Question 1

Government economic policies:

Accepted Answer

A)  following the same principles as microeconomics.
B)  are not self-correcting.
C)  are self-regulating.
D)  often disregard the benefits of the few for the gain of the many.E) A) and B)
F) All of the above

Question 2

Senator A agrees to vote for Senator K's state project in exchange for Senator K voting for Senator A's state project.This is an example of:

Accepted Answer

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

Question 3

Government loan guarantees tend to have the effect of:

Accepted Answer

A)  socializing losses and privatizing gains.
B)  socializing gains and privatizing losses.
C)  socializing both gains and losses.
D)  privatizing both gains and losses.E) A) and B)
F) A) and D)

Question 4

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 5

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) C) and D)
F) B) and C)

Question 6

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 industry.E) All of the above
F) C) and D)

Question 7

In a sporting goods store, you can buy the equipment you want and not buy the rest.In an election, you "buy" the entire range of the candidate's positions, including some you may not agree with.This difference:

Accepted Answer

A)  reflects limited and bundled choices in the public sector.
B)  describes the paradox of voting.
C)  describes the principal-agent problem in the public sector.
D)  creates bureaucratic inefficiency in the public sector.E) A) and D)
F) B) and C)

Question 8

Government guarantees that socialize losses and privatize gains tend to encourage risky and imprudent investment.

Accepted Answer

A) True 
 B)False

Question 9

Proponents of deregulation point to all of the following industries as examples of successful deregulation except for:

Accepted Answer

A)  airlines.
B)  pharmaceuticals.
C)  railroads.
D)  interstate trucking.E) None of the above
F) B) and C)

Question 10

When congressional representatives vote on an appropriations bill, they must vote yea or nay, taking the bad with the good.This statement best reflects the:

Accepted Answer

A)  paradox of voting.
B)  regulatory capture effect.
C)  benefits-received principle.
D)  concept of limited and bundled choices.E) A) and B)
F) A) and C)

Question 11

The government of Southland wants to improve resource allocation in the country.Which of the following actions by the Southland government is most likely to accomplish this?

Accepted Answer

A)  Weakening enforcement of laws and contracts.
B)  Promising to cover every risk of loss for private firms.
C)  Coercing all firms to innovate and invest.
D)  Taxing polluters and subsidizing firms that are creating significant positive externalities.E) A) and C)
F) C) and D)

Question 12

Which of the following is an activity of government that is not an activity of private firms?

Accepted Answer

A)  Enforcing involuntary transactions.
B)  Paying equitable wages.
C)  Creating positive externalities.
D)  Pursuing economic efficiency.E) B) and D)
F) C) and D)

Question 13

The trading of votes by elected officials to secure favorable outcomes is called:

Accepted Answer

A)  splitting the difference.
B)  social engineering.
C)  logrolling.
D)  grandstanding.E) None of the above
F) A) and C)

Question 14

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

Accepted Answer

A) True 
 B)False

Question 15

The paradox of voting is that under majority voting rules the median voter decides the election outcome.

Accepted Answer

A) True 
 B)False

Question 16

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

Question 17

The field of economics that analyzes government decision making, politics, and elections is called:

Accepted Answer

A)  public finance.
B)  public choice theory.
C)  collective economics.
D)  political economy.E) A) and B)
F) A) and C)

Question 18

Which of the following is true of government failure?

Accepted Answer

A)  It occurs despite government officials knowing what voters prefer.
B)  It occurs because government officials do not know what voters prefer.
C)  Government officials placing the interests of the majority over the minority is one cause of government failure.
D)  Government officials placing public interests above their own personal interests can be a cause for government failure.E) A) and B)
F) A) and C)

Question 19

The invisible hand guides government's economic activity just as it does with private economic activity.

Accepted Answer

A) True 
 B)False

Question 20

The principle that under some circumstances majority voting fails to make consistent choices reflecting the community's underlying preference is best demonstrated by the:

Accepted Answer

A)  paradox of voting.
B)  concept of logrolling.
C)  median-voter model.
D)  Coase theorem.E) A) and B)
F) C) and D)

Exam 5: Part B: Governments Role and Government Failure

Government economic policies:

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The government of Southland wants to improve resource allocation in the country.Which of the following actions by the Southland government is most likely to accomplish this?

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The median-voter model implies that:

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The trading of votes by elected officials to secure favorable outcomes is called:

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The principle that under some circumstances majority voting fails to make consistent choices reflecting the community's underlying preference is best demonstrated by the:

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In a sporting goods store, you can buy the equipment you want and not buy the rest.In an election, you "buy" the entire range of the candidate's positions, including some you may not agree with.This difference:

Correct AnswerverifiedShow Answer

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

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The invisible hand guides government's economic activity just as it does with private economic activity.

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Which of the following is true of government failure?

Correct AnswerverifiedShow Answer

The field of economics that analyzes government decision making, politics, and elections is called:

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When congressional representatives vote on an appropriations bill, they must vote yea or nay, taking the bad with the good.This statement best reflects the:

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Which of the following is an activity of government that is not an activity of private firms?

Correct AnswerverifiedShow Answer

Public choice theory focuses on the economics of:

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Proponents of deregulation point to all of the following industries as examples of successful deregulation except for:

Correct AnswerverifiedShow Answer

Government guarantees that socialize losses and privatize gains tend to encourage risky and imprudent investment.

Correct AnswerverifiedShow Answer

Senator A agrees to vote for Senator K's state project in exchange for Senator K voting for Senator A's state project.This is an example of:

Correct AnswerverifiedShow Answer

Government loan guarantees tend to have the effect of:

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The paradox of voting is that under majority voting rules the median voter decides the election outcome.

Correct AnswerverifiedShow Answer

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