Question 1

Suppose that Mick and Cher are the only two members of society and are willing to pay $10 and $8, respectively, for the third unit of a public good. Also, assume that the marginal cost of the third unit is $17. We can conclude that

Accepted Answer

A)  the third unit should not be produced.
B)  the third unit should be produced.
C)  zero units should be produced.
D)  4 units should be produced.E) A) and C)
F) B) and C) B

Question 2

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) A) and B)
F) C) and D)

Question 3

Majority voting fails to incorporate the strength of the preferences of individual voters and therefore

Accepted Answer

A)  reduces the power of the median voter.
B)  is the primary reason for public sector failure.
C)  may produce economically inefficient outcomes.
D)  creates the opportunity for the fallacy of limited decisions.E) A) and D)
F) B) and C)

Question 4

Majority voting may produce economically inefficient outcomes because it

Accepted Answer

A)  does not always lead to fair results.
B)  requires everyone to vote and bear the costs.
C)  does not consider the strength of individual voters' preferences.
D)  does not provide benefits to everyone.E) A) and D)
F) A) and C)

Question 5

What is regulatory capture?

Accepted Answer

Regulatory capture is the situ...

Question 6

Because majority voting fails to incorporate the strength of the preferences of individual voters, it

Accepted Answer

A)  creates negative externalities.
B)  can, under some circumstances, produce economically inefficient outcomes.
C)  leads to market failure.
D)  leads to politics dominated by special-interest groups.E) All of the above
F) A) and B)

Question 7

Professional sports teams will sometimes seek public subsidies for stadium financing projects that produce large benefits for a relatively small number of fans and impose small costs on a relatively large number of people. Sometimes these efforts to secure public funding are successful even though the decision is not efficient. This is an example of

Accepted Answer

A)  log-rolling.
B)  pork-barrel politics.
C)  the special-interest effect.
D)  market failure.E) B) and D)
F) A) and C)

Question 8

Which of the following would be the best example of regulatory capture?

Accepted Answer

A)  Starbucks buys up all the available supplies of coffee beans.
B)  Nike executives influence the rules for track and field events.
C)  Federal law makers write and pass legislation that protects domestic companies from foreign competition.
D)  Executives from the Ford, General Motors, and Chrysler companies write the rules regulating automobile safety and fuel requirements.E) None of the above
F) A) and D)

Question 9

One implication of the median-voter model, as applied to a vote regarding how much government involvement to have in the economy, is that most voters would find the resulting government involvement either too large or too small.

Accepted Answer

A) True 
 B)False

Question 10

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 11

A public good

Accepted Answer

A)  generally results in substantial negative externalities.
B)  can never be provided by a nongovernmental organization.
C)  costs essentially nothing to produce and is thus provided by the government at a zero price.
D)  can't be provided to one person without making it available to others as well.E) All of the above
F) A) and C)

Question 12

The problem of limited and bundled choices explains why many voters cannot fully express their political preferences.

Accepted Answer

A) True 
 B)False

Question 13

Nonexcludability describes a condition where

Accepted Answer

A)  one person's consumption of a good does not prevent consumption of the good by others.
B)  there is no effective way to keep people from using a good once it comes into being.
C)  sellers can withhold the benefits of a good from those unwilling to pay for it.
D)  there is no potential for free-riding behavior.E) A) and C)
F) C) and D) B

Question 14

Refer to the table. In a choice between education and public safety,

Accepted Answer

A)  a majority of voters would favor education.
B)  no voter decision is possible.
C)  a majority of voters would favor public safety.
D)  the outcome would depend on which item was listed first on the ballot.E) None of the above
F) All of the above C

Question 15

Senator A agrees to vote for Senator K's state project in exchange for Senator K voting for Senator A's state project. This is an example of

Accepted Answer

A)  logrolling.
B)  the paradox of voting.
C)  the principal-agent problem.
D)  the median voter model.E) A) and B)
F) A) and C)

Question 16

The principal-agent problem is a problem for the private sector but does not apply to political decision making.

Accepted Answer

A) True 
 B)False

Question 17

Demand-side market failures refer to those situations when there is a shortage in the market because buyers want to buy more than what is available in the market.

Accepted Answer

A) True 
 B)False

Question 18

Sometimes, public goods whose benefits are less than their costs still get produced because

Accepted Answer

A)  the marginal benefit is still larger than the marginal cost.
B)  of externalities in production.
C)  the benefits accrue to politically powerful government officials and their constituents.
D)  of market failures.E) None of the above
F) B) and C)

Question 19

When congressional representatives vote on an appropriations bill, they must vote yea or nay, taking the bad with the good. This statement best reflects the

Accepted Answer

A)  paradox of voting.
B)  regulatory capture effect.
C)  benefits-received principle.
D)  concept of limited and bundled choices.E) B) and D)
F) None of the above

Question 20

In assessing the efficiency of government policy, economic analysis would focus on

Accepted Answer

A)  the size of government: big versus small.
B)  marginal benefits versus marginal costs of government policy and action.
C)  presence or absence of the invisible hand.
D)  revenues and profitability of the government agencies.E) A) and D)
F) B) and C)

Exam 5: Public Goods, Public Choice, and Government Failure

Suppose that Mick and Cher are the only two members of society and are willing to pay $10 and $8, respectively, for the third unit of a public good. Also, assume that the marginal cost of the third unit is $17. We can conclude that

Correct Answer
verified
B

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

Correct Answer
verified

Majority voting fails to incorporate the strength of the preferences of individual voters and therefore

Correct Answer
verified

Majority voting may produce economically inefficient outcomes because it

Correct Answer
verified

What is regulatory capture?

Correct Answer
verified
Regulatory capture is the situ...
View Answer

Because majority voting fails to incorporate the strength of the preferences of individual voters, it

Correct Answer
verified

Correct Answer
verified

Which of the following would be the best example of regulatory capture?

Correct Answer
verified

One implication of the median-voter model, as applied to a vote regarding how much government involvement to have in the economy, is that most voters would find the resulting government involvement either too large or too small.

Correct Answer
verified

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

Correct Answer
verified

A public good

Correct Answer
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The problem of limited and bundled choices explains why many voters cannot fully express their political preferences.

Correct Answer
verified

Nonexcludability describes a condition where

Correct Answer
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B

Refer to the table. In a choice between education and public safety,

Correct Answer
verified
C

Senator A agrees to vote for Senator K's state project in exchange for Senator K voting for Senator A's state project. This is an example of

Correct Answer
verified

The principal-agent problem is a problem for the private sector but does not apply to political decision making.

Correct Answer
verified

Demand-side market failures refer to those situations when there is a shortage in the market because buyers want to buy more than what is available in the market.

Correct Answer
verified

Sometimes, public goods whose benefits are less than their costs still get produced because

Correct Answer
verified

When congressional representatives vote on an appropriations bill, they must vote yea or nay, taking the bad with the good. This statement best reflects the

Correct Answer
verified

In assessing the efficiency of government policy, economic analysis would focus on

Correct Answer
verified

Exam 5: Public Goods, Public Choice, and Government Failure

Suppose that Mick and Cher are the only two members of society and are willing to pay $10 and $8, respectively, for the third unit of a public good. Also, assume that the marginal cost of the third unit is $17. We can conclude that

Correct AnswerverifiedB

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

Correct AnswerverifiedShow Answer

Majority voting fails to incorporate the strength of the preferences of individual voters and therefore

Correct AnswerverifiedShow Answer

Majority voting may produce economically inefficient outcomes because it

Correct AnswerverifiedShow Answer

What is regulatory capture?

Correct AnswerverifiedRegulatory capture is the situ...View AnswerShow Answer

Because majority voting fails to incorporate the strength of the preferences of individual voters, it

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following would be the best example of regulatory capture?

Correct AnswerverifiedShow Answer

One implication of the median-voter model, as applied to a vote regarding how much government involvement to have in the economy, is that most voters would find the resulting government involvement either too large or too small.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A public good

Correct AnswerverifiedShow Answer

The problem of limited and bundled choices explains why many voters cannot fully express their political preferences.

Correct AnswerverifiedShow Answer

Nonexcludability describes a condition where

Correct AnswerverifiedB

Refer to the table. In a choice between education and public safety,

Correct AnswerverifiedC

Senator A agrees to vote for Senator K's state project in exchange for Senator K voting for Senator A's state project. This is an example of

Correct AnswerverifiedShow Answer

The principal-agent problem is a problem for the private sector but does not apply to political decision making.

Correct AnswerverifiedShow Answer

Demand-side market failures refer to those situations when there is a shortage in the market because buyers want to buy more than what is available in the market.

Correct AnswerverifiedShow Answer

Sometimes, public goods whose benefits are less than their costs still get produced because

Correct AnswerverifiedShow Answer

When congressional representatives vote on an appropriations bill, they must vote yea or nay, taking the bad with the good. This statement best reflects the

Correct AnswerverifiedShow Answer

In assessing the efficiency of government policy, economic analysis would focus on

Correct AnswerverifiedShow Answer

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B

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Regulatory capture is the situ...
View Answer

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B

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C

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