Question 1

Current tax rates are insufficient to finance the benefits promised by both the Social Security and Medicare programs. Are these unfunded promises surprising according to economic theory?

Accepted Answer

A) Yes, political representatives have a strong incentive to levy taxes that are sufficient to cover the cost of all programs they favor. 
B) No, the unfunded promises reflect the shortsighted nature of the political process. 
C) Yes, political representatives generally favor balancing the government budget because this is best for the economy. 
D) No, even though debt financing often makes sense, politicians are reluctant to use it because it will damage their chances of being reelected.

Question 2

With a strong and active federal government, why do we need state and local governments?

Accepted Answer

The answer of With a strong and active federal government,...

Question 3

How does a voting structure that relies on unanimity for an action guarantee that no one will be adversely affected? Why isn't this type of decision making used more frequently?

Accepted Answer

The answer of How does a voting structure that relies...

Question 4

In a representative democracy, government action results from the

Accepted Answer

A) choices of voters. 
B) legislative decisions by politicians. 
C) political action of organized interest groups. 
D) complex interaction of all of the above.

Question 5

Despite being a college graduate, Ethan cannot name any of his representatives in Congress and he has no idea which issues are being debated and voted on this week in Congress. According to public choice analysis, Ethan is

Accepted Answer

A) irrational. 
B) considering only the welfare of society and not his own personal interests. 
C) not intelligent enough to understand the issues. 
D) making a rational personal choice because knowing these things gives him little personal benefit.

Question 6

The branch of economics that attempts to understand the outcomes observed in the public sector by examining the incentives faced by the individual actors involved (such as voters, politicians, and bureaucrats) is known as

Accepted Answer

A) private choice analysis. 
B) public choice analysis. 
C) government operations analysis. 
D) incentive analysis.

Question 7

According to the economic way of thinking, personal benefits and costs influence the actions of

Accepted Answer

A) consumers in the private sector but not voters in the public sector. 
B) producers in the private sector but not politicians in the public sector. 
C) taxpayers but not recipients of government-provided goods and services. 
D) consumers, producers, voters, and politicians in both the private and the public sectors.

Question 8

Which of the following represents why private production tends to be more efficient then government production?

Accepted Answer

A) Politicians have a strong incentive to support projects that have immediate and easily recognized benefits and distant and unidentifiable costs, even if the total costs outweigh the total benefits. 
B) Politicians have a strong incentive to support programs where the benefits are highly concentrated on special interest groups and the costs are widely dispersed among voters, even if the total costs outweigh the benefits. 
C) Private companies face a profit motive that keeps them operating efficiently, government bureaucracies use taxpayer money and, therefore, do not face this profit motive. 
D) All of the above are reasons why private production tends to be more efficient then government production.

Question 9

The term pork-barrel legislation refers to

Accepted Answer

A) government spending programs financed with user charges. 
B) the exchange between legislators of their votes on issues. 
C) legislation that bundles together a number of projects, each benefiting local interests at the expense of general taxpayers. 
D) the actions of legislators who are willing to trade their political votes for campaign contributions from special interest groups.

Question 10

Dairy farmers hold an annual Capitol Hill ice cream social that provides free ice cream for congressional staffers during which time representatives from the industry discuss issues with, and provide information to, congressional staff. This is an example of

Accepted Answer

A) logrolling. 
B) rent seeking. 
C) pork-barrel legislation. 
D) the shortsightedness effect.

Question 11

Government decisions tend to be biased toward actions that have

Accepted Answer

A) current benefits that are easily observable and future costs that are difficult to identify. 
B) current benefits and future costs that are both difficult to identify. 
C) future costs that are easily observable. 
D) clear benefits to the poor at no costs to the wealthy.

Question 12

Which of the following is an example of political action that reflects the shortsightedness effect?

Accepted Answer

A) budget surpluses 
B) the promise of future benefits without providing for their funding 
C) spending on roads and highways 
D) spending on programs that transfer income from the rich to the poor

Question 13

Which of the following is true of government activities under a system of representative democracy?

Accepted Answer

A) If a majority favors an activity, it must be productive. 
B) If a majority opposes an activity, it must be counterproductive. 
C) When voters pay in proportion to benefits received, productive activities undertaken by the government will be favored by an overwhelming majority of voters. 
D) When voters pay in proportion to benefits received, productive activities will generally be defeated under a majority rule vote.

Question 14

In which of the following situations is representative democracy most likely to lead to the adoption of an inefficient government program?

Accepted Answer

A) The program provides substantial benefits to a small interest group, and the costs are widespread among voters. 
B) Both the benefits and costs of the program are widespread among voters. 
C) The program is financed by a user charge that makes the individuals who benefit from the program pay for its cost. 
D) The program provides widespread benefits to all voters and imposes a significant cost on a small interest group.

Question 15

Which of the following is an example of a good that is produced by the public sector but consumers purchase it in proportion to the benefit received?

Accepted Answer

A) milk 
B) public education 
C) first-class mail delivery from the U.S.Post Office 
D) national defense

Question 16

Public choice analysis suggests that bureaucrats and public-sector managers have a strong incentive to

Accepted Answer

A) economize on their spending so more funds will be available for other government programs. 
B) ensure that their budget is exactly the size that would be considered economically efficient. 
C) expand their budgets to sizes beyond what would be considered economically efficient. 
D) keep individual legislators fully informed as to every expenditure.

Question 17

Economics indicates that government funding of special interest projects and favoritism of some business firms relative to others will lead to

Accepted Answer

A) efficient allocation of resources because the government action will correct the failures of the market. 
B) the funding of productive projects that will improve the well-being of most citizens. 
C) economic inefficiency because the funding will be driven by political rather than economic considerations. 
D) a decline in political contributions and a reduction in the quality of the candidates willing to run for political office.

Question 18

A local government operates a city recreation center with a pool and tennis courts. The center is financed through $50 annual membership fees (required for members to use it). This type of financing is an example of a

Accepted Answer

A) head tax. 
B) excise fee. 
C) user charge. 
D) progressive tax.

Question 19

Which of the following is true?

Accepted Answer

A) Competitive behavior is present in the market sector but not in the public sector. 
B) Because candidates for public office represent a bundle of views, there is more ability for individuals to make their preferences count on specific issues than in the market sector. 
C) When decisions are made democratically, the economic and political power of all individuals will be equal unlike in the market sector. 
D) The reality of the aggregate consumption-aggregate payment link imposed by scarcity is present in both the market and public sectors.

Question 20

Public choice analysis suggests that the primary motivating factor for politicians will be finding the policies that are most likely to

Accepted Answer

A) get them reelected. 
B) improve economic efficiency. 
C) improve the welfare of society as a whole. 
D) anger the interest groups that provide substantial contributions to their campaigns.

Exam 6: The Economics of Political Action