Question 1

Government's ability to enforce laws and contracts increases private-sector economic risks.

Accepted Answer

A) True 
 B)False

Question 2

The median-voter model implies that:

Accepted Answer

A)   political voting will be as economically efficient as "dollar voting" in competitive markets.
B)   all voters have about the same preferences for various public goods and services.
C)   many people will be dissatisfied with the size of government in the economy.
D)   with majority voting there can never be a consistent ordering of public good preferences.E) A) and C)
F) A) and B)

Question 3

To curb the problem of voters wanting immediate benefits and deferred costs,many state governments in the United States have:

Accepted Answer

A)   made unfunded liabilities illegal.
B)   resorted to greater use of monetary policy.
C)   passed laws requiring balanced budgets.
D)   stopped using fiscal policy.E) None of the above
F) B) and C)

Question 4

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

Accepted Answer

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

Question 5

(Consider This) Government passes a law requiring all domestic clothing factories to pay workers at least $20 per hour.As a result,domestic clothing companies move their operations overseas,leaving domestic workers unemployed.This situation illustrates the problem of:

Accepted Answer

A)   political corruption.
B)   unintended consequences.
C)   misdirection of stabilization policy.
D)   principal-agent.E) A) and C)
F) B) and D)

Question 6

The U.S.federal government's largest unfunded liability is:

Accepted Answer

A)   Medicare.
B)   national defense.
C)   Social Security.
D)   unemployment insurance.E) A) and B)
F) None of the above

Question 7

A government using fiscal policy in an attempt to stimulate the economy would do which of the following?

Accepted Answer

A)   Raise taxes.
B)   Raise interest rates.
C)   Lower interest rates.
D)   Raise government spending.E) A) and D)
F) B) and C)

Question 8

Answer the question on the basis of the following table that shows the total costs and total benefits facing a city of five different potential baseball stadiums of increasing size.All figures are in millions of dollars.   Stadium ‾ Total Cost ‾ Total Benefit ‾ A $80$140 B 100200 C 130250 D 165290 E 220300\begin{array}{l}\begin{array}{ccc}\underline{	ext { Stadium }}&\underline{	ext { Total Cost }}&\underline{	ext { Total Benefit }}\	ext { A } & \$ 80 & \$ 140 \	ext { B } & 100 & 200 \	ext { C } & 130 & 250 \	ext { D } & 165 & 290 \	ext { E } & 220 & 300\end{array}\end{array} Stadium ​ A  B  C  D  E ​ Total Cost ​$80100130165220​ Total Benefit ​$140200250290300​​  Refer to the table.The marginal cost and marginal benefit of stadium B (relative to A) are:

Accepted Answer

A)   $20 million and $50 million,respectively.
B)   $100 million and $200 million,respectively.
C)   $30 million and $50 million,respectively.
D)   $20 million and $60 million,respectively. E) A) and D)
F) A) and C)

Question 9

A debt crisis refers to how much government spending exceeds tax revenues in a given year.

Accepted Answer

A) True 
 B)False

Question 10

(Last Word) In 2011,Congress funded a sanctuary for white squirrels,a giant roadside coffee pot,and an antique bicycle museum.This is an example of:

Accepted Answer

A)   the paradox of voting.
B)   pork barrel politics.
C)   the benefits-received principle.
D)   the adverse selection problem.E) A) and D)
F) B) and C)

Question 11

Suppose that Katie and Kelly each expects to receive $500 worth of marginal benefits from a proposed new recreation center,whereas Kerry expects to receive only $100 worth.If the proposed tax levied on each for the center would be $400,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 efficiently allocated.
C)   pass this project and resources will be underallocated to it.
D)   pass this project and resources will be overallocated to it.E) None of the above
F) A) and D)

Question 12

Deregulation:

Accepted Answer

A)   tends to improve outcomes in industries generating substantial negative externalities.
B)   eliminates regulatory capture and can improve outcomes by increasing competition.
C)   is most appropriate to undertake by government agencies responsible for human safety,financial regulation,and environmental protection.
D)   always generates greater economic efficiency.E) None of the above
F) A) and C)

Question 13

The Road Runner Club contributes money to Senator Sly's reelection campaign fund,and Senator Sly helps pass legislation to add more jogging paths across the state.From this we can definitively conclude:

Accepted Answer

A)   that political corruption has occurred.
B)   that logrolling has occurred.
C)   that a principal-agent problem has occurred.
D)   nothing;the Road Runner Club may have donated to Senator Sly because he already supported the jogging paths.E) A) and B)
F) A) and C)

Question 14

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

Question 15

Regulatory capture occurs when government exerts excessive control over an industry.

Accepted Answer

A) True 
 B)False

Question 16

Individual accountability within the government bureaucracy:

Accepted Answer

A)   tends to be greater than in private firms,making government more efficient than private firms.
B)   is not a problem because government bureaucrats are not affected by the self-interest that affects private sector individuals.
C)   is easy to monitor because of the small size and scope of government.
D)   tends to be lacking because of civil service protections and the complexity of government.E) B) and C)
F) B) and D)

Question 17

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) None of the above
F) A) and C)

Question 18

(Consider This) Subsidies for mohair production illustrate:

Accepted Answer

A)   why special-interest effects are often characterized by concentrated benefits and diffuse costs.
B)   why special-interest effects are often characterized by concentrated costs and diffuse benefits.
C)   that larger groups carry greater political weight than smaller groups.
D)   the moral hazard problem.E) A) and C)
F) B) and C)

Question 19

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) All of the above
F) A) and C)

Question 20

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 D)
F) A) and C)

Exam 5: Governments Role and Government Failure

The median-voter model implies that:

Correct Answer
verified

A debt crisis refers to how much government spending exceeds tax revenues in a given year.

Correct Answer
verified

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

Correct Answer
verified

In representative democracy,voters are and politicians are __.

Correct Answer
verified

Government's ability to enforce laws and contracts increases private-sector economic risks.

Correct Answer
verified

Public choice economists contend public bureaucracies are inefficient primarily because:

Correct Answer
verified

(Last Word) In 2011,Congress funded a sanctuary for white squirrels,a giant roadside coffee pot,and an antique bicycle museum.This is an example of:

Correct Answer
verified

(Consider This) Government passes a law requiring all domestic clothing factories to pay workers at least $20 per hour.As a result,domestic clothing companies move their operations overseas,leaving domestic workers unemployed.This situation illustrates the problem of:

Correct Answer
verified

Suppose that Katie and Kelly each expects to receive $500 worth of marginal benefits from a proposed new recreation center,whereas Kerry expects to receive only $100 worth.If the proposed tax levied on each for the center would be $400,a majority vote will:

Correct Answer
verified

(Consider This) Subsidies for mohair production illustrate:

Correct Answer
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Deregulation:

Correct Answer
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A government using fiscal policy in an attempt to stimulate the economy would do which of the following?

Correct Answer
verified

Correct Answer
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Individual accountability within the government bureaucracy:

Correct Answer
verified

The Road Runner Club contributes money to Senator Sly's reelection campaign fund,and Senator Sly helps pass legislation to add more jogging paths across the state.From this we can definitively conclude:

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

To curb the problem of voters wanting immediate benefits and deferred costs,many state governments in the United States have:

Correct Answer
verified

The U.S.federal government's largest unfunded liability is:

Correct Answer
verified

Regulatory capture occurs when government exerts excessive control over an industry.

Correct Answer
verified

Exam 5: Governments Role and Government Failure

The median-voter model implies that:

Correct AnswerverifiedShow Answer

A debt crisis refers to how much government spending exceeds tax revenues in a given year.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Government's ability to enforce laws and contracts increases private-sector economic risks.

Correct AnswerverifiedShow Answer

Public choice economists contend public bureaucracies are inefficient primarily because:

Correct AnswerverifiedShow Answer

(Last Word) In 2011,Congress funded a sanctuary for white squirrels,a giant roadside coffee pot,and an antique bicycle museum.This is an example of:

Correct AnswerverifiedShow Answer

(Consider This) Government passes a law requiring all domestic clothing factories to pay workers at least $20 per hour.As a result,domestic clothing companies move their operations overseas,leaving domestic workers unemployed.This situation illustrates the problem of:

Correct AnswerverifiedShow Answer

Suppose that Katie and Kelly each expects to receive $500 worth of marginal benefits from a proposed new recreation center,whereas Kerry expects to receive only $100 worth.If the proposed tax levied on each for the center would be $400,a majority vote will:

Correct AnswerverifiedShow Answer

(Consider This) Subsidies for mohair production illustrate:

Correct AnswerverifiedShow Answer

Deregulation:

Correct AnswerverifiedShow Answer

A government using fiscal policy in an attempt to stimulate the economy would do which of the following?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Individual accountability within the government bureaucracy:

Correct AnswerverifiedShow Answer

The Road Runner Club contributes money to Senator Sly's reelection campaign fund,and Senator Sly helps pass legislation to add more jogging paths across the state.From this we can definitively conclude:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

To curb the problem of voters wanting immediate benefits and deferred costs,many state governments in the United States have:

Correct AnswerverifiedShow Answer

The U.S.federal government's largest unfunded liability is:

Correct AnswerverifiedShow Answer

Regulatory capture occurs when government exerts excessive control over an industry.

Correct AnswerverifiedShow Answer

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Correct Answer
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Correct Answer
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In representative democracy,voters are and politicians are __.

Correct Answer
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