Question 1

Suppose three roommates cannot agree on the size of a pizza to order.Domino argues for a medium pizza, Godfather contends a large pizza will be needed, and Little Caesar wants a super-large pizza.Assuming no paradox of voting, majority voting will result in a decision to order

Accepted Answer

A) a medium pizza. 
B) a large pizza. 
C) a super-large pizza. 
D) two medium pizzas.

Question 2

The size and scope of government inhibit the flow of information to decision makers, leading to inefficient outcomes.

Accepted Answer

A) True 
 B)False

Question 3

One key difference between government activities and private transactions is that

Accepted Answer

A) government can enforce involuntary transactions, whereas private transactions are mostly voluntary. 
B) government can produce only services, whereas private producers can produce both goods and services. 
C) government does not run any production operations, whereas private firms have the main purpose of running production operations. 
D) government does not earn revenues from its activities, whereas private firms aim to earn revenues and profits.

Question 4

(Consider This) Which of the following is an example of voter failure?

Accepted Answer

A) Voters support adding stoplights that would increase congestion and travel costs without increasing safety or convenience. 
B) Government officials ignore voter calls for regulations that would reduce negative externalities and enhance efficiency. 
C) Voters wanting greater highway safety are unable to express their preferences on how to achieve it because the voting system doesn't allow it. 
D) Voters wanting more government services are divided on what services they most prefer, leaving government officials to determine what is best.

Question 5

The public (or national) debt refers to the

Accepted Answer

A) same thing as a budget deficit. 
B) deadweight loss in a market. 
C) accumulation of all past budget deficits. 
D) sum of all the debts of households and businesses.

Question 6

One prediction of the median-voter model is that during elections, candidates will tend to become "centrists."

Accepted Answer

A) True 
 B)False

Question 7

Suppose lawyers seek legislation to limit the use of computer software that enables people to use their personal computers to self-prepare their own wills, trusts, and other legal documents.This is an example of

Accepted Answer

A) logrolling. 
B) the principal-agent problem. 
C) rent-seeking behavior. 
D) limited and bundled choices.

Question 8

(Consider This) From an economist's perspective,

Accepted Answer

A) small government is better than big government. 
B) big government is better than small government. 
C) regardless of size, government is incapable of achieving allocative or productive efficiency. 
D) the size of government doesn't matter, as long as spending occurs up to where MB = MC.

Question 9

The term government failure refers to the

Accepted Answer

A) large losses suffered by publicly owned water, gas, and electric companies. 
B) large number of bankruptcies that have occurred recently among local governments. 
C) economically inefficient outcomes caused by voting problems or incentive structures in government. 
D) inability of government agencies to provide adequate police protection in low-income neighborhoods.

Question 10

Assume that Abby, Ben, and Clara are the only citizens in a community.A proposed public good has a total cost of $1,000.All three citizens will share an equal portion of this cost in taxes.The benefit of the public good is $400 each to Abby, Ben, and Clara.Based on economic analysis, the public good should

Accepted Answer

A) be produced, because the benefits are greater than the costs. 
B) not be produced, because the costs are greater than the benefits. 
C) be put to a vote and produced only if voters approve it. 
D) not be produced, even if voters vote in favor of it.

Question 11

Refer to the table.The outcomes of the three possible sets of paired-choice majority votes illustrate the

Accepted Answer

A) paradox of voting. 
B) inefficiency of logrolling. 
C) principal-agent problem. 
D) the benefits of majority rule.

Question 12

Refer to the table.In a choice between the highway and the lighthouse,

Accepted Answer

A) a majority of voters favor the lighthouse. 
B) a majority of voters favor the highway. 
C) the voters are indifferent between the two. 
D) no voter decision is possible.

Question 13

Suppose that Steve and Susie each perceive $200 of marginal benefit from a proposed new park, whereas Elizabeth perceives $800.If the proposed tax levied on each for the park would be $300, a majority vote will

Accepted Answer

A) defeat this project and resources will be underallocated to it. 
B) defeat this project and resources will be efficiently allocated. 
C) pass this project and resources will be underallocated to it. 
D) pass this project and resources will be overallocated to it.

Question 14

Which of the following would best explain why regulatory capture is a problem?

Accepted Answer

A) The regulations implemented tend to reduce the profitability of the regulated industry and reduce global competitiveness. 
B) Regulatory capture unduly increases the size and power of government, increasing costs for taxpayers. 
C) Individuals implementing the regulations lack expertise about the industry and therefore make poor regulatory choices. 
D) The regulations implemented serve the private interests of the regulated industry, rather than addressing social interests such as consumer safety and environmental protection.

Question 15

The government's ability to coerce can enhance economic efficiency by

Accepted Answer

A) eliminating income inequality. 
B) correcting market failures. 
C) preventing resources from going to their most valued uses. 
D) restraining self-interest.

Question 16

It is generally believed that, because of the election process, the incentives and pressures for internal efficiency are stronger in the public sector than in the private sector.Topic: Government Failure

Accepted Answer

A) True 
 B)False

Question 17

As voters "vote with their feet" and move to political districts where the median voter's preference is closer to their own, the median voter's preference will

Accepted Answer

A) strengthen. 
B) weaken. 
C) shift. 
D) stagnate.

Question 18

Because of the so-called "bundled choice" problem, voters often vote for candidates that they are not entirely happy with.

Accepted Answer

A) True 
 B)False

Question 19

When the special-interest effect is the major reason for the passage of a government policy or project, then economic efficiency will always improve.

Accepted Answer

A) True 
 B)False

Question 20

Majority voting on whether or not a public good should be produced could lead to a result where a public good whose costs are bigger than the benefits would end up getting approved by the voters.

Accepted Answer

A) True 
 B)False

Exam 5: Governments Role and Government Failure

Suppose three roommates cannot agree on the size of a pizza to order.Domino argues for a medium pizza, Godfather contends a large pizza will be needed, and Little Caesar wants a super-large pizza.Assuming no paradox of voting, majority voting will result in a decision to order

The size and scope of government inhibit the flow of information to decision makers, leading to inefficient outcomes.

One key difference between government activities and private transactions is that

(Consider This) Which of the following is an example of voter failure?

The public (or national) debt refers to the

One prediction of the median-voter model is that during elections, candidates will tend to become "centrists."

Suppose lawyers seek legislation to limit the use of computer software that enables people to use their personal computers to self-prepare their own wills, trusts, and other legal documents.This is an example of

(Consider This) From an economist's perspective,

The term government failure refers to the

Refer to the table.The outcomes of the three possible sets of paired-choice majority votes illustrate the

Refer to the table.In a choice between the highway and the lighthouse,

Suppose that Steve and Susie each perceive $200 of marginal benefit from a proposed new park, whereas Elizabeth perceives $800.If the proposed tax levied on each for the park would be $300, a majority vote will

Which of the following would best explain why regulatory capture is a problem?

The government's ability to coerce can enhance economic efficiency by

It is generally believed that, because of the election process, the incentives and pressures for internal efficiency are stronger in the public sector than in the private sector.Topic: Government Failure

As voters "vote with their feet" and move to political districts where the median voter's preference is closer to their own, the median voter's preference will

Because of the so-called "bundled choice" problem, voters often vote for candidates that they are not entirely happy with.

When the special-interest effect is the major reason for the passage of a government policy or project, then economic efficiency will always improve.

Majority voting on whether or not a public good should be produced could lead to a result where a public good whose costs are bigger than the benefits would end up getting approved by the voters.