Question 1

Suppose the U.S. House of Representatives is debating a bill to fund construction and maintenance for the nation's highway system. Representative Sandy Shady adds a provision to the bill that would fund a new public art museum in her district. The authorization of expenditure for the museum would be an example of

Accepted Answer

A)   an earmark.
B)   an unfunded liability.
C)   a collective action problem.
D)   a principal-agent problem.E) All of the above
F) C) and D)

Question 2

Suppose a college economics department decides to use a single economics text for all sections of principles of economics. Also assume that the three individual members of the textbook selection committee have the following preferences.  Assuming all other textbook qualities except analytical level are the same, paired-choice majority voting will result in the committee

Accepted Answer

A)   being deadlocked and unable to decide on a book.
B)   selecting the C/F book.
C)   selecting the M/B book.
D)   selecting the O/S book.E) A) and D)
F) B) and C)

Question 3

Economists call the pursuit of a transfer of wealth through government at someone else's expense

Accepted Answer

A)   the paradox of voting.
B)   adverse selection.
C)   rent-seeking behavior.
D)   the benefits-received principle.E) A) and B)
F) A) and C)

Question 4

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 $600 per person, a majority vote will

Accepted Answer

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

Question 5

The size and scope of government inhibit the flow of information to decision makers, leading to inefficient outcomes.

Accepted Answer

A) True 
 B)False

Question 6

Public choice theory focuses on the economics of

Accepted Answer

A)   fiscal and monetary policy.
B)   the behavior of business firms.
C)   antitrust and regulatory policy.
D)   government decision making, politics, and elections.E) All of the above
F) A) and C)

Question 7

As long as government officials have to be elected, they are always held accountable for their policy decisions and choices.

Accepted Answer

A) True 
 B)False

Question 8

One consequence of the paradox of voting is that whoever sets the agenda of a vote could practically predetermine the results of the vote.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following is considered a potential solution to some regulatory capture?

Accepted Answer

A)   bringing industry experts into the regulatory process
B)   creating a standard set of regulations for all industries
C)   deregulation of the industry
D)   government subsidies for firms in the industryE) B) and C)
F) A) and B)

Question 10

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 B)
F) A) and C)

Question 11

(Consider This)  Voter failure describes the situation where

Accepted Answer

A)   an insufficient number of voters turn out to express their preferences.
B)   voter preferences cannot be adequately captured because of a voting paradox.
C)   voters support policies that would reduce productive and allocative efficiency.
D)   government officials make poor decisions that contradict voter preferences.E) None of the above
F) B) and D)

Question 12

Suppose lawyers seek legislation to limit the use of computer software that enables people to use their personal computers to self-prepare their own wills, trusts, and other legal documents. This is an example of

Accepted Answer

A)   logrolling.
B)   the principal-agent problem.
C)   rent-seeking behavior.
D)   limited and bundled choices.E) None of the above
F) All of the above

Question 13

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

Question 14

To reduce politicization of policy making, many countries have given control of to politically independent central banks.

Accepted Answer

A)   fiscal policy
B)   monetary policy
C)   unfunded liabilities
D)   budget deficitsE) All of the above
F) A) and C)

Question 15

A budget deficit will require the government to issue bonds to fill in the gap in the budget.

Accepted Answer

A) True 
 B)False

Question 16

Even if a majority of the population wants a law and the law is passed, the outcome may still be economically inefficient.

Accepted Answer

A) True 
 B)False

Question 17

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

Question 18

Regulatory capture in government happens because the people who are most qualified to supervise and regulate an industry oftentimes are or have been the leaders of the industry.

Accepted Answer

A) True 
 B)False

Question 19

Monetary policy attempts to change the level of spending by altering interest rates.

Accepted Answer

A) True 
 B)False

Question 20

(Last Word)  In 2004, Congress passed a corporate tax relief bill with 276 provisions for tax breaks to groups such as restaurant owners, Hollywood producers, and NASCAR track owners. This is an example of the

Accepted Answer

A)   special-interest effect.
B)   benefits-received principle.
C)   paradox of voting.
D)   principal-agent problem.E) A) and C)
F) B) and C)

Exam 5: Governments Role and Government Failure

A budget deficit will require the government to issue bonds to fill in the gap in the budget.

Correct Answer
verified

(Last Word) In 2004, Congress passed a corporate tax relief bill with 276 provisions for tax breaks to groups such as restaurant owners, Hollywood producers, and NASCAR track owners. This is an example of the

Correct Answer
verified

(Consider This) Voter failure describes the situation where

Correct Answer
verified

Public choice theory focuses on the economics of

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

The size and scope of government inhibit the flow of information to decision makers, leading to inefficient outcomes.

Correct Answer
verified

Suppose lawyers seek legislation to limit the use of computer software that enables people to use their personal computers to self-prepare their own wills, trusts, and other legal documents. This is an example of

Correct Answer
verified

Monetary policy attempts to change the level of spending by altering interest rates.

Correct Answer
verified

Regulatory capture in government happens because the people who are most qualified to supervise and regulate an industry oftentimes are or have been the leaders of the industry.

Correct Answer
verified

One consequence of the paradox of voting is that whoever sets the agenda of a vote could practically predetermine the results of the vote.

Correct Answer
verified

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 $600 per person, a majority vote will

Correct Answer
verified

Which of the following is considered a potential solution to some regulatory capture?

Correct Answer
verified

To reduce politicization of policy making, many countries have given control of to politically independent central banks.

Correct Answer
verified

Economists call the pursuit of a transfer of wealth through government at someone else's expense

Correct Answer
verified

Correct Answer
verified

Chronic budget deficits can be attributed to

Correct Answer
verified

Correct Answer
verified

As long as government officials have to be elected, they are always held accountable for their policy decisions and choices.

Correct Answer
verified

Even if a majority of the population wants a law and the law is passed, the outcome may still be economically inefficient.

Correct Answer
verified

Exam 5: Governments Role and Government Failure

A budget deficit will require the government to issue bonds to fill in the gap in the budget.

Correct AnswerverifiedShow Answer

(Last Word) In 2004, Congress passed a corporate tax relief bill with 276 provisions for tax breaks to groups such as restaurant owners, Hollywood producers, and NASCAR track owners. This is an example of the

Correct AnswerverifiedShow Answer

(Consider This) Voter failure describes the situation where

Correct AnswerverifiedShow Answer

Public choice theory focuses on the economics of

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The size and scope of government inhibit the flow of information to decision makers, leading to inefficient outcomes.

Correct AnswerverifiedShow Answer

Suppose lawyers seek legislation to limit the use of computer software that enables people to use their personal computers to self-prepare their own wills, trusts, and other legal documents. This is an example of

Correct AnswerverifiedShow Answer

Monetary policy attempts to change the level of spending by altering interest rates.

Correct AnswerverifiedShow Answer

Regulatory capture in government happens because the people who are most qualified to supervise and regulate an industry oftentimes are or have been the leaders of the industry.

Correct AnswerverifiedShow Answer

One consequence of the paradox of voting is that whoever sets the agenda of a vote could practically predetermine the results of the vote.

Correct AnswerverifiedShow Answer

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 $600 per person, a majority vote will

Correct AnswerverifiedShow Answer

Which of the following is considered a potential solution to some regulatory capture?

Correct AnswerverifiedShow Answer

To reduce politicization of policy making, many countries have given control of to politically independent central banks.

Correct AnswerverifiedShow Answer

Economists call the pursuit of a transfer of wealth through government at someone else's expense

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Chronic budget deficits can be attributed to

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

As long as government officials have to be elected, they are always held accountable for their policy decisions and choices.

Correct AnswerverifiedShow Answer

Even if a majority of the population wants a law and the law is passed, the outcome may still be economically inefficient.

Correct AnswerverifiedShow Answer

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