Question 1

The situation where "the few who yell the loudest get heard" is referred to as the

Accepted Answer

A)  special-interest effect.
B)  principal-agent problem.
C)  moral hazard problem.
D)  adverse selection effect.E) All of the above
F) B) and C)

Question 2

Loan guarantees provided by government will reduce the willingness of investors to take on the risk in a project.

Accepted Answer

A) True 
 B)False

Question 3

"Regulatory capture" refers to the situation where a government agency charged with supervising and regulating a particular industry is

Accepted Answer

A)  strongly influenced by the firms in the very industry that it is regulating.
B)  headed by bureaucrats who have a "lock" on their positions, without any rivals.
C)  completely dominating and controlling the actions of firms in the industry.
D)  headed by unelected government officials who have no strong desire to regulate.E) B) and D)
F) A) and D)

Question 4

Which of the following would be an avenue for resolving the inefficiencies associated with majority voting?

Accepted Answer

A)  political logrolling
B)  progressive taxation
C)  proportional taxation
D)  the paradox of votingE) None of the above
F) A) and D)

Question 5

In a market economy, the government's power to coerce can

Accepted Answer

A)  undermine economic efficiency by increasing private-sector risk.
B)  improve economic efficiency by directing all resources to their most valued uses.
C)  reduce private-sector risk and increase economic efficiency.
D)  cause significant negative externalities.E) None of the above
F) All of the above

Question 6

In corporations, owners are and managers are .

Accepted Answer

A)  agents; principals
B)  stockholders; bondholders
C)  agents; employees
D)  principals; agentsE) A) and D)
F) A) and C)

Question 7

Economic analysis would focus on the size of the government, in order to assess whether or not it fosters economic efficiency.

Accepted Answer

A) True 
 B)False

Question 8

When voters have different opinions about an issue, the position that is most likely to be adopted is that of the

Accepted Answer

A)  lobbyist.
B)  logroller.
C)  rent seeker.
D)  median voter.E) None of the above
F) B) and C)

Question 9

One primary reason why regulatory capture may occur in an industry is that

Accepted Answer

A)  the government designates unelected officials to head the various regulatory agencies of different industries.
B)  there is a lot of bribery and corruption going on in all major industries that the government seeks to regulate.
C)  the industry's leaders are the ones who pushed for the government to impose supervision and regulation over their industry.
D)  people who are qualified to supervise and regulate the industry often come from the industry itself.E) None of the above
F) A) and B)

Question 10

A situation in which society may not be able to rank its preferences consistently through paired-choice majority voting is

Accepted Answer

A)  the fallacy of limited decisions.
B)  the paradox of voting.
C)  the median-voter model.
D)  political logrolling.E) All of the above
F) A) and D)

Question 11

Problems with collective decision making and policy making in government are subjects that are studied in an area of economics called public

Accepted Answer

A)  finance.
B)  choice.
C)  policy.
D)  interest.E) All of the above
F) C) and D)

Question 12

The politicization of monetary and fiscal policies tends to enhance their effectiveness in stabilizing the economy.

Accepted Answer

A) True 
 B)False

Question 13

Politicians seeking reelection tend to do the following, except

Accepted Answer

A)  inserting "earmarks" in legislation.
B)  favoring projects with clear benefits and hidden costs.
C)  favoring long-term projects over short-term ones.
D)  engaging in pork-barrel politics.E) A) and B)
F) None of the above

Question 14

Because of the force of law and bureaucratic structure, government accountability is less of a problem than in the private sector.

Accepted Answer

A) True 
 B)False

Question 15

Even in a democratic government, elected officials may end up pursuing policies that go against the preferences of the people due to the following reasons, except

Accepted Answer

A)  the special-interest effect.
B)  the invisible hand of the market.
C)  limited and bundled choice in elections.
D)  the majority voting system.E) None of the above
F) C) and D)

Question 16

Political corruption occurs whenever

Accepted Answer

A)  logrolling is used to secure votes for controversial legislation.
B)  government officials use unlawful misdirection of governmental resources for their own personal gain.
C)  special interest groups contribute to elected officials, who in turn support legislation that benefits the special interest group.
D)  there is pork barrel politics involved.E) A) and D)
F) A) and C)

Question 17

Under what circumstances would government loan guarantees be socially beneficial?

Accepted Answer

A)  when the guarantees socialize losses and privatize gains
B)  when the guarantees stimulate production of goods generating significant spillover costs
C)  when the guarantees promote production of goods otherwise underproduced by the private sector
D)  when the guarantees increase company profitsE) All of the above
F) None of the above

Question 18

Factors that impede the attainment of economic efficiency in the public sector are called

Accepted Answer

A)  market failures.
B)  externalities.
C)  government failures.
D)  voting irregularities.E) A) and B)
F) All of the above

Question 19

Political corruption occurs in the following instances, except when

Accepted Answer

A)  government officials use their powers for personal gain.
B)  people pay a government official to do what she should be doing.
C)  people pay a bureaucrat to do something that he should not be doing.
D)  businesses pay property taxes and license fees.E) A) and D)
F) A) and C)

Question 20

Which of the following will tend to socialize losses and privatize gains?

Accepted Answer

A)  lowering interest rates to encourage private borrowing and investment
B)  government regulation to promote human safety and environmental protection
C)  government creating projects rather than supporting private efforts
D)  government guarantees to private investors that they will get their money back even if the company failsE) B) and C)
F) B) and D)

Exam 5: Governments Role and Government Failure

Even in a democratic government, elected officials may end up pursuing policies that go against the preferences of the people due to the following reasons, except

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Political corruption occurs in the following instances, except when

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Factors that impede the attainment of economic efficiency in the public sector are called

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In a market economy, the government's power to coerce can

Correct AnswerverifiedShow Answer

Problems with collective decision making and policy making in government are subjects that are studied in an area of economics called public

Correct AnswerverifiedShow Answer

One primary reason why regulatory capture may occur in an industry is that

Correct AnswerverifiedShow Answer

Economic analysis would focus on the size of the government, in order to assess whether or not it fosters economic efficiency.

Correct AnswerverifiedShow Answer

The politicization of monetary and fiscal policies tends to enhance their effectiveness in stabilizing the economy.

Correct AnswerverifiedShow Answer

Which of the following will tend to socialize losses and privatize gains?

Correct AnswerverifiedShow Answer

When voters have different opinions about an issue, the position that is most likely to be adopted is that of the

Correct AnswerverifiedShow Answer

Political corruption occurs whenever

Correct AnswerverifiedShow Answer

Because of the force of law and bureaucratic structure, government accountability is less of a problem than in the private sector.

Correct AnswerverifiedShow Answer

In corporations, owners are and managers are .

Correct AnswerverifiedShow Answer

Loan guarantees provided by government will reduce the willingness of investors to take on the risk in a project.

Correct AnswerverifiedShow Answer

Politicians seeking reelection tend to do the following, except

Correct AnswerverifiedShow Answer

"Regulatory capture" refers to the situation where a government agency charged with supervising and regulating a particular industry is

Correct AnswerverifiedShow Answer

Which of the following would be an avenue for resolving the inefficiencies associated with majority voting?

Correct AnswerverifiedShow Answer

Under what circumstances would government loan guarantees be socially beneficial?

Correct AnswerverifiedShow Answer

The situation where "the few who yell the loudest get heard" is referred to as the

Correct AnswerverifiedShow Answer

A situation in which society may not be able to rank its preferences consistently through paired-choice majority voting is

Correct AnswerverifiedShow Answer

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