Question 1

Government's unfunded liabilities:

Accepted Answer

A)  result from the political bias toward immediate benefits and deferred costs. 
B)  result in more efficient policies in an attempt to satisfy these liabilities. 
C)  are caused primarily by market failures. 
D)  only occur in democratically elected governments. 
A)  result from the political bias toward immediate benefits and deferred costs. 
B)  result in more efficient policies in an attempt to satisfy these liabilities. 
C)  are caused primarily by market failures. 
D)  only occur in democratically elected governments.

Question 2

Majority voting assures that government will provide a public good if it yields total benefits in excess of total costs.

Accepted Answer

A) True 
 B)False

Question 3

Public choice theory focuses on the economics of:

Accepted Answer

A)  fiscal and monetary policy. 
B)  the behavior of business firms. 
C)  antitrust and regulatory policy. 
D)  government decision making,politics,and elections. 
A)  fiscal and monetary policy. 
B)  the behavior of business firms. 
C)  antitrust and regulatory policy. 
D)  government decision making,politics,and elections.

Question 4

An economic analysis of the relationship between proposed legislation affecting major employers in each state and the voting patterns of senators and representatives in Congress on that legislation would fit within the subcategory of economics called:

Accepted Answer

A)  the economics of fiscal policy. 
B)  public choice theory. 
C)  behavioral economics. 
D)  monetarism. 
A)  the economics of fiscal policy. 
B)  public choice theory. 
C)  behavioral economics. 
D)  monetarism.

Question 5

The pursuit through government of a transfer of wealth at society's expense is called "rent seeking."

Accepted Answer

A) True 
 B)False

Question 6

Monetary policy attempts to change the level of spending by altering interest rates.

Accepted Answer

A) True 
 B)False

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 trading of votes by elected officials to secure favorable outcomes is called:

Accepted Answer

A)  splitting the difference. 
B)  social engineering. 
C)  logrolling. 
D)  grandstanding. 
A)  splitting the difference. 
B)  social engineering. 
C)  logrolling. 
D)  grandstanding.

Question 9

Because of the force of law and bureaucratic structure,government accountability is less of a problem than in the private sector.

Accepted Answer

A) True 
 B)False

Question 10

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 11

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 12

Government guarantees that socialize losses and privatize gains tend to encourage risky and imprudent investment.

Accepted Answer

A) True 
 B)False

Question 13

(Consider This)Smaller groups are sometimes able to achieve political victories against larger groups.This is referred to as the:

Accepted Answer

A)  moral hazard problem. 
B)  featherbedding problem. 
C)  collective action problem. 
D)  pork barrel problem. 
A)  moral hazard problem. 
B)  featherbedding problem. 
C)  collective action problem. 
D)  pork barrel problem.

Question 14

How does government's power to coerce behavior tend to reduce private-sector risk?

Accepted Answer

A)  By enforcing contracts and discouraging illegal behavior that threatens private property. 
B)  By guaranteeing that the government will financially cover any losses by private-sector firms. 
C)  By strictly regulating the allocation of most property resources in the economy. 
D)  The coercive power of government only increases private-sector risk. 
A)  By enforcing contracts and discouraging illegal behavior that threatens private property. 
B)  By guaranteeing that the government will financially cover any losses by private-sector firms. 
C)  By strictly regulating the allocation of most property resources in the economy. 
D)  The coercive power of government only increases private-sector risk.

Question 15

The government's ability to force people to do things can increase economic efficiency.

Accepted Answer

A) True 
 B)False

Question 16

(Consider This)From an economist's perspective:

Accepted Answer

A)  small government is better than big government. 
B)  big government is better than small government. 
C)  regardless of size,government is incapable of achieving allocative or productive efficiency. 
D)  the size of government doesn't matter,as long as spending occurs up to where MB = MC. 
A)  small government is better than big government. 
B)  big government is better than small government. 
C)  regardless of size,government is incapable of achieving allocative or productive efficiency. 
D)  the size of government doesn't matter,as long as spending occurs up to where MB = MC.

Question 17

(Consider This)From an economist's perspective,when is government too big?

Accepted Answer

A)  Government is always too big. 
B)  When government activity exceeds 10 percent of gross domestic product. 
C)  When the marginal costs from additional government spending exceed marginal benefits. 
D)  When the marginal benefits from additional government spending exceed marginal costs. 
A)  Government is always too big. 
B)  When government activity exceeds 10 percent of gross domestic product. 
C)  When the marginal costs from additional government spending exceed marginal benefits. 
D)  When the marginal benefits from additional government spending exceed marginal costs.

Question 18

Government loan guarantees tend to socialize gains and privatize losses.

Accepted Answer

A) True 
 B)False

Question 19

Chronic budget deficits can be attributed to:

Accepted Answer

A)  unfunded liabilities. 
B)  voters wanting government programs but not wanting to pay taxes. 
C)  inappropriate monetary policy. 
D)  state budget laws. 
A)  unfunded liabilities. 
B)  voters wanting government programs but not wanting to pay taxes. 
C)  inappropriate monetary policy. 
D)  state budget laws.

Question 20

When a nation is in a debt crisis,the government's level of debt is so high that:

Accepted Answer

A)  monetary policy is ineffective. 
B)  the government is unable to find willing lenders so it can continue borrowing. 
C)  it can only be solved with a fiscal stimulus of lower taxes and more government spending. 
D)  other countries will be unwilling to buy goods and services from the nation. 
A)  monetary policy is ineffective. 
B)  the government is unable to find willing lenders so it can continue borrowing. 
C)  it can only be solved with a fiscal stimulus of lower taxes and more government spending. 
D)  other countries will be unwilling to buy goods and services from the nation.

Exam 5: Governments Role and Government Failure

Government's unfunded liabilities:

Majority voting assures that government will provide a public good if it yields total benefits in excess of total costs.

Public choice theory focuses on the economics of:

An economic analysis of the relationship between proposed legislation affecting major employers in each state and the voting patterns of senators and representatives in Congress on that legislation would fit within the subcategory of economics called:

The pursuit through government of a transfer of wealth at society's expense is called "rent seeking."

Monetary policy attempts to change the level of spending by altering interest rates.

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

The trading of votes by elected officials to secure favorable outcomes is called:

Because of the force of law and bureaucratic structure,government accountability is less of a problem than in the private sector.

Weak government enforcement of contracts and laws tends to:

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

Government guarantees that socialize losses and privatize gains tend to encourage risky and imprudent investment.

(Consider This)Smaller groups are sometimes able to achieve political victories against larger groups.This is referred to as the:

How does government's power to coerce behavior tend to reduce private-sector risk?

The government's ability to force people to do things can increase economic efficiency.

(Consider This)From an economist's perspective:

(Consider This)From an economist's perspective,when is government too big?

Government loan guarantees tend to socialize gains and privatize losses.

Chronic budget deficits can be attributed to:

When a nation is in a debt crisis,the government's level of debt is so high that:

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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