Question 1

In the case of the sugar quota, costs are ______ and benefits are ______.

Accepted Answer

A)  diffused; diffused 
B)  concentrated; diffused 
C)  diffused; concentrated 
D)  concentrated; concentrated 
A)  diffused; diffused 
B)  concentrated; diffused 
C)  diffused; concentrated 
D)  concentrated; concentrated

Question 2

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 ignorant. 
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 are too small in number to influence the outcome of elections. 
A)  The people who are harmed by the quota are rationally ignorant. 
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 are too small in number to influence the outcome of elections.

Question 3

One reason for the good record of democracies on economic growth is that:

Accepted Answer

A)  people can become rich by gaining economic resources in their favor. 
B)  people can become rich by competing for the limited economic resources. 
C)  the public as a whole can become rich by equally dividing the economic resources. 
D)  the public as a whole can become rich by supporting efficient policies that generate economic growth. 
A)  people can become rich by gaining economic resources in their favor. 
B)  people can become rich by competing for the limited economic resources. 
C)  the public as a whole can become rich by equally dividing the economic resources. 
D)  the public as a whole can become rich by supporting efficient policies that generate economic growth.

Question 4

The Fanjuls are:

Accepted Answer

A)  sugar barons who give considerable money to politicians who make decisions on sugar quotas. 
B)  a consumer advocacy group attempting to ban special interest groups. 
C)  a new political party based on the opposition to special interest politics. 
D)  free traders who propose doing away with all tariffs. 
A)  sugar barons who give considerable money to politicians who make decisions on sugar quotas. 
B)  a consumer advocacy group attempting to ban special interest groups. 
C)  a new political party based on the opposition to special interest politics. 
D)  free traders who propose doing away with all tariffs.

Question 5

Saying that voters are rationally ignorant is the same as saying voters are irrational.

Accepted Answer

A) True 
 B)False

Question 6

When the costs of a good are paid for by nonconsumers, ______ of the good is produced.

Accepted Answer

A)  an inefficiently small amount 
B)  an efficient amount 
C)  an inefficiently large amount 
D)  none 
A)  an inefficiently small amount 
B)  an efficient amount 
C)  an inefficiently large amount 
D)  none

Question 7

Which of the following best explains the term rational ignorance?

Accepted Answer

A)  It is the decision to search for and acquire information only if there is enough time. 
B)  It is the decision to stay uninformed on certain topics because of the prohibitive cost of gathering information. 
C)  It is the decision to ignore free information that is vital in making the correct decision. 
D)  It is the rational weighing of costs versus benefits. 
A)  It is the decision to search for and acquire information only if there is enough time. 
B)  It is the decision to stay uninformed on certain topics because of the prohibitive cost of gathering information. 
C)  It is the decision to ignore free information that is vital in making the correct decision. 
D)  It is the rational weighing of costs versus benefits.

Question 8

Which of the following statements is TRUE?
I. Rationally ignorant people may favor price controls because they receive biased information.
II. Rational ignorance may lead voters to have mistaken beliefs about the state of the economy.
III. Rationally informed people can take advantage of the rationally ignorant by supporting policies that transfer wealth from the ignorant to the informed.

Accepted Answer

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

Question 9

Use the following to answer questions:
Figure: Kidney Trade Ban Policy Spectrum  
-(Figure: Kidney Trade Ban Policy Spectrum) Refer to the figure. If there are only two candidates, A and B, and an open market for kidney trading is the only issue being debated in this election, which one of the voters is the median voter?

Accepted Answer

A)  Mariska 
B)  Tuppence 
C)  Tommy 
D)  Agatha 
A)  Mariska 
B)  Tuppence 
C)  Tommy 
D)  Agatha

Question 10

Politicians have a strong incentive to support projects even when their costs outweigh their benefits if:

Accepted Answer

A)  the costs are concentrated among a small group and the benefits are widely dispersed across taxpayers. 
B)  the costs of the project are spread widely across taxpayers and the benefits are spread widely across taxpayers. 
C)  all voters and taxpayers are perfectly informed. 
D)  the costs of the project are spread widely across taxpayers and the benefits are concentrated on a small group. 
A)  the costs are concentrated among a small group and the benefits are widely dispersed across taxpayers. 
B)  the costs of the project are spread widely across taxpayers and the benefits are spread widely across taxpayers. 
C)  all voters and taxpayers are perfectly informed. 
D)  the costs of the project are spread widely across taxpayers and the benefits are concentrated on a small group.

Question 11

Political business cycles are due primarily to ______ voters.

Accepted Answer

A)  rationally informed 
B)  rationally ignorant 
C)  myopic 
D)  forward-looking 
A)  rationally informed 
B)  rationally ignorant 
C)  myopic 
D)  forward-looking

Question 12

Which of the following conditions best predicts when the incumbent party will NOT win the presidential election?

Accepted Answer

A)  personal disposable income is growing 
B)  the inflation rate is low 
C)  the unemployment rate is low 
D)  the incumbent party has been in power for too many terms in a row 
A)  personal disposable income is growing 
B)  the inflation rate is low 
C)  the unemployment rate is low 
D)  the incumbent party has been in power for too many terms in a row

Question 13

Rational ignorance:

Accepted Answer

A)  makes it difficult for voters to make informed decisions regarding government intervention in the economy. 
B)  may cause voters to give credit to or blame politicians for things not under their control. 
C)  may allow special interest groups to take advantage of the uninformed. 
D)  All of these possibilities are correct. 
A)  makes it difficult for voters to make informed decisions regarding government intervention in the economy. 
B)  may cause voters to give credit to or blame politicians for things not under their control. 
C)  may allow special interest groups to take advantage of the uninformed. 
D)  All of these possibilities are correct.

Question 14

Which of the following is NOT the reason why ignorance about political matters is important?

Accepted Answer

A)  It is difficult for voters to make informed choices if they are not well informed. 
B)  Voters who are rationally ignorant will often make decisions for irrational reasons. 
C)  Voters who are well informed would perceive politics as entertainment. 
D)  Rational ignorance matters because not everyone is rationally ignorant. 
A)  It is difficult for voters to make informed choices if they are not well informed. 
B)  Voters who are rationally ignorant will often make decisions for irrational reasons. 
C)  Voters who are well informed would perceive politics as entertainment. 
D)  Rational ignorance matters because not everyone is rationally ignorant.

Question 15

What is a reason why markets should be free and unregulated?

Accepted Answer

A)  bad incentives 
B)  some people ignore ethical values in making market decisions 
C)  politicians' election agendas 
D)  good incentives 
A)  bad incentives 
B)  some people ignore ethical values in making market decisions 
C)  politicians' election agendas 
D)  good incentives

Question 16

Use the following to answer questions:
Figure: Economic Freedom and Living Standards  
-(Figure: Economic Freedom and Living Standards) Refer to the figure. Based on the data in this chart, two countries that have about the same level of economic freedom but very different standards of living are:

Accepted Answer

A)  Venezuela and Niger. 
B)  Congo and Luxembourg. 
C)  Haiti and Niger. 
D)  Luxembourg and the United States. 
A)  Venezuela and Niger. 
B)  Congo and Luxembourg. 
C)  Haiti and Niger. 
D)  Luxembourg and the United States.

Question 17

Let's check on whether you are rationally ignorant. Which of the following four items is the smallest in terms of government expenditure?

Accepted Answer

A)  Social Security 
B)  welfare 
C)  foreign aid 
D)  health care 
A)  Social Security 
B)  welfare 
C)  foreign aid 
D)  health care

Question 18

Public choice theory implies that democracy is a perfect system to serve the social interest.

Accepted Answer

A) True 
 B)False

Question 19

An issue that generates substantial benefits to a small group of individuals while imposing a small cost on many others is called a:

Accepted Answer

A)  nonissue. 
B)  special-interest issue. 
C)  popular issue. 
D)  minority issue. 
A)  nonissue. 
B)  special-interest issue. 
C)  popular issue. 
D)  minority issue.

Question 20

Explain why economists say that voters are rationally ignorant about politics.

Accepted Answer

The incentives for voters to be informed

Exam 20: Political Economy and Public Choice

In the case of the sugar quota, costs are ______ and benefits are ______.

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

One reason for the good record of democracies on economic growth is that:

The Fanjuls are:

Saying that voters are rationally ignorant is the same as saying voters are irrational.

When the costs of a good are paid for by nonconsumers, ______ of the good is produced.

Which of the following best explains the term rational ignorance?

Politicians have a strong incentive to support projects even when their costs outweigh their benefits if:

Political business cycles are due primarily to ______ voters.

Which of the following conditions best predicts when the incumbent party will NOT win the presidential election?

Rational ignorance:

Which of the following is NOT the reason why ignorance about political matters is important?

What is a reason why markets should be free and unregulated?

Use the following to answer questions: Figure: Economic Freedom and Living Standards -(Figure: Economic Freedom and Living Standards) Refer to the figure. Based on the data in this chart, two countries that have about the same level of economic freedom but very different standards of living are:

Let's check on whether you are rationally ignorant. Which of the following four items is the smallest in terms of government expenditure?

Public choice theory implies that democracy is a perfect system to serve the social interest.

An issue that generates substantial benefits to a small group of individuals while imposing a small cost on many others is called a:

Explain why economists say that voters are rationally ignorant about politics.

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

Filters

In the case of the sugar quota, costs are and benefits are .