Question 1

Stalin:

Accepted Answer

A)  instituted democratic reforms, leading to widespread prosperity. 
B)  took government control of the farms in Ukraine, leading to the starvation of millions of people. 
C)  increased the provision of public goods, which had a positive effect on lowering the unemployment rate. 
D)  tried unsuccessfully to expand voting rights in 1924 Russia. 
A)  instituted democratic reforms, leading to widespread prosperity. 
B)  took government control of the farms in Ukraine, leading to the starvation of millions of people. 
C)  increased the provision of public goods, which had a positive effect on lowering the unemployment rate. 
D)  tried unsuccessfully to expand voting rights in 1924 Russia. B

Question 2

Who will likely have the most incentive to be rationally informed about the effect of government policy on the price of sugar?

Accepted Answer

A)  sugar consumers 
B)  sugar producers 
C)  the President of the United States 
D)  taxpayers 
A)  sugar consumers 
B)  sugar producers 
C)  the President of the United States 
D)  taxpayers B

Question 3

In the public sector, politicians:

Accepted Answer

A)  pursue primarily the general public interest since competition is less intense in the public sector. 
B)  pursue primarily the general public interest since they are concerned mostly with the collective good. 
C)  act in the narrow self-interest of their constituents and contributors to remain in office. 
D)  respond to the broader active political interests even though they choose to be rationally ignorant. 
A)  pursue primarily the general public interest since competition is less intense in the public sector. 
B)  pursue primarily the general public interest since they are concerned mostly with the collective good. 
C)  act in the narrow self-interest of their constituents and contributors to remain in office. 
D)  respond to the broader active political interests even though they choose to be rationally ignorant. C

Question 4

There are three voters and two representatives in a democracy. Voter 1 supports government spending of $51. Voter 2 supports government spending of $52. Voter 3 supports government spending of $56. According to the median voter theorem, politicians will converge upon a spending bill of:

Accepted Answer

A)  $51. 
B)  $52. 
C)  $53. 
D)  $56. 
A)  $51. 
B)  $52. 
C)  $53. 
D)  $56.

Question 5

The acronym PAC stands for:

Accepted Answer

A)  politically active committee. 
B)  political agent coordinator. 
C)  politically active coordinator. 
D)  political action committee. 
A)  politically active committee. 
B)  political agent coordinator. 
C)  politically active coordinator. 
D)  political action committee.

Question 6

If a special interest group represents 10% of society and gets a public policy passed that costs society $1 million and benefits that special interest group $1 million, the net payoff for the special interest group will be:

Accepted Answer

A)  -$100,000. 
B)  $0. 
C)  $900,000. 
D)  $1,000,000. 
A)  -$100,000. 
B)  $0. 
C)  $900,000. 
D)  $1,000,000.

Question 7

Which of the following explains why the sugar quota is a winning policy for politicians?

Accepted Answer

A)  The people who are harmed by the quota are rationally informed. 
B)  The people who are harmed by the quota have strong incentive to oppose the policy. 
C)  The people who benefit from the quota are rationally ignorant. 
D)  The people who benefit from the quota have strong incentive to support the policy. 
A)  The people who are harmed by the quota are rationally informed. 
B)  The people who are harmed by the quota have strong incentive to oppose the policy. 
C)  The people who benefit from the quota are rationally ignorant. 
D)  The people who benefit from the quota have strong incentive to support the policy.

Question 8

Which of the following government programs is the largest in terms of spending?

Accepted Answer

A)  health care 
B)  defense 
C)  foreign aid 
D)  welfare 
A)  health care 
B)  defense 
C)  foreign aid 
D)  welfare

Question 9

The median voter is the person/voter who is exactly in the middle of the population, when one is counting the population in numbers.

Accepted Answer

A) True 
 B)False

Question 10

Private choice is the study of political behavior using the tools of economics.

Accepted Answer

A) True 
 B)False

Question 11

Briefly specify the three reasons why ignorance about political matters is important.

Accepted Answer

1. If voters are not well-informed, then

Question 12

One way to achieve political success is to:

Accepted Answer

A)  concentrate costs and diffuse benefits. 
B)  concentrate benefits and costs. 
C)  concentrate benefits and diffuse costs. 
D)  diffuse costs and benefits. 
A)  concentrate costs and diffuse benefits. 
B)  concentrate benefits and costs. 
C)  concentrate benefits and diffuse costs. 
D)  diffuse costs and benefits.

Question 13

The theory of the median voter may not work if:
I. voters do not vote.
II. voters do not vote for the policy closest to their own positions.
III. there is only a single dimension over which the voting occurs.

Accepted Answer

A)  I only 
B)  II only 
C)  I and II only 
D)  I, II, and III 
A)  I only 
B)  II only 
C)  I and II only 
D)  I, II, and III

Question 14

Some people argue that mainstream economics ignores important ethical values.

Accepted Answer

A) True 
 B)False

Question 15

The fall of the Roman Empire was partially attributable to:

Accepted Answer

A)  low taxes, low government spending, and unregulated markets. 
B)  high taxes which were used to finance projects with benefits that were less than their costs. 
C)  an overreliance on private property. 
D)  debtors who successfully petitioned Roman Senators for deflation. 
A)  low taxes, low government spending, and unregulated markets. 
B)  high taxes which were used to finance projects with benefits that were less than their costs. 
C)  an overreliance on private property. 
D)  debtors who successfully petitioned Roman Senators for deflation.

Question 16

Which of the following is TRUE about the effects of democracy?

Accepted Answer

A)  Democracy can perfectly align self-interest with the social interest. 
B)  Because of democracy, there is no incentive for the public to align self-interest with the social interest. 
C)  Democracy leads to good institutions that help align self-interest with the social interest. 
D)  Democracy has no effect on the alignment between self-interest and the social interest. 
A)  Democracy can perfectly align self-interest with the social interest. 
B)  Because of democracy, there is no incentive for the public to align self-interest with the social interest. 
C)  Democracy leads to good institutions that help align self-interest with the social interest. 
D)  Democracy has no effect on the alignment between self-interest and the social interest.

Question 17

Two weeks before the 1972 election, Richard Nixon:

Accepted Answer

A)  sent a letter to each Social Security recipient informing them that their payments have been increased by 20%. 
B)  sent a letter to each person in the military informing them that their pension payouts will be 33% higher. 
C)  sent a letter to each unemployed person informing them about his intent to extend unemployment benefits. 
D)  made a national radio address to discuss his plan for a four-day workweek. 
A)  sent a letter to each Social Security recipient informing them that their payments have been increased by 20%. 
B)  sent a letter to each person in the military informing them that their pension payouts will be 33% higher. 
C)  sent a letter to each unemployed person informing them about his intent to extend unemployment benefits. 
D)  made a national radio address to discuss his plan for a four-day workweek.

Question 18

When a policy is highly visible, appears often in the newspapers, and has a major effect on the lives of millions of Americans, lobbies and special interests very often get their way.

Accepted Answer

A) True 
 B)False

Question 19

Rational ignorance can not be seen in which of the following scenarios?

Accepted Answer

A)  A student has a final exam in exactly three hours. He knows from past experience that without at least some sleep he will be useless on the exam. In spite of the fact that he still has four chapters to read for the exam, he decides to sleep for 2.5 hours. 
B)  You are a worker looking for work in a recessionary environment. You get a phone interview after which you are offered a job and have to start the next day. To secure a paycheck, you accept without doing any further research on the company. 
C)  You have to fly urgently. You buy the first ticket available and it is expensive, but you pay anyway because you do not have time to research other flights. 
D)  You have to fly urgently; however, you do extensive research for over an hour to find the best deal. 
A)  A student has a final exam in exactly three hours. He knows from past experience that without at least some sleep he will be useless on the exam. In spite of the fact that he still has four chapters to read for the exam, he decides to sleep for 2.5 hours. 
B)  You are a worker looking for work in a recessionary environment. You get a phone interview after which you are offered a job and have to start the next day. To secure a paycheck, you accept without doing any further research on the company. 
C)  You have to fly urgently. You buy the first ticket available and it is expensive, but you pay anyway because you do not have time to research other flights. 
D)  You have to fly urgently; however, you do extensive research for over an hour to find the best deal.

Question 20

Use the following to answer questions:
Figure: Smoking Ban Policy Spectrum  
-(Figure: Smoking Ban Policy Spectrum) Refer to the figure. If A, B, and C are all candidates in the election, and a smoking ban is the only issue being debated, based on the median voter theorem which candidate will win the election?

Accepted Answer

A)  A 
B)  B 
C)  C 
D)  A, B, and C will each receive an equal number of votes. 
A)  A 
B)  B 
C)  C 
D)  A, B, and C will each receive an equal number of votes.

Exam 20: Political Economy and Public Choice

Stalin:

Who will likely have the most incentive to be rationally informed about the effect of government policy on the price of sugar?

In the public sector, politicians:

There are three voters and two representatives in a democracy. Voter 1 supports government spending of $51. Voter 2 supports government spending of $52. Voter 3 supports government spending of $56. According to the median voter theorem, politicians will converge upon a spending bill of:

The acronym PAC stands for:

If a special interest group represents 10% of society and gets a public policy passed that costs society $1 million and benefits that special interest group $1 million, the net payoff for the special interest group will be:

Which of the following explains why the sugar quota is a winning policy for politicians?

Which of the following government programs is the largest in terms of spending?

The median voter is the person/voter who is exactly in the middle of the population, when one is counting the population in numbers.

Private choice is the study of political behavior using the tools of economics.

Briefly specify the three reasons why ignorance about political matters is important.

One way to achieve political success is to:

The theory of the median voter may not work if: I. voters do not vote. II. voters do not vote for the policy closest to their own positions. III. there is only a single dimension over which the voting occurs.

Some people argue that mainstream economics ignores important ethical values.

The fall of the Roman Empire was partially attributable to:

Which of the following is TRUE about the effects of democracy?

Two weeks before the 1972 election, Richard Nixon:

When a policy is highly visible, appears often in the newspapers, and has a major effect on the lives of millions of Americans, lobbies and special interests very often get their way.

Rational ignorance can not be seen in which of the following scenarios?

The Big Ideas

The Power of Trade and Comparative

Supply and Demand

Equilibrium

Elasticity and Its Applications

Taxes and Subsidies

The Price System

Price Ceilings and Floors

International Trade

Externalities- When the Price Is Not Right

Costs and Profit Maximization Under Competition

Competition and the Invisible Hand

Monopoly

Price Discrimination

Oligopoly and Game Theory

Competing for Monopoly

Monopolistic Competition and Advertising

Labor Markets

Public Goods and the Tragedy of the Commons

Economics, Ethics, and Public Policy

Managing Incentives

Stock Markets and Personal Finance

Price Discrimination

Consumer Choice

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