Question 1

The "principal-agent problem" often arises in public choice when politicians pursue the best interests of their constituents.

Accepted Answer

A) True 
 B)False

Question 2

In thinking about the "principal-agent problem" in a democratic government, we assign the role of "principal" to the government.

Accepted Answer

A) True 
 B)False

Question 3

Assume that Abby, Ben, Clara, Joe, and Matt are the only citizens in a community.A proposed public good has a total cost of $1,000.All five citizens will share an equal portion of this cost in taxes.The benefit of the public good is $220 to Abby, $210 to Ben, $210 to Clara, $180 to Joe, and $120 to Matt.In a majority vote, this proposal will most likely be

Accepted Answer

A)  accepted, four in favor and one against.
B)  defeated, one in favor and four against.
C)  accepted, three in favor and two against.
D)  defeated, two in favor and three against.E) All of the above
F) B) and C)

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

Assume that Matt, Joe, and Teresa are the only citizens in a community.A proposed public good has a total cost of $1,000.All three citizens will share an equal portion of this cost in taxes.The benefit of the public good is $500 for Matt, $280 for Joe, and $260 for Teresa.In a majority vote, this proposal will most likely be

Accepted Answer

A)  accepted, two in favor and one against.
B)  defeated, two against and one in favor.
C)  accepted, three in favor and none against.
D)  defeated, none in favor and three against.E) All of the above
F) C) and D)

Question 6

"Vote for my special local project and I will vote for yours." This political technique

Accepted Answer

A)  illustrates the paradox of voting.
B)  is called "logrolling."
C)  illustrates the median voter model.
D)  undermines the benefits-received principle.E) A) and C)
F) B) and D)

Question 7

Assume that Matt, Joe, and Teresa are the only citizens in a community.A proposed public good has a total cost of $1,000.All three citizens will share an equal portion of this cost in taxes.The benefit of the public good is $500 for Matt, $280 for Joe, and $260 for Teresa.In a majority vote, this proposal will most likely be

Accepted Answer

A)  accepted; the public good is produced, even though it is economically inefficient.
B)  defeated; the public good is not produced, even though it would have been efficient to do so.
C)  accepted; the public good is produced, which is economically efficient.
D)  defeated; the public good is not produced, which is the proper outcome.E) All of the above
F) B) and C)

Question 8

The median-voter model indicates that political parties will

Accepted Answer

A)  target only those voters who can be influenced by rent seeking.
B)  direct their work to voters who can be influenced by special interests.
C)  campaign at one end of the distribution of voter sentiments.
D)  try to appeal to the sentiments of the voter holding the middle position.E) B) and D)
F) C) and D)

Question 9

The collective action problem makes it hard for voters to counter the influence of special-interest groups.

Accepted Answer

A) True 
 B)False

Question 10

Fiscal policy is more susceptible to politicization than monetary policy.

Accepted Answer

A) True 
 B)False

Question 11

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 other nations.
C)  some resources are not available from within, so they have to be bought from other nations.
D)  businesses do not want to have "big government" around too much.E) A) and B)
F) C) and D)

Question 12

Which of the following countries had the least corruption, as reported in the Global Corruption Barometer survey in 2013?

Accepted Answer

A)  Mexico
B)  Italy
C)  India
D)  South AfricaE) B) and C)
F) A) and D)

Question 13

If the government runs a smaller budget deficit, then the public debt will decrease.

Accepted Answer

A) True 
 B)False

Question 14

When the government provides loan guarantees and in effect "socializes losses and privatizes gains" of a project or firm, it can lead to a

Accepted Answer

A)  moral hazard problem among investors.
B)  regulatory capture problem.
C)  principal-agent problem within the firm.
D)  limited and bundled choice problem.E) All of the above
F) B) and C)

Question 15

Which one of the following topics would be of the most interest to a public choice economist?

Accepted Answer

A)  the theory of comparative advantage
B)  the law of increasing opportunity cost
C)  inflation and unemployment
D)  rent-seeking behaviorE) None of the above
F) A) and B)

Question 16

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

Question 17

Majority voting produces efficient outcomes because it takes into account the strength of the preferences of individual voters.

Accepted Answer

A) True 
 B)False

Question 18

In assessing the efficiency of government policy, economic analysis would focus on

Accepted Answer

A)  the size of government: big versus small.
B)  marginal benefits versus costs of government policy and action.
C)  presence or absence of the invisible hand.
D)  revenues and profitability of the government agencies.E) B) and C)
F) A) and C)

Question 19

"Informal payments" or "under-the table fees" are a common form of corruption.

Accepted Answer

A) True 
 B)False

Question 20

Refer to the table.In a choice between public safety and parks,

Accepted Answer

A)  the outcome would depend on which item was listed first on the ballot.
B)  a majority of voters would favor public safety.
C)  no voter decision is possible.
D)  a majority of voters would favor parks.E) A) and B)
F) A) and C)

Exam 5: Governments Role and Government Failure

In thinking about the "principal-agent problem" in a democratic government, we assign the role of "principal" to the government.

Correct Answer
verified

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

Correct Answer
verified

Fiscal policy is more susceptible to politicization than monetary policy.

Correct Answer
verified

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

Correct Answer
verified

The collective action problem makes it hard for voters to counter the influence of special-interest groups.

Correct Answer
verified

The "principal-agent problem" often arises in public choice when politicians pursue the best interests of their constituents.

Correct Answer
verified

Refer to the table.In a choice between public safety and parks,

Correct Answer
verified

Which of the following countries had the least corruption, as reported in the Global Corruption Barometer survey in 2013?

Correct Answer
verified

Which one of the following topics would be of the most interest to a public choice economist?

Correct Answer
verified

"Informal payments" or "under-the table fees" are a common form of corruption.

Correct Answer
verified

Majority voting produces efficient outcomes because it takes into account the strength of the preferences of individual voters.

Correct Answer
verified

"Vote for my special local project and I will vote for yours." This political technique

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Many governments end up with chronic budget deficits because

Correct Answer
verified

Correct Answer
verified

When the government provides loan guarantees and in effect "socializes losses and privatizes gains" of a project or firm, it can lead to a

Correct Answer
verified

In assessing the efficiency of government policy, economic analysis would focus on

Correct Answer
verified

The median-voter model indicates that political parties will

Correct Answer
verified

If the government runs a smaller budget deficit, then the public debt will decrease.

Correct Answer
verified

Exam 5: Governments Role and Government Failure

In thinking about the "principal-agent problem" in a democratic government, we assign the role of "principal" to the government.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Fiscal policy is more susceptible to politicization than monetary policy.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The collective action problem makes it hard for voters to counter the influence of special-interest groups.

Correct AnswerverifiedShow Answer

The "principal-agent problem" often arises in public choice when politicians pursue the best interests of their constituents.

Correct AnswerverifiedShow Answer

Refer to the table.In a choice between public safety and parks,

Correct AnswerverifiedShow Answer

Which of the following countries had the least corruption, as reported in the Global Corruption Barometer survey in 2013?

Correct AnswerverifiedShow Answer

Which one of the following topics would be of the most interest to a public choice economist?

Correct AnswerverifiedShow Answer

"Informal payments" or "under-the table fees" are a common form of corruption.

Correct AnswerverifiedShow Answer

Majority voting produces efficient outcomes because it takes into account the strength of the preferences of individual voters.

Correct AnswerverifiedShow Answer

"Vote for my special local project and I will vote for yours." This political technique

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Many governments end up with chronic budget deficits because

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

When the government provides loan guarantees and in effect "socializes losses and privatizes gains" of a project or firm, it can lead to a

Correct AnswerverifiedShow Answer

In assessing the efficiency of government policy, economic analysis would focus on

Correct AnswerverifiedShow Answer

The median-voter model indicates that political parties will

Correct AnswerverifiedShow Answer

If the government runs a smaller budget deficit, then the public debt will decrease.

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified