Question 1

Making blackmail, extortion, and other forms of private coercion illegal is one way that government:

Accepted Answer

A)   Reduces private-sector economic risk
B)   Increases private-sector economic risk
C)   Reduces the market's economic efficiency
D)   Increases the economy's deadweight lossesE) A) and D)
F) B) and C)

Question 2

One major role that the government plays in the market economy of the U.S. is:

Accepted Answer

A)   Setting production targets for major industries
B)   Requiring minimum levels of employment in major industries
C)   Allocating resources in various market activities
D)   Setting laws governing economic activityE) None of the above
F) C) and D)

Question 3

What is a likely explanation for why the budget of a government agency might increase beyond its optimal size?

Accepted Answer

A)   The paradox of voting
B)   The influence of the median voter
C)   The power of special-interest groups
D)   The allocative efficiency of governmentE) A) and D)
F) A) and C)

Question 4

Assume that Abby, Ben, and Clara are the only citizens in a community. A proposed public good has a total cost of $1000. 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 itE) B) and C)
F) A) and C)

Question 5

A budget deficit is another name for the public debt.

Accepted Answer

A) True 
 B)False

Question 6

The "pork" in pork-barrel politics refers to government projects that politicians try to secure in favor of the common good for the whole nation.

Accepted Answer

A) True 
 B)False

Question 7

The trading of votes to secure favorable outcomes on decisions which would otherwise be defeated is called:

Accepted Answer

A)   Median-voter trading
B)   The special-interest effect
C)   Political logrolling
D)   The paradox of votingE) B) and C)
F) None of the above

Question 8

In presidential elections, voters often find that they do not agree with any single candidate on all the issues that matter to them (the voters) . This is known as the:

Accepted Answer

A)   Principal-agent problem
B)   Limited and bundled choice problem
C)   Rent-seeking behavior problem
D)   Lack of accountability problemE) A) and B)
F) B) and D)

Question 9

Monetary policy refers to the government's attempt at smoothing business cycles through the use of changes in:

Accepted Answer

A)   Tax rates
B)   Interest rates
C)   Wage rates
D)   Government spendingE) B) and C)
F) All of the above

Question 10

The concept of limited and bundled choice, as used in public choice theory, refers to the fact that:

Accepted Answer

A)   Politicians may not be objective in evaluating economic policy programs
B)   Because of the importance of television and other modern communication techniques, the best and brightest candidates may not be selected by voters
C)   In an election, voters must select a candidate who has various preferences in a wide array of issues
D)   The most economically efficient public policy programs may not be selected because political leaders do not know enough about economicsE) None of the above
F) B) and C)

Question 11

In the U.S., the Federal government runs a chronic budget deficit, whereas many state and local governments do not, because:

Accepted Answer

A)   Many state and local governments have balanced-budget laws that make deficits illegal, while the Federal government does not
B)   Voters in Federal elections tend to favor budget deficits, while voters in state and local elections do not
C)   Many state and local governments face stricter accounting standards than the Federal government does
D)   Elections at the state and local levels tend to occur more frequently than at the Federal levelE) A) and D)
F) A) and C)

Question 12

Loan guarantees provided by the government for specific private-sector investments tend to:

Accepted Answer

A)   Generate high positive returns for the government
B)   Increase the financial risk faced by the private investors
C)   Attract private investors into the specific project
D)   Eliminate the moral hazard problem among investorsE) A) and B)
F) B) and D)

Question 13

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 decisionsE) None of the above
F) A) and B)

Question 14

The special interest effect in government is the reason why firms in some industries are willing to pay huge amounts of money to lobbyists.

Accepted Answer

A) True 
 B)False

Question 15

Assume that Abby, Ben, Clara, Joe, and Matt are the only citizens in a community. A proposed public good has a total cost of $1000. All five citizens will share an equal portion of this cost in taxes. The benefit of the public good is $220 to Abby, $210 to Ben, $210 to Clara, $180 to Joe, and $120 to Matt. In a majority vote, this proposal will most likely be:

Accepted Answer

A)   Accepted; four in favor and one against
B)   Defeated; one in favor and four against
C)   Accepted; three in favor and two against
D)   Defeated; two in favor and three againstE) A) and B)
F) B) and C)

Question 16

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

Question 17

Inefficiencies associated with majority voting may get resolved through:

Accepted Answer

A)   Using the median-voter model
B)   Bureaucratic inefficiency
C)   The paradox of voting
D)   Political logrollingE) A) and B)
F) A) and C)

Question 18

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

Accepted Answer

A)   The paradox of voting
B)   Progressive taxation
C)   Proportional taxation
D)   Special interest groupsE) B) and C)
F) A) and D)

Question 19

If the government runs a smaller budget deficit, then the public debt will decrease.

Accepted Answer

A) True 
 B)False

Question 20

Assume that Abby, Ben, Clara, Joe, and Matt are the only citizens in a community. A proposed public good has a total cost of $1000. All five citizens will share an equal portion of this cost in taxes. The benefit of the public good is $220 to Abby, $210 to Ben, $210 to Clara, $180 to Joe, and $120 to Matt. In a majority vote, this proposal will most likely be:

Accepted Answer

A)   Accepted; the public good is produced even though it is economically inefficient
B)   Defeated; the public good is not produced even though it would have been efficient to do so
C)   Accepted; the public good is produced which is economically efficient
D)   Defeated; the public good is not produced, which is the proper outcomeE) None of the above
F) A) and B)

Exam 5: Governments Role and Government Failure

In presidential elections, voters often find that they do not agree with any single candidate on all the issues that matter to them (the voters) . This is known as the:

Correct Answer
verified

If the government runs a smaller budget deficit, then the public debt will decrease.

Correct Answer
verified

Correct Answer
verified

One major role that the government plays in the market economy of the U.S. is:

Correct Answer
verified

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

Correct Answer
verified

In the U.S., the Federal government runs a chronic budget deficit, whereas many state and local governments do not, because:

Correct Answer
verified

Loan guarantees provided by the government for specific private-sector investments tend to:

Correct Answer
verified

The special interest effect in government is the reason why firms in some industries are willing to pay huge amounts of money to lobbyists.

Correct Answer
verified

Monetary policy refers to the government's attempt at smoothing business cycles through the use of changes in:

Correct Answer
verified

Correct Answer
verified

The trading of votes to secure favorable outcomes on decisions which would otherwise be defeated is called:

Correct Answer
verified

A budget deficit is another name for the public debt.

Correct Answer
verified

What is a likely explanation for why the budget of a government agency might increase beyond its optimal size?

Correct Answer
verified

Correct Answer
verified

The concept of limited and bundled choice, as used in public choice theory, refers to the fact that:

Correct Answer
verified

Making blackmail, extortion, and other forms of private coercion illegal is one way that government:

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

The "pork" in pork-barrel politics refers to government projects that politicians try to secure in favor of the common good for the whole nation.

Correct Answer
verified

Inefficiencies associated with majority voting may get resolved through:

Correct Answer
verified

Exam 5: Governments Role and Government Failure

In presidential elections, voters often find that they do not agree with any single candidate on all the issues that matter to them (the voters) . This is known as the:

Correct AnswerverifiedShow Answer

If the government runs a smaller budget deficit, then the public debt will decrease.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

One major role that the government plays in the market economy of the U.S. is:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

In the U.S., the Federal government runs a chronic budget deficit, whereas many state and local governments do not, because:

Correct AnswerverifiedShow Answer

Loan guarantees provided by the government for specific private-sector investments tend to:

Correct AnswerverifiedShow Answer

The special interest effect in government is the reason why firms in some industries are willing to pay huge amounts of money to lobbyists.

Correct AnswerverifiedShow Answer

Monetary policy refers to the government's attempt at smoothing business cycles through the use of changes in:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The trading of votes to secure favorable outcomes on decisions which would otherwise be defeated is called:

Correct AnswerverifiedShow Answer

A budget deficit is another name for the public debt.

Correct AnswerverifiedShow Answer

What is a likely explanation for why the budget of a government agency might increase beyond its optimal size?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The concept of limited and bundled choice, as used in public choice theory, refers to the fact that:

Correct AnswerverifiedShow Answer

Making blackmail, extortion, and other forms of private coercion illegal is one way that government:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The "pork" in pork-barrel politics refers to government projects that politicians try to secure in favor of the common good for the whole nation.

Correct AnswerverifiedShow Answer

Inefficiencies associated with majority voting may get resolved through:

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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