Question 1

Government changes in interest rates to regulate the economy are part of:

Accepted Answer

A)  monetary policy. 
B)  fiscal policy. 
C)  debt policy. 
D)  liability policy. 
A)  monetary policy. 
B)  fiscal policy. 
C)  debt policy. 
D)  liability policy.

Question 2

Government loan guarantees tend to have the effect of:

Accepted Answer

A)  socializing losses and privatizing gains. 
B)  socializing gains and privatizing losses. 
C)  socializing both gains and losses. 
D)  privatizing both gains and losses. 
A)  socializing losses and privatizing gains. 
B)  socializing gains and privatizing losses. 
C)  socializing both gains and losses. 
D)  privatizing both gains and losses.

Question 3

Regulatory capture often occurs because of which of the following?

Accepted Answer

A)  Government officials want stronger control over industry regulation. 
B)  Nearly everyone with expertise works in the regulated industry. 
C)  Patent law allows firms to gain monopoly power easily and therefore control a market. 
D)  Consumer groups are effective at lobbying the government for industry regulation. 
A)  Government officials want stronger control over industry regulation. 
B)  Nearly everyone with expertise works in the regulated industry. 
C)  Patent law allows firms to gain monopoly power easily and therefore control a market. 
D)  Consumer groups are effective at lobbying the government for industry regulation.

Question 4

Which of the following impacts would economists expect to result from chronic budget deficits?

Accepted Answer

A)  Greater economic efficiency resulting from the abundance of public goods produced. 
B)  Permanently high levels of output and continued economic growth. 
C)  Greater political control over monetary policy. 
D)  Government control of an inefficiently large share of the economy's resources. 
A)  Greater economic efficiency resulting from the abundance of public goods produced. 
B)  Permanently high levels of output and continued economic growth. 
C)  Greater political control over monetary policy. 
D)  Government control of an inefficiently large share of the economy's resources.

Question 5

(Last Word)In 2004,Congress passed a corporate tax relief bill with 276 provisions for tax breaks to groups such as restaurant owners,Hollywood producers,and NASCAR track owners.This is an example of the:

Accepted Answer

A)  special-interest effect. 
B)  benefits-received principle. 
C)  paradox of voting. 
D)  principal-agent problem. 
A)  special-interest effect. 
B)  benefits-received principle. 
C)  paradox of voting. 
D)  principal-agent problem.

Question 6

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 7

According to some economists,the private sector is more efficient than the public sector mainly because:

Accepted Answer

A)  the private sector has a clear test of performance: profit and loss. 
B)  wages,salaries,and fringe benefits are higher in the private sector. 
C)  worker turnover is higher in the public sector. 
D)  of extensive negative externalities in the public sector. 
A)  the private sector has a clear test of performance: profit and loss. 
B)  wages,salaries,and fringe benefits are higher in the private sector. 
C)  worker turnover is higher in the public sector. 
D)  of extensive negative externalities in the public sector.

Question 8

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 9

As it relates to corporations,the principal-agent problem is that:

Accepted Answer

A)  the goals of the corporate managers (the principals)may not match the goals of the corporate owners (the agents). 
B)  the goals of the corporate managers (the agents)may not match the goals of the corporate owners (the principals). 
C)  the federal government (the agent)taxes both corporate profits and the dividends paid to stockholders (the principals). 
D)  it is costly for the corporate owners (the principals)to obtain a corporate charter from government (the agent). 
A)  the goals of the corporate managers (the principals)may not match the goals of the corporate owners (the agents). 
B)  the goals of the corporate managers (the agents)may not match the goals of the corporate owners (the principals). 
C)  the federal government (the agent)taxes both corporate profits and the dividends paid to stockholders (the principals). 
D)  it is costly for the corporate owners (the principals)to obtain a corporate charter from government (the agent).

Question 10

The pursuit through government of a "transfer of wealth" at someone else's expense refers to:

Accepted Answer

A)  logrolling. 
B)  rent-seeking behavior. 
C)  the paradox of voting. 
D)  the median-voter model. 
A)  logrolling. 
B)  rent-seeking behavior. 
C)  the paradox of voting. 
D)  the median-voter model.

Question 11

Answer the question on the basis of this table showing the marginal benefit that a particular public project will provide to each of the three members of a community.No vote trading is allowed. $$\begin{array} { c c c } 
\text { Voter } & & \text { Marginal Benefit } \
\hline
\text { Xavier } & & \$ 500 \
\text { Yoho } & & 200 \
\text { Zest } & & 2,000
\end{array}$$ If the tax cost of this proposed project is $600 per person,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 allocated efficiently. 
C)  pass this project and resources will be overallocated to it. 
D)  defeat 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 allocated efficiently. 
C)  pass this project and resources will be overallocated to it. 
D)  defeat this project and resources will be overallocated to it.

Question 12

The political technique called logrolling:

Accepted Answer

A)  always increases economic efficiency. 
B)  always decreases economic efficiency. 
C)  involves trading votes to secure favorable outcomes that otherwise could be rejected. 
D)  is an example of the paradox of voting. 
A)  always increases economic efficiency. 
B)  always decreases economic efficiency. 
C)  involves trading votes to secure favorable outcomes that otherwise could be rejected. 
D)  is an example of the paradox of voting.

Question 13

The principal-agent problem is a problem for the private sector but does not apply to political decision making.

Accepted Answer

A) True 
 B)False

Question 14

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 15

Public choice economists:

Accepted Answer

A)  analyze the incidence of taxes. 
B)  are also known as Keynesian economists. 
C)  use the tools of economics to analyze decision making,politics,and elections in the public sector. 
D)  are,by definition,economists employed by federal,state,and local governments. 
A)  analyze the incidence of taxes. 
B)  are also known as Keynesian economists. 
C)  use the tools of economics to analyze decision making,politics,and elections in the public sector. 
D)  are,by definition,economists employed by federal,state,and local governments.

Question 16

Narrow,specifically designated expenditures that are included in more comprehensive legislation are known as:

Accepted Answer

A)  earmarks. 
B)  logrolls. 
C)  benefits-received allocations. 
D)  progressive expenditures. 
A)  earmarks. 
B)  logrolls. 
C)  benefits-received allocations. 
D)  progressive expenditures.

Question 17

Answer the question on the basis of this table showing the marginal benefit a particular public project will provide to each of the three members of a community.No vote trading is allowed. $$\begin{array} { c c c } 
\text { Voter } & & \text { Marginal Benefit } \
\hline
\text { Xavier } & & \$ 800 \
\text { Yoho } & & 800 \
\text { Zest } & & 100
\end{array}$$ If the tax cost of this proposed project is $600 per person,a majority vote will:

Accepted Answer

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

Question 18

Public choice economists hold that politicians will:

Accepted Answer

A)  favor programs entailing immediate and clear-cut costs and vaguely defined or deferred benefits. 
B)  follow policies leading to an optimal allocation of resources between public and private sectors. 
C)  favor programs entailing immediate and clear-cut benefits and vaguely defined or deferred costs. 
D)  objectively weigh the costs and benefits of various government programs and vote accordingly. 
A)  favor programs entailing immediate and clear-cut costs and vaguely defined or deferred benefits. 
B)  follow policies leading to an optimal allocation of resources between public and private sectors. 
C)  favor programs entailing immediate and clear-cut benefits and vaguely defined or deferred costs. 
D)  objectively weigh the costs and benefits of various government programs and vote accordingly.

Question 19

The Securities and Exchange Commission's supervision of Wall Street financial firms is a possible example of regulatory capture.

Accepted Answer

A) True 
 B)False

Question 20

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.

Government changes in interest rates to regulate the economy are part of:

Government loan guarantees tend to have the effect of:

Regulatory capture often occurs because of which of the following?

Which of the following impacts would economists expect to result from chronic budget deficits?

(Last Word)In 2004,Congress passed a corporate tax relief bill with 276 provisions for tax breaks to groups such as restaurant owners,Hollywood producers,and NASCAR track owners.This is an example of the:

A special-interest issue is one whose passage yields:

According to some economists,the private sector is more efficient than the public sector mainly because:

Political corruption occurs whenever:

As it relates to corporations,the principal-agent problem is that:

The pursuit through government of a "transfer of wealth" at someone else's expense refers to:

The political technique called logrolling:

The principal-agent problem is a problem for the private sector but does not apply to political decision making.

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

Public choice economists:

Narrow,specifically designated expenditures that are included in more comprehensive legislation are known as:

Public choice economists hold that politicians will:

The Securities and Exchange Commission's supervision of Wall Street financial firms is a possible example of regulatory capture.

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:

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

Filters

Exam 5: Governments Role and Government Failure

Government changes in interest rates to regulate the economy are part of:

Government loan guarantees tend to have the effect of:

Regulatory capture often occurs because of which of the following?

Which of the following impacts would economists expect to result from chronic budget deficits?

(Last Word)In 2004,Congress passed a corporate tax relief bill with 276 provisions for tax breaks to groups such as restaurant owners,Hollywood producers,and NASCAR track owners.This is an example of the:

A special-interest issue is one whose passage yields:

According to some economists,the private sector is more efficient than the public sector mainly because:

Political corruption occurs whenever:

As it relates to corporations,the principal-agent problem is that:

The pursuit through government of a "transfer of wealth" at someone else's expense refers to:

The political technique called logrolling:

The principal-agent problem is a problem for the private sector but does not apply to political decision making.

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

Public choice economists:

Narrow,specifically designated expenditures that are included in more comprehensive legislation are known as:

Public choice economists hold that politicians will:

The Securities and Exchange Commission's supervision of Wall Street financial firms is a possible example of regulatory capture.

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:

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

Filters