Question 1

Changes in tax rates are a form of monetary policy.

Accepted Answer

A) True 
 B)False

Question 2

Answer the question on the basis of this table showing the marginal benefit that a particular public project will provide to each of the three members of a community.No vote trading is allowed.  If the tax cost of this proposed project is $300 per person, a majority vote will:

Accepted Answer

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

Question 3

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

Accepted Answer

A)  Voters support adding stop lights 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.E) B) and C)
F) All of the above

Question 4

Public choice economists contend public bureaucracies are inefficient primarily because:

Accepted Answer

A)  the value of public goods is more easily measured than is the value of private goods.
B)  of the absence of competitive market pressures.
C)  public sector workers are more security-conscious than are private sector workers.
D)  relatively low pay in government attracts workers of lesser quality.E) B) and C)
F) A) and C)

Question 5

In corporations, owners are __________________ and managers are ________________.

Accepted Answer

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

Question 6

In representative democracy, voters are ____________ and politicians are ______________.

Accepted Answer

A)  agents; principals
B)  logrollers; principals
C)  agents; employees
D)  principals; agentsE) None of the above
F) A) and B)

Question 7

Regulatory capture often occurs because of which of the following?

Accepted Answer

A)  Government officials want stronger control over industry regulation.
B)  Nearly everyone with expertise works in the regulated industry.
C)  Patent law allows firms to gain monopoly power easily and therefore control a market.
D)  Consumer groups are effective at lobbying the government for industry regulation.E) All of the above
F) A) and B)

Question 8

Weak government enforcement of contracts and laws tends to:

Accepted Answer

A)  increase economic efficiency by minimizing government interference.
B)  stimulate innovation and investment.
C)  discourage economic activity by encouraging private-sector coercion such as blackmail and extortion.
D)  not affect economic activity, as incentives for theft and deception are low.E) None of the above
F) A) and D)

Question 9

The appeal to government for special benefits at taxpayers' or someone else's expense is called:

Accepted Answer

A)  rent seeking.
B)  rent expense.
C)  rent revenue.
D)  land rent.E) C) and D)
F) None of the above

Question 10

The unlawful misdirection of governmental resources for personal gain is known as:

Accepted Answer

A)  political corruption.
B)  logrolling.
C)  adverse selection.
D)  the special-interest effect.E) A) and D)
F) B) and D)

Question 11

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 as between the two.
D)  no voter decision is possible.E) All of the above
F) A) and C)

Question 12

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

Accepted Answer

A)  logrolling.
B)  the paradox of voting.
C)  the median-voter model.
D)  the special-interest effect.E) B) and C)
F) None of the above

Question 13

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.E) A) and B)
F) B) and D)

Question 14

The information contained in the table illustrates:

Accepted Answer

A)  political logrolling.
B)  the median-voter model.
C)  the paradox of voting.
D)  the principal-agent problem theorem.E) None of the above
F) A) and B)

Question 15

Chronic budget deficits can be attributed to:

Accepted Answer

A)  unfunded liabilities.
B)  voters wanting government programs but not wanting to pay taxes.
C)  inappropriate monetary policy.
D)  state budget laws.E) A) and D)
F) C) and D)

Question 16

As it relates to the political process, the principal-agent problem results from the:

Accepted Answer

A)  negative externalities that are created by some policy actions.
B)  political rules that encourage elected officials to engage in unethical and illegal behavior.
C)  inconsistency between voters' interest in programs and politicians' interest in reelection.
D)  paradox of voting.E) All of the above
F) C) and D)

Question 17

Deregulation is seen as a solution to regulatory capture because it eliminates the regulatory agency that can or has been captured.

Accepted Answer

A) True 
 B)False

Question 18

Refer to the table.The inconsistency illustrated by the table is that, while a majority of voters prefer the:

Accepted Answer

A)  highway to the lighthouse and the submarine to the highway, they also prefer the lighthouse to the submarine.
B)  lighthouse to the highway and the lighthouse to the submarine, they also prefer the submarine to the highway.
C)  highway to the lighthouse and the submarine to the lighthouse, they also prefer the submarine to the highway.
D)  lighthouse to the submarine and the highway to the submarine, they also prefer the highway to the lighthouse.E) B) and D)
F) B) and C)

Question 19

Refer to the table.In a choice between parks and education:

Accepted Answer

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

Question 20

Economists widely support deregulation of industries that tend toward monopoly or generate substantial negative externalities.

Accepted Answer

A) True 
 B)False

Exam 5: Part B: Governments Role and Government Failure

Refer to the table.The inconsistency illustrated by the table is that, while a majority of voters prefer the:

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Weak government enforcement of contracts and laws tends to:

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

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As it relates to the political process, the principal-agent problem results from the:

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Chronic budget deficits can be attributed to:

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The appeal to government for special benefits at taxpayers' or someone else's expense is called:

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In corporations, owners are __________________ and managers are ________________.

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Answer the question on the basis of this table showing the marginal benefit that a particular public project will provide to each of the three members of a community.No vote trading is allowed. If the tax cost of this proposed project is $300 per person, a majority vote will:

Correct AnswerverifiedShow Answer

Changes in tax rates are a form of monetary policy.

Correct AnswerverifiedShow Answer

The unlawful misdirection of governmental resources for personal gain is known as:

Correct AnswerverifiedShow Answer

In representative democracy, voters are ____________ and politicians are ______________.

Correct AnswerverifiedShow Answer

Economists widely support deregulation of industries that tend toward monopoly or generate substantial negative externalities.

Correct AnswerverifiedShow Answer

Public choice economists contend public bureaucracies are inefficient primarily because:

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Regulatory capture often occurs because of which of the following?

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

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

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Refer to the table.In a choice between parks and education:

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Deregulation is seen as a solution to regulatory capture because it eliminates the regulatory agency that can or has been captured.

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

Correct AnswerverifiedShow Answer

The information contained in the table illustrates:

Correct AnswerverifiedShow Answer

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In corporations, owners are __ and managers are .

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In representative democracy, voters are and politicians are __.

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