Question 1

Personal disposable income peaks:

Accepted Answer

A)  the year before an election year. 
B)  in the year of an election. 
C)  the year after an election. 
D)  at largely random points in time. 
A)  the year before an election year. 
B)  in the year of an election. 
C)  the year after an election. 
D)  at largely random points in time.

Question 2

Figure: Median Voter 3   
Suppose this figure represents defense spending preferences for seven voters and two candidates. Which candidate is more likely to win the election and why? If the losing candidate knows these preferences BEFORE the election, will that candidate be likely to change his or her public stance on defense spending? How?

Accepted Answer

Candidate A is most likely to win the el

Question 3

When it comes to deciding on whether to vote for the incumbent party, voters:

Accepted Answer

A)  are more likely to vote out the incumbent party after strong growth in disposable income. 
B)  prefer incumbents the longer they have been in power. 
C)  focus on the state of the economy in the year of the election. 
D)  are farsighted and consider the impact of the incumbent party's future policies. 
A)  are more likely to vote out the incumbent party after strong growth in disposable income. 
B)  prefer incumbents the longer they have been in power. 
C)  focus on the state of the economy in the year of the election. 
D)  are farsighted and consider the impact of the incumbent party's future policies.

Question 4

Ignorance about political matters is important for the economy for each of the following reasons, except:

Accepted Answer

A)  ignorance makes it easier for special interest groups to affect government policy outcomes. 
B)  ignorance makes it difficult for voters to make informed economic decisions. 
C)  rationally ignorant voters tend to make economic decisions on the basis of poor or biased information. 
D)  everyone is rationally ignorant so that no one in society will make appropriate economic decisions. 
A)  ignorance makes it easier for special interest groups to affect government policy outcomes. 
B)  ignorance makes it difficult for voters to make informed economic decisions. 
C)  rationally ignorant voters tend to make economic decisions on the basis of poor or biased information. 
D)  everyone is rationally ignorant so that no one in society will make appropriate economic decisions.

Question 5

An incumbent president can take advantage of voters' myopia to win a reelection by:

Accepted Answer

A)  applying policies with small immediate gains but large costs in the future. 
B)  applying policies with small immediate costs but large gains in the future. 
C)  applying only policies that have the same amount of gains as costs, so there is no net benefit. 
D)  doing nothing. 
A)  applying policies with small immediate gains but large costs in the future. 
B)  applying policies with small immediate costs but large gains in the future. 
C)  applying only policies that have the same amount of gains as costs, so there is no net benefit. 
D)  doing nothing.

Question 6

If policies like sugar quotas and tariffs have benefits that are concentrated among few people, why do taxpayers who pay for the costs of these policies remain rationally ignorant?

Accepted Answer

Because the costs are diffused

Question 7

Rational ignorance occurs when people are not knowledgeable of something because:

Accepted Answer

A)  those people have no incentives to learn anything. 
B)  the benefits of being informed are less than the cost of becoming informed. 
C)  they are simply irrational. 
D)  they are self-centered and lack the ability to learn. 
A)  those people have no incentives to learn anything. 
B)  the benefits of being informed are less than the cost of becoming informed. 
C)  they are simply irrational. 
D)  they are self-centered and lack the ability to learn.

Question 8

According to the text, one formula for political success is to:

Accepted Answer

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

Question 9

Which of the following statements is FALSE?

Accepted Answer

A)  Democracies have a good record for economic growth. 
B)  Small nondemocratic elites are more likely to consider the welfare of larger groups. 
C)  Democracies tend to uphold private property rights and rule of law. 
D)  The incentives of small nondemocratic elites may help to keep their nations poor. 
A)  Democracies have a good record for economic growth. 
B)  Small nondemocratic elites are more likely to consider the welfare of larger groups. 
C)  Democracies tend to uphold private property rights and rule of law. 
D)  The incentives of small nondemocratic elites may help to keep their nations poor.

Question 10

A woman approached Senator Adlai Stevenson when he was running for president, saying, "Senator, you have the vote of every thinking person!" The Senator is often credited with responding: "That's not enough, madam, we need a majority!" Which concept does this quip best reflect?

Accepted Answer

A)  rational ignorance 
B)  opportunity cost 
C)  diffuse costs and concentrated benefits 
D)  median voter theorem 
A)  rational ignorance 
B)  opportunity cost 
C)  diffuse costs and concentrated benefits 
D)  median voter theorem

Question 11

Which of the following is most likely the result of rational ignorance?

Accepted Answer

A)  Democrats get elected more often than Republicans. 
B)  Older people tend to vote more often than younger people. 
C)  Better-looking candidates tend to get more votes. 
D)  More candidates tend to enter the political race when there is not an incumbent running. 
A)  Democrats get elected more often than Republicans. 
B)  Older people tend to vote more often than younger people. 
C)  Better-looking candidates tend to get more votes. 
D)  More candidates tend to enter the political race when there is not an incumbent running.

Question 12

The political business cycle is:

Accepted Answer

A)  more apparent in GDP data than in personal disposable income data. 
B)  less apparent in GDP data than in personal disposable income data. 
C)  equally apparent in GDP data as in personal disposable income data. 
D)  not apparent in either GDP data or personal disposable income data. 
A)  more apparent in GDP data than in personal disposable income data. 
B)  less apparent in GDP data than in personal disposable income data. 
C)  equally apparent in GDP data as in personal disposable income data. 
D)  not apparent in either GDP data or personal disposable income data.

Question 13

Politicians can often use the concept of rational ignorance on the part of voters to their advantage.

Accepted Answer

A) True 
 B)False

Question 14

When citizens have NOT satisfied their basic needs for food, shelter and security, they still demand more cerebral goods.

Accepted Answer

A) True 
 B)False

Question 15

When government makes it possible to externalize the cost of a good:

Accepted Answer

A)  there will be an optimal quantity of the good. 
B)  there will be an insufficient quantity of the good. 
C)  there will be too much of the good. 
D)  the good will not be produced at all. 
A)  there will be an optimal quantity of the good. 
B)  there will be an insufficient quantity of the good. 
C)  there will be too much of the good. 
D)  the good will not be produced at all.

Question 16

Ignorance is rational when the benefits of being informed are:

Accepted Answer

A)  greater than the costs of becoming informed. 
B)  less than the costs of becoming informed. 
C)  equal to the costs of becoming informed. 
D)  likely to be quite large but information is costless. 
A)  greater than the costs of becoming informed. 
B)  less than the costs of becoming informed. 
C)  equal to the costs of becoming informed. 
D)  likely to be quite large but information is costless.

Question 17

The median voter theorem predicts that the politician who ignores the median voters' wants will be elected.

Accepted Answer

A) True 
 B)False

Question 18

Political business cycles occur when:

Accepted Answer

A)  economic conditions tend to improve immediately before elections but then worsen afterwards. 
B)  economic conditions tend to worsen immediately before elections but then improve afterwards. 
C)  the economy becomes more stable between elections. 
D)  economic conditions become less stable and show more random patterns over time. 
A)  economic conditions tend to improve immediately before elections but then worsen afterwards. 
B)  economic conditions tend to worsen immediately before elections but then improve afterwards. 
C)  the economy becomes more stable between elections. 
D)  economic conditions become less stable and show more random patterns over time.

Question 19

Explain why there may be a bi-causal (causation in both directions) relationship between democracy and wealth.

Accepted Answer

Greater wealth means that people demand

Question 20

It is sometimes rational to be ignorant.

Accepted Answer

A) True 
 B)False

Exam 20: Political Economy and Public Choice

Personal disposable income peaks:

When it comes to deciding on whether to vote for the incumbent party, voters:

Ignorance about political matters is important for the economy for each of the following reasons, except:

An incumbent president can take advantage of voters' myopia to win a reelection by:

If policies like sugar quotas and tariffs have benefits that are concentrated among few people, why do taxpayers who pay for the costs of these policies remain rationally ignorant?

Rational ignorance occurs when people are not knowledgeable of something because:

According to the text, one formula for political success is to:

Which of the following statements is FALSE?

A woman approached Senator Adlai Stevenson when he was running for president, saying, "Senator, you have the vote of every thinking person!" The Senator is often credited with responding: "That's not enough, madam, we need a majority!" Which concept does this quip best reflect?

Which of the following is most likely the result of rational ignorance?

The political business cycle is:

Politicians can often use the concept of rational ignorance on the part of voters to their advantage.

When citizens have NOT satisfied their basic needs for food, shelter and security, they still demand more cerebral goods.

When government makes it possible to externalize the cost of a good:

Ignorance is rational when the benefits of being informed are:

The median voter theorem predicts that the politician who ignores the median voters' wants will be elected.

Political business cycles occur when:

Explain why there may be a bi-causal (causation in both directions) relationship between democracy and wealth.

It is sometimes rational to be ignorant.

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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