Exam 20: Political Economy and Public Choice

Why is rational ignorance important from an economic standpoint? I. Voters might not make informed choices. II. Voters will make decisions based on incorrect or incomplete information. III. Special interest groups may control economic outcomes if they are the only ones who are not rationally ignorant.

As countries become wealthier:

Suppose that a special interest group makes up 2% of the population. If a policy transfers $600 to the special interest at a cost of $100,000 to society, will the special interest group lobby for this policy?

Voters have a strong incentive to be well-informed about the positions of political candidates-after all, every vote counts.

Democracy typically brings about more efficient outcomes because:

Voter myopia is the notion that voters are largely swayed by current economic conditions when casting their vote.

With certain political policies, the people who benefit are rationally ignorant and have little incentive to oppose the policy.

Which of the following statements seems to be that of a rationally ignorant person?

When benefits are concentrated and costs are diffused:

Suppose that a special interest group makes up 10% of the overall population. If a new proposal stands to generate $2 million in additional benefits to the group, the group will:

Table: Government Spending According to the median voter theorem and the data in this table, candidates will position their ideal level of spending at:

Just before the 1972 election, ________ sent a letter to 24 million Social Security recipients informing them of automatic cost of living increases in the future.

Nobel Prize-winning economist Amartya Sen indicated that hunger is caused by a lack of exchange entitlements. In other words, food may be plentiful but people starve because they are unable to access it. Can you explain how this is possible even if markets are well functioning?

There are three voters and two representatives in a democracy. Voter 1 supports government spending of $30. Voter 2 supports government spending of $50. Voter 3 supports government spending of $90. According to the median voter theorem, politicians will converge upon a spending bill of:

Public choice theory suggests that larger special interest groups:

Politicians have a greater interest in serving the voters' will when:

Evidence suggests that voters will vote for a political party based on the economic conditions that prevail in the year of the election. This behavior is known as:

Special interest groups are so powerful because the costs of their policy are widely disbursed across the population and hence largely unopposed.

Voter decisions seem to depend greatly on:

Use the following to answer questions: Figure: Median Voter 2 -(Figure: Median Voter 2) If taxes are the only issue and the candidates' names are in gray, who votes for John Jackson?