses that have gone bankrupt. 
D)  put money in specific mutual funds in order to vouch for the funds' liabilities. 
A)  not pay the government bonds that are coming due. 
B)  spend in the future without also committing to collect enough tax money to pay for it. 
C)  support the retirement funds of businesses that have gone bankrupt. 
D)  put money in specific mutual funds in order to vouch for the funds' liabilities.

Question 5

The difficulties in managing government in a market economy include the following, except

Accepted Answer

A)  the need for complex bureaucracy of various levels. 
B)  the need for detailed paperwork and inflexibility. 
C)  the close resemblance of government to the "invisible hand." 
D)  the lack of accountability in government. 
A)  the need for complex bureaucracy of various levels. 
B)  the need for detailed paperwork and inflexibility. 
C)  the close resemblance of government to the "invisible hand." 
D)  the lack of accountability in government.

Question 6

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

Accepted Answer

A)  logrolling. 
B)  the paradox of voting. 
C)  the median-voter model. 
D)  the special-interest effect. 
A)  logrolling. 
B)  the paradox of voting. 
C)  the median-voter model. 
D)  the special-interest effect.

Question 7

Political corruption occurs whenever

Accepted Answer

A)  logrolling is used to secure votes for controversial legislation. 
B)  government officials use unlawful misdirection of governmental resources for their own personal gain. 
C)  special interest groups contribute to elected officials, who in turn support legislation that benefits the special interest group. 
D)  there is pork barrel politics involved. 
A)  logrolling is used to secure votes for controversial legislation. 
B)  government officials use unlawful misdirection of governmental resources for their own personal gain. 
C)  special interest groups contribute to elected officials, who in turn support legislation that benefits the special interest group. 
D)  there is pork barrel politics involved.

Question 8

Government fiscal policy involves changing which of the following?

Accepted Answer

A)  interest rates 
B)  taxes and government spending 
C)  regulations on business 
D)  the amount of money in circulation 
A)  interest rates 
B)  taxes and government spending 
C)  regulations on business 
D)  the amount of money in circulation

Question 9

"Regulatory capture" refers to the situation where a government agency charged with supervising and regulating a particular industry is

Accepted Answer

A)  strongly influenced by the firms in the very industry that it is regulating. 
B)  headed by bureaucrats who have a "lock" on their positions, without any rivals. 
C)  completely dominating and controlling the actions of firms in the industry. 
D)  headed by unelected government officials who have no strong desire to regulate. 
A)  strongly influenced by the firms in the very industry that it is regulating. 
B)  headed by bureaucrats who have a "lock" on their positions, without any rivals. 
C)  completely dominating and controlling the actions of firms in the industry. 
D)  headed by unelected government officials who have no strong desire to regulate.

Question 10

Budget deficit is another name for the public debt.

Accepted Answer

A) True 
 B)False

Question 11

The collective action problem is the reason why there are no lobbyists representing the interest of general taxpayers or consumers in Washington, DC.

Accepted Answer

A) True 
 B)False

Question 12

When the special-interest effect is the major reason for the passage of a government policy or project, then economic efficiency will always improve.

Accepted Answer

A) True 
 B)False

Question 13

Weak government enforcement of contracts and laws tends to

Accepted Answer

A)  increase economic efficiency by minimizing government interference. 
B)  stimulate innovation and investment. 
C)  discourage economic activity by encouraging private-sector coercion such as blackmail and extortion. 
D)  not affect economic activity, as incentives for theft and deception are low. 
A)  increase economic efficiency by minimizing government interference. 
B)  stimulate innovation and investment. 
C)  discourage economic activity by encouraging private-sector coercion such as blackmail and extortion. 
D)  not affect economic activity, as incentives for theft and deception are low.

Question 14

The government's ability to coerce people to do things is always detrimental to the achievement of economic efficiency.

Accepted Answer

A) True 
 B)False

Question 15

Answer the question on the basis of the following table that shows the total costs and total benefits facing a city of five different potential baseball stadiums of increasing size. All figures are in millions of dollars.   The marginal cost and marginal benefit of stadium B (relative to A) are

Accepted Answer

A)  $20 million and $50 million, respectively. 
B)  $100 million and $200 million, respectively. 
C)  $30 million and $50 million, respectively. 
D)  $20 million and $60 million, respectively. 
A)  $20 million and $50 million, respectively. 
B)  $100 million and $200 million, respectively. 
C)  $30 million and $50 million, respectively. 
D)  $20 million and $60 million, respectively.

Question 16

(Consider This) Subsidies for mohair production illustrate

Accepted Answer

A)  why special-interest effects are often characterized by concentrated benefits and diffuse costs. 
B)  why special-interest effects are often characterized by concentrated costs and diffuse benefits. 
C)  that larger groups carry greater political weight than smaller groups. 
D)  the moral hazard problem. 
A)  why special-interest effects are often characterized by concentrated benefits and diffuse costs. 
B)  why special-interest effects are often characterized by concentrated costs and diffuse benefits. 
C)  that larger groups carry greater political weight than smaller groups. 
D)  the moral hazard problem.

Question 17

In the median-voter model, half the voters have stronger or more positive preferences than the median voter, while half of the voters have weaker or more negative preferences.

Accepted Answer

A) True 
 B)False

Question 18

The principle that under some circumstances majority voting fails to make consistent choices reflecting the community's underlying preference is best demonstrated by the

Accepted Answer

A)  paradox of voting. 
B)  concept of logrolling. 
C)  median-voter model. 
D)  Coase theorem. 
A)  paradox of voting. 
B)  concept of logrolling. 
C)  median-voter model. 
D)  Coase theorem.

Question 19

Fiscal policy refers to the government's attempt at stabilizing the economy through the use of changes in

Accepted Answer

A)  taxes and government spending. 
B)  interest rates and borrowing. 
C)  wage rates and employment contracts. 
D)  exchange rates and foreign trade. 
A)  taxes and government spending. 
B)  interest rates and borrowing. 
C)  wage rates and employment contracts. 
D)  exchange rates and foreign trade.

Question 20

In a market economy, the government's power to coerce can

Accepted Answer

A)  undermine economic efficiency by increasing private-sector risk. 
B)  improve economic efficiency by directing all resources to their most valued uses. 
C)  reduce private-sector risk and increase economic efficiency. 
D)  cause significant negative externalities. 
A)  undermine economic efficiency by increasing private-sector risk. 
B)  improve economic efficiency by directing all resources to their most valued uses. 
C)  reduce private-sector risk and increase economic efficiency. 
D)  cause significant negative externalities.

Exam 5: Governments Role and Government Failure

Politicians seeking reelection tend to do the following, except

A debt crisis refers to how much government spending exceeds tax revenues in a given year.

Economic analysis would focus on the size of the government, in order to assess whether or not it fosters economic efficiency.

"Unfunded liability" refers to a government commitment to

The difficulties in managing government in a market economy include the following, except

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

Political corruption occurs whenever

Government fiscal policy involves changing which of the following?

"Regulatory capture" refers to the situation where a government agency charged with supervising and regulating a particular industry is

Budget deficit is another name for the public debt.

The collective action problem is the reason why there are no lobbyists representing the interest of general taxpayers or consumers in Washington, DC.

When the special-interest effect is the major reason for the passage of a government policy or project, then economic efficiency will always improve.

Weak government enforcement of contracts and laws tends to

The government's ability to coerce people to do things is always detrimental to the achievement of economic efficiency.

Answer the question on the basis of the following table that shows the total costs and total benefits facing a city of five different potential baseball stadiums of increasing size. All figures are in millions of dollars. The marginal cost and marginal benefit of stadium B (relative to A) are

(Consider This) Subsidies for mohair production illustrate

In the median-voter model, half the voters have stronger or more positive preferences than the median voter, while half of the voters have weaker or more negative preferences.

The principle that under some circumstances majority voting fails to make consistent choices reflecting the community's underlying preference is best demonstrated by the

Fiscal policy refers to the government's attempt at stabilizing the economy through the use of changes in

In a market economy, the government's power to coerce can

Limits, Alternatives, and Choices

The Market System and the Circular Flow

Demand, Supply, and Market Equilibrium

Market Failures: Public Goods and Externalities

Elasticity

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Behavioral Economics

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Pure Competition in the Short Run

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Technology, Rd, and Efficiency

The Demand for Resources

Wage Determination

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Public Finance: Expenditures and Taxes

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Income Inequality, Poverty, and Discrimination

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