Question 1

Refer to the above table, which shows the ranked preferences of voters for three alternative projects, with "1" being the top preference. In a paired-choice vote between a jail and a stadium:

Accepted Answer

A)   A majority of the voters would favor the jail, 2-to-1
B)   A majority of the voters would favor the stadium, 2-to-1
C)   A majority of the voters would favor the jail, 3-to-0
D)   A majority of the voters would favor the stadium, 3-to-0E) A) and D)
F) B) and C)

Question 2

Loan guarantees provided by government will reduce the willingness of investors to take on the risk in a project.

Accepted Answer

A) True 
 B)False

Question 3

In the median-voter model, the median voter refers to the voter who makes her choice at the midpoint of the voting period.

Accepted Answer

A) True 
 B)False

Question 4

The so-called collective action problem is the reason why:

Accepted Answer

A)   Taxpayers are not able to effectively counter special interest groups
B)   Corporations have board of directors
C)   We have local and national elections
D)   Majority voting can lead to economically inefficient outcomesE) All of the above
F) A) and D)

Question 5

If choice A wins over choice B in a majority vote, while choice B wins over choice C in a majority vote, then we can conclude that choice A would win over choice
C.

Accepted Answer

A) True 
 B)False

Question 6

Government's ability to reduce private-sector economic risks through laws and regulations would encourage all of the following, except:

Accepted Answer

A)   Higher levels of private economic investment
B)   Formation of new businesses
C)   Introduction of new products and processes
D)   Reduction of private goods and servicesE) A) and B)
F) All of the above

Question 7

Rent-seeking behavior in public choice theory refers to:

Accepted Answer

A)   Politicians trading votes with one another
B)   Receiving perks and freebies from businesses trying to sway their votes
C)   Specific groups appealing to government for special benefits at someone else's expense
D)   Politicians getting low rent for their living quarters when government is in sessionE) None of the above
F) A) and B)

Question 8

Interest groups result when people:

Accepted Answer

A)   In a certain zip code vote together
B)   Who share strong preferences on a choice band together
C)   Do not all vote in elections
D)   Do not have strong preferences on the issues to be voted onE) B) and D)
F) A) and B)

Question 9

Government laws and policies need to be uniformly enforced. But this leads to all of the following problems, except:

Accepted Answer

A)   Inflexibility
B)   Massive paperwork
C)   Excessively detailed rules
D)   Haphazard applicationE) A) and B)
F) B) and D)

Question 10

Many governments end up with chronic budget deficits because:

Accepted Answer

A)   Many government programs are popular with voters, but hardly any voter likes paying taxes
B)   The nation simply cannot produce everything that it consumes, so it has to rely on others
C)   Some resources are not available from within, so they would have to be bought from others
D)   Businesses do not want to have "big government" around too muchE) All of the above
F) C) and D)

Question 11

Fiscal policy refers to the government's attempt at regulating the economy through the use of changes in:

Accepted Answer

A)   Taxes and government spending
B)   Interest rates and borrowing
C)   Wage rates and contracts
D)   Exchange rates and foreign tradeE) A) and B)
F) A) and C)

Question 12

Refer to the graph above. Suppose that its shows the S and D graphs in a market where production entails a significant amount of pollution. In this case, the government should use its coercive power to make:

Accepted Answer

A)   The supply curve shift to the left
B)   The supply curve shift to the right
C)   The demand curve shift to the left
D)   The demand curve shift to the rightE) B) and D)
F) B) and C)

Question 13

Refer to the above table, which shows the ranked preferences of voters for three alternative projects, with "1" being the top preference. In a paired-choice vote between a park and a jail:

Accepted Answer

A)   A majority of the voters would favor the jail, 3-to-0
B)   A majority of the voters would favor the park, 3-to-0
C)   A majority of the voters would favor the jail, 2-to-1
D)   A majority of the voters would favor the park, 2-to-1E) None of the above
F) A) and B)

Question 14

Critics of government contend that the market system creates incentives and pressures for internal efficiency which are absent in the public sector.

Accepted Answer

A) True 
 B)False

Question 15

Unfunded liabilities occur when the government considers long-term benefits and costs of projects, and approves only those with positive long-term net benefits.

Accepted Answer

A) True 
 B)False

Question 16

It is generally believed that, because of the election process, the incentives and pressures for internal efficiency are stronger in the public sector than in the private sector.

Accepted Answer

A) True 
 B)False

Question 17

Majority voting may produce economically inefficient outcomes because it:

Accepted Answer

A)   Does not always lead to fair results
B)   Requires everyone to vote and bear the costs
C)   Does not consider the strength of individual voters' preferences
D)   Does not provide benefits to everyoneE) B) and D)
F) B) and C)

Question 18

If a public good provides social benefits that are greater than its costs, then majority of voters would always vote in favor of producing the good.

Accepted Answer

A) True 
 B)False

Question 19

The provision of loan guarantees can improve economic efficiency when:

Accepted Answer

A)   There's a moral hazard problem among investors
B)   The project supported has significant external benefits
C)   There is regulatory capture in the industry
D)   The private investors are providing too much funds to the projectE) A) and B)
F) None of the above

Question 20

Some economists contend that government agencies are generally less efficient than private businesses due to the following reasons, except:

Accepted Answer

A)   Government bureaucracies do not face the profit motive, which is a major incentive that guides private firms
B)   Government bureaucrats tend to deal with failing programs by putting more resources into the programs
C)   Incompetent workers gravitate towards government, while motivated workers gravitate towards the private sector
D)   Bureaucrats, along with the special-interest groups they serve often have enough political clout to keep their agencies going regardless of performanceE) B) and D)
F) B) and C)

Exam 5: Governments Role and Government Failure

Rent-seeking behavior in public choice theory refers to:

Correct AnswerverifiedShow Answer

Refer to the above table, which shows the ranked preferences of voters for three alternative projects, with "1" being the top preference. In a paired-choice vote between a jail and a stadium:

Correct AnswerverifiedShow Answer

The provision of loan guarantees can improve economic efficiency when:

Correct AnswerverifiedShow Answer

Unfunded liabilities occur when the government considers long-term benefits and costs of projects, and approves only those with positive long-term net benefits.

Correct AnswerverifiedShow Answer

If choice A wins over choice B in a majority vote, while choice B wins over choice C in a majority vote, then we can conclude that choice A would win over choice C.

Correct AnswerverifiedShow Answer

Refer to the graph above. Suppose that its shows the S and D graphs in a market where production entails a significant amount of pollution. In this case, the government should use its coercive power to make:

Correct AnswerverifiedShow Answer

If a public good provides social benefits that are greater than its costs, then majority of voters would always vote in favor of producing the good.

Correct AnswerverifiedShow Answer

Interest groups result when people:

Correct AnswerverifiedShow Answer

Fiscal policy refers to the government's attempt at regulating the economy through the use of changes in:

Correct AnswerverifiedShow Answer

Loan guarantees provided by government will reduce the willingness of investors to take on the risk in a project.

Correct AnswerverifiedShow Answer

It is generally believed that, because of the election process, the incentives and pressures for internal efficiency are stronger in the public sector than in the private sector.

Correct AnswerverifiedShow Answer

In the median-voter model, the median voter refers to the voter who makes her choice at the midpoint of the voting period.

Correct AnswerverifiedShow Answer

Government's ability to reduce private-sector economic risks through laws and regulations would encourage all of the following, except:

Correct AnswerverifiedShow Answer

Critics of government contend that the market system creates incentives and pressures for internal efficiency which are absent in the public sector.

Correct AnswerverifiedShow Answer

Some economists contend that government agencies are generally less efficient than private businesses due to the following reasons, except:

Correct AnswerverifiedShow Answer

Majority voting may produce economically inefficient outcomes because it:

Correct AnswerverifiedShow Answer

Many governments end up with chronic budget deficits because:

Correct AnswerverifiedShow Answer

Government laws and policies need to be uniformly enforced. But this leads to all of the following problems, except:

Correct AnswerverifiedShow Answer

Refer to the above table, which shows the ranked preferences of voters for three alternative projects, with "1" being the top preference. In a paired-choice vote between a park and a jail:

Correct AnswerverifiedShow Answer

The so-called collective action problem is the reason why:

Correct AnswerverifiedShow Answer

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