Question 1

John Smith is a typical citizen. Economic theory suggests that he is likely to make a more informed choice when he buys a personal computer than when he votes for a congressional candidate. This view is

Accepted Answer

A)   false because the actions of legislators will exert a greater impact on Smith's welfare than will the purchase of the computer.
B)   false; Smith will tend to choose more carefully when he makes public choices than when he makes private choices.
C)   uncertain; it would be true if, and only if, Smith's spending on personal computers exceeds his tax bill.
D)   true; since Smith can decide what computer to buy, but his individual vote is very unlikely to decide the outcome of a congressional election, he has more incentive to inform himself about the computer than the congressional election.

Question 2

Legislators often gain by bundling a number of projects benefiting local districts at the expense of general taxpayers together on a single bill. Such legislation is called

Accepted Answer

A)   market failure legislation.
B)   the rational-ignorance effect.
C)   public-goods legislation.
D)   pork-barrel legislation.

Question 3

Legislation that offers immediate and easily recognized benefits, at the expense of uncertain costs that are in the distant future (such as financing by government debt) , is often enacted even when economic inefficiency results. This can be expected because of

Accepted Answer

A)   a lack of incentive for operational efficiency in the public sector.
B)   market failure.
C)   the special-interest effect.
D)   the shortsightedness effect.

Question 4

When goods are produced privately, but the cost of their purchase is paid for by the taxpayer or some other third party,

Accepted Answer

A)   consumers have a strong incentive to search out those firms offering them the best deal.
B)   private producers of such goods will have little incentive to control costs and provide them at low prices.
C)   goods and services will only be supplied if consumers are willing to pay an amount sufficient to cover their production costs.
D)   the invisible hand will direct consumers and producers toward an efficient level of output.

Question 5

In 2010, the combined expenditures of federal, state, and local governments in the United States were approximately 40 percent of gross domestic product (GDP) . Approximately what percentage of GDP were government expenditures in 1930?

Accepted Answer

A)   9 percent
B)   19 percent
C)   29 percent
D)   39 percent

Question 6

When voters pay taxes in proportion to the benefits they receive from government projects,

Accepted Answer

A)   efficient projects will tend to be opposed by a majority of voters.
B)   inefficient projects will often be favored by a majority of voters.
C)   projects that are efficient will tend to be favored by an overwhelming majority of voters.
D)   democratic political decision making can be expected to work poorly.

Question 7

Public choice theory indicates that competitive forces between candidates in elections provide a politician with a strong incentive to offer voters a bundle of political goods that she believes

Accepted Answer

A)   is best for the economic and political situations the country faces.
B)   will most likely clear the legislative process.
C)   will increase the welfare of society.
D)   will increase her chances of winning elections.

Question 8

For activities in which the benefits are concentrated and the costs widespread, governments are likely to undertake

Accepted Answer

A)   too little of these activities relative to what would be efficient.
B)   too much of these activities relative to what would be efficient.
C)   exactly the amount of these activities that would be efficient.
D)   none of these activities.

Question 9

Which of the following refers to when legislators trade votes on legislation?

Accepted Answer

A)   logrolling
B)   the special interest effect
C)   rational ignorance
D)   the shortsightedness effect

Question 10

Subsidizing coal mining and orange growing have both been found to be economically inefficient in that the costs outweigh the benefits. However, a subsidy on coal mining would help the coal producers in West Virginia and a subsidy on orange growing would help the orange farmers in Florida. So the senator from West Virginia approaches the senator from Florida and says that he will vote for the orange subsidy if the Florida senator votes for the coal-mining subsidy. The Florida senator agrees. Which term best describes what just happened?

Accepted Answer

A)   the shortsightedness effect
B)   logrolling
C)   the use of user charges
D)   the political voter theory

Question 11

According to the special-interest effect, which of the following groups is least likely to have a significant influence on the political process?

Accepted Answer

A)   the American Federation of Labor
B)   the National Association of Manufacturers
C)   nonunion employees
D)   the American Medical Association

Question 12

The rational-ignorance effect is a result of

Accepted Answer

A)   externalities that lead to an excess supply of information.
B)   the limited incentive of the news media to cover political campaigns.
C)   the expectation of individual voters that their vote will not be decisive.
D)   the lack of a college education on the part of most voters in the United States.

Question 13

Which of the following provides the best summary of the basic idea of public choice analysis?

Accepted Answer

A)   Public choice analysis applies the principles of economics to political science topics.
B)   Public choice analysis takes the principles of political science and applies them to the traditional topics of economics.
C)   Public choice analysis uses the principle of majority rule to determine the efficiency of an action.
D)   Public choice analysis indicates there is a sharp distinction between economic and political topics.

Question 14

Legislation that offers immediate and easily recognized benefits, at the expense of costs that are observable only in the distant future, is often enacted even when economic inefficiency results. This can be expected because of

Accepted Answer

A)   a lack of incentive for operational efficiency in the public sector.
B)   market failure.
C)   the special-interest effect.
D)   the shortsightedness effect.

Question 15

Which of the following provides the most reasonable explanation for why agricultural interests lobby for higher farm subsidies and price supports?

Accepted Answer

A)   Without the farm subsidies, food shortages would result.
B)   Subsidies promote the efficient use of agricultural resources.
C)   Agricultural interests seek a redistribution of income favoring themselves.
D)   The price support programs reduce food costs, which helps the poor.

Question 16

Which of the following is a predictable side effect of increased government activity (e.g., taxes and subsidies)  designed to redistribute income among citizens?

Accepted Answer

A)   improvement in the operational efficiency of government agencies
B)   budget surpluses
C)   reduction in the poverty rate
D)   an increase in rent-seeking activity

Question 17

If new regulations make it illegal to sell older model electrical appliances, then

Accepted Answer

A)   producers of new models that meet the regulations will see demand for their output rise.
B)   consumers who might have purchased to older appliances are clearly made better off.
C)   consumers are helped, but the profits of appliance producers are not affected.
D)   consumers will certainly gain from the change.

Question 18

Which of the following increases the political power of special interest groups and makes counterproductive government action more likely?

Accepted Answer

A)   logrolling and pork barrel legislation
B)   the rational-ignorance effect
C)   public goods
D)   both a and b, but not c

Question 19

Public choice analysis indicates

Accepted Answer

A)   most income transfers will be directed toward the poor.
B)   rent-seeking activities will improve the efficiency of resource allocation and promote economic growth.
C)   rent seeking will be less attractive if the nation's legal (or constitutional)  structure makes it difficult to use the political process to take the property or income of others.
D)   politicians will consistently oppose programs favored by rent seekers if those programs reduce the welfare of society.

Question 20

A local government operates a city water system and finances it through fees that it charges to water consumers. This type of financing is an example of a

Accepted Answer

A)   head tax.
B)   excise fee.
C)   progressive tax.
D)   user charge.

Exam 6: The Economics of Collective Decision-Making

Public choice theory indicates that competitive forces between candidates in elections provide a politician with a strong incentive to offer voters a bundle of political goods that she believes

Correct Answer
verified

Which of the following provides the best summary of the basic idea of public choice analysis?

Correct Answer
verified

Which of the following is a predictable side effect of increased government activity (e.g., taxes and subsidies) designed to redistribute income among citizens?

Correct Answer
verified

When voters pay taxes in proportion to the benefits they receive from government projects,

Correct Answer
verified

John Smith is a typical citizen. Economic theory suggests that he is likely to make a more informed choice when he buys a personal computer than when he votes for a congressional candidate. This view is

Correct Answer
verified

If new regulations make it illegal to sell older model electrical appliances, then

Correct Answer
verified

Legislators often gain by bundling a number of projects benefiting local districts at the expense of general taxpayers together on a single bill. Such legislation is called

Correct Answer
verified

Which of the following refers to when legislators trade votes on legislation?

Correct Answer
verified

Which of the following increases the political power of special interest groups and makes counterproductive government action more likely?

Correct Answer
verified

Public choice analysis indicates

Correct Answer
verified

Which of the following provides the most reasonable explanation for why agricultural interests lobby for higher farm subsidies and price supports?

Correct Answer
verified

According to the special-interest effect, which of the following groups is least likely to have a significant influence on the political process?

Correct Answer
verified

The rational-ignorance effect is a result of

Correct Answer
verified

Legislation that offers immediate and easily recognized benefits, at the expense of uncertain costs that are in the distant future (such as financing by government debt) , is often enacted even when economic inefficiency results. This can be expected because of

Correct Answer
verified

A local government operates a city water system and finances it through fees that it charges to water consumers. This type of financing is an example of a

Correct Answer
verified

For activities in which the benefits are concentrated and the costs widespread, governments are likely to undertake

Correct Answer
verified

In 2010, the combined expenditures of federal, state, and local governments in the United States were approximately 40 percent of gross domestic product (GDP) . Approximately what percentage of GDP were government expenditures in 1930?

Correct Answer
verified

Correct Answer
verified

Legislation that offers immediate and easily recognized benefits, at the expense of costs that are observable only in the distant future, is often enacted even when economic inefficiency results. This can be expected because of

Correct Answer
verified

When goods are produced privately, but the cost of their purchase is paid for by the taxpayer or some other third party,

Correct Answer
verified

Exam 6: The Economics of Collective Decision-Making

Public choice theory indicates that competitive forces between candidates in elections provide a politician with a strong incentive to offer voters a bundle of political goods that she believes

Correct AnswerverifiedShow Answer

Which of the following provides the best summary of the basic idea of public choice analysis?

Correct AnswerverifiedShow Answer

Which of the following is a predictable side effect of increased government activity (e.g., taxes and subsidies) designed to redistribute income among citizens?

Correct AnswerverifiedShow Answer

When voters pay taxes in proportion to the benefits they receive from government projects,

Correct AnswerverifiedShow Answer

John Smith is a typical citizen. Economic theory suggests that he is likely to make a more informed choice when he buys a personal computer than when he votes for a congressional candidate. This view is

Correct AnswerverifiedShow Answer

If new regulations make it illegal to sell older model electrical appliances, then

Correct AnswerverifiedShow Answer

Legislators often gain by bundling a number of projects benefiting local districts at the expense of general taxpayers together on a single bill. Such legislation is called

Correct AnswerverifiedShow Answer

Which of the following refers to when legislators trade votes on legislation?

Correct AnswerverifiedShow Answer

Which of the following increases the political power of special interest groups and makes counterproductive government action more likely?

Correct AnswerverifiedShow Answer

Public choice analysis indicates

Correct AnswerverifiedShow Answer

Which of the following provides the most reasonable explanation for why agricultural interests lobby for higher farm subsidies and price supports?

Correct AnswerverifiedShow Answer

According to the special-interest effect, which of the following groups is least likely to have a significant influence on the political process?

Correct AnswerverifiedShow Answer

The rational-ignorance effect is a result of

Correct AnswerverifiedShow Answer

Legislation that offers immediate and easily recognized benefits, at the expense of uncertain costs that are in the distant future (such as financing by government debt) , is often enacted even when economic inefficiency results. This can be expected because of

Correct AnswerverifiedShow Answer

A local government operates a city water system and finances it through fees that it charges to water consumers. This type of financing is an example of a

Correct AnswerverifiedShow Answer

For activities in which the benefits are concentrated and the costs widespread, governments are likely to undertake

Correct AnswerverifiedShow Answer

In 2010, the combined expenditures of federal, state, and local governments in the United States were approximately 40 percent of gross domestic product (GDP) . Approximately what percentage of GDP were government expenditures in 1930?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Legislation that offers immediate and easily recognized benefits, at the expense of costs that are observable only in the distant future, is often enacted even when economic inefficiency results. This can be expected because of

Correct AnswerverifiedShow Answer

When goods are produced privately, but the cost of their purchase is paid for by the taxpayer or some other third party,

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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