Question 1

The U.S.Federal Reserve,the Bank of Japan,the Bank of England,and the European Central Bank are all in charge of what for the countries they represent?

Accepted Answer

A)  Debt management. 
B)  Unfunded liabilities. 
C)  Monetary policy. 
D)  Fiscal policy. 
A)  Debt management. 
B)  Unfunded liabilities. 
C)  Monetary policy. 
D)  Fiscal policy. C

Question 2

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. D

Question 3

"Vote for my special local project and I will vote for yours." This political technique:

Accepted Answer

A)  illustrates the paradox of voting. 
B)  is called "logrolling." 
C)  illustrates the median voter model. 
D)  undermines the benefits-received principle. 
A)  illustrates the paradox of voting. 
B)  is called "logrolling." 
C)  illustrates the median voter model. 
D)  undermines the benefits-received principle. B

Question 4

"Earmarks" refer to:

Accepted Answer

A)  the additional votes that must be taken when a voting paradox occurs. 
B)  taxes that redistribute wealth or income from one income group to another. 
C)  authorized expenditures benefiting a narrow,specifically designated group that are included in more comprehensive spending legislation. 
D)  legislation focused on correcting negative externalities. 
A)  the additional votes that must be taken when a voting paradox occurs. 
B)  taxes that redistribute wealth or income from one income group to another. 
C)  authorized expenditures benefiting a narrow,specifically designated group that are included in more comprehensive spending legislation. 
D)  legislation focused on correcting negative externalities.

Question 5

Proponents of deregulation point to all of the following industries as examples of successful deregulation except for:

Accepted Answer

A)  airlines. 
B)  pharmaceuticals. 
C)  railroads. 
D)  interstate trucking. 
A)  airlines. 
B)  pharmaceuticals. 
C)  railroads. 
D)  interstate trucking.

Question 6

Suppose that Steve and Susie each perceives $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 7

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 8

Which one of the following topics would be of the most interest to a public choice economist?

Accepted Answer

A)  The theory of comparative advantage. 
B)  The law of increasing opportunity cost. 
C)  Inflation and unemployment. 
D)  Rent-seeking behavior. 
A)  The theory of comparative advantage. 
B)  The law of increasing opportunity cost. 
C)  Inflation and unemployment. 
D)  Rent-seeking behavior.

Question 9

(Consider This)Voter failure describes the situation where:

Accepted Answer

A)  an insufficient number of voters turn out to express their preferences. 
B)  voter preferences cannot be adequately captured because of a voting paradox. 
C)  voters support policies that would reduce productive and allocative efficiency. 
D)  government officials make poor decisions that contradict voter preferences. 
A)  an insufficient number of voters turn out to express their preferences. 
B)  voter preferences cannot be adequately captured because of a voting paradox. 
C)  voters support policies that would reduce productive and allocative efficiency. 
D)  government officials make poor decisions that contradict voter preferences.

Question 10

Information problems create inefficient outcomes in:

Accepted Answer

A)  the private sector but not the public sector. 
B)  the public sector but not the private sector. 
C)  neither the private nor the public sector. 
D)  both the private and the public sectors. 
A)  the private sector but not the public sector. 
B)  the public sector but not the private sector. 
C)  neither the private nor the public sector. 
D)  both the private and the public sectors.

Question 11

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 12

Logrolling can either increase or diminish economic efficiency.

Accepted Answer

A) True 
 B)False

Question 13

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.

Question 14

Which of the following would best explain why regulatory capture is a problem?

Accepted Answer

A)  The regulations implemented tend to reduce the profitability of the regulated industry and reduce global competitiveness. 
B)  Regulatory capture unduly increases the size and power of government,increasing costs for taxpayers. 
C)  Individuals implementing the regulations lack expertise about the industry and therefore make poor regulatory choices. 
D)  The regulations implemented serve the private interests of the regulated industry,rather than addressing social interests such as consumer safety and environmental protection. 
A)  The regulations implemented tend to reduce the profitability of the regulated industry and reduce global competitiveness. 
B)  Regulatory capture unduly increases the size and power of government,increasing costs for taxpayers. 
C)  Individuals implementing the regulations lack expertise about the industry and therefore make poor regulatory choices. 
D)  The regulations implemented serve the private interests of the regulated industry,rather than addressing social interests such as consumer safety and environmental protection.

Question 15

Which of the following is an activity of government that is not an activity of private firms?

Accepted Answer

A)  Enforcing involuntary transactions. 
B)  Paying equitable wages. 
C)  Creating positive externalities. 
D)  Pursuing economic efficiency. 
A)  Enforcing involuntary transactions. 
B)  Paying equitable wages. 
C)  Creating positive externalities. 
D)  Pursuing economic efficiency.

Question 16

Which of the following is considered a potential solution to some regulatory capture?

Accepted Answer

A)  Bringing industry experts into the regulatory process. 
B)  Creating a standard set of regulations for all industries. 
C)  Deregulation of the industry. 
D)  Government subsidies for firms in the industry. 
A)  Bringing industry experts into the regulatory process. 
B)  Creating a standard set of regulations for all industries. 
C)  Deregulation of the industry. 
D)  Government subsidies for firms in the industry.

Question 17

The idea of government failure includes all of the following except:

Accepted Answer

A)  special-interest effect. 
B)  bureaucratic inefficiency. 
C)  pressure by special-interest groups. 
D)  extensive positive externalities from public and quasi-public goods. 
A)  special-interest effect. 
B)  bureaucratic inefficiency. 
C)  pressure by special-interest groups. 
D)  extensive positive externalities from public and quasi-public goods.

Question 18

Economists widely support deregulation of industries that tend toward monopoly or generate substantial negative externalities.

Accepted Answer

A) True 
 B)False

Question 19

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 20

Medicare is the U.S.government's largest unfunded liability.

Accepted Answer

A) True 
 B)False

Exam 5: Governments Role and Government Failure

The U.S.Federal Reserve,the Bank of Japan,the Bank of England,and the European Central Bank are all in charge of what for the countries they represent?

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:

"Vote for my special local project and I will vote for yours." This political technique:

"Earmarks" refer to:

Proponents of deregulation point to all of the following industries as examples of successful deregulation except for:

Suppose that Steve and Susie each perceives $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:

Public choice theorists contend that:

Which one of the following topics would be of the most interest to a public choice economist?

(Consider This)Voter failure describes the situation where:

Information problems create inefficient outcomes in:

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

Logrolling can either increase or diminish economic efficiency.

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

Which of the following would best explain why regulatory capture is a problem?

Which of the following is an activity of government that is not an activity of private firms?

Which of the following is considered a potential solution to some regulatory capture?

The idea of government failure includes all of the following except:

Economists widely support deregulation of industries that tend toward monopoly or generate substantial negative externalities.

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

Medicare is the U.S.government's largest unfunded liability.

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 Cost of Production

Pure Competition in the Short Run

Pure Competition in the Long Run

Pure Monopoly

Monopolistic Competition and Oligopoly

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

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