Question 1

In a market economy, the government's power to coerce can:

Accepted Answer

A)  undermine economic efficiency by increasing private-sector risk.
B)  improve economic efficiency by directing all resources to their most valued uses.
C)  reduce private-sector risk and increase economic efficiency.
D)  cause significant negative externalities.E) B) and D)
F) B) and C)

Question 2

Regulatory capture occurs when government exerts excessive control over an industry.

Accepted Answer

A) True 
 B)False

Question 3

Factors that impede the attainment of economic efficiency in the public sector are called:

Accepted Answer

A)  market failures.
B)  externalities.
C)  government failures.
D)  voting irregularities.E) B) and C)
F) B) and D)

Question 4

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 D)
F) B) and C)

Question 5

Answer the question on the basis of this table showing the marginal benefit 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)  pass this project and resources will be allocated efficiently.
C)  pass this project and resources will be overallocated to it.
D)  pass this project and resources will be underallocated to it.E) A) and B)
F) B) and D)

Question 6

According to the paradox of voting:

Accepted Answer

A)  public goods that cost more than the total benefits they confer may get produced under majority voting.
B)  trading of votes may either add to or subtract from economic efficiency.
C)  the median voter decides what public goods all voters should have.
D)  majority voting fails under some circumstances to make consistent choices that reflect the community's underlying preferences.E) A) and D)
F) A) and C)

Question 7

The pursuit through government of a transfer of wealth at society's expense is called "rent seeking."

Accepted Answer

A) True 
 B)False

Question 8

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) None of the above
F) A) and D)

Question 9

Public choice economists:

Accepted Answer

A)  analyze the incidence of taxes.
B)  are also known as Keynesian economists.
C)  use the tools of economics to analyze decision making, politics, and elections in the public sector.
D)  are, by definition, economists employed by federal, state, and local governments.E) B) and D)
F) A) and C)

Question 10

Suppose Canadian winemakers convince the federal government to issue a directive to serve only domestically produced wine at government functions.This would be an example of:

Accepted Answer

A)  moral hazard.
B)  the principal-agent problem.
C)  logrolling.
D)  rent-seeking behavior.E) None of the above
F) All of the above

Question 11

According to some economists, the private sector is more efficient than the public sector mainly because:

Accepted Answer

A)  the private sector has a clear test of performance: profit and loss.
B)  wages, salaries, and fringe benefits are higher in the private sector.
C)  worker turnover is higher in the public sector.
D)  of extensive negative externalities in the public sector.E) A) and C)
F) C) and D)

Question 12

Deregulation:

Accepted Answer

A)  tends to improve outcomes in industries generating substantial negative externalities.
B)  eliminates regulatory capture and can improve outcomes by increasing competition.
C)  is most appropriate to undertake by government agencies responsible for human safety, financial regulation, and environmental protection.
D)  always generates greater economic efficiency.E) A) and D)
F) A) and B)

Question 13

Suppose that friends Jennifer, Stephanie, and Megan cannot agree on how much to spend for a bouquet of flowers to send to a person that allowed them to use their beach house for the weekend.Jennifer wants to buy a moderately priced bouquet, Stephanie wants to buy an expensive bouquet, and Megan wants to buy a very expensive bouquet.Assuming no paradox of voting, majority voting will result in the decision to buy:

Accepted Answer

A)  an inexpensive bouquet.
B)  a very expensive bouquet.
C)  a moderately priced bouquet.
D)  an expensive bouquet.E) All of the above
F) A) and D)

Question 14

Which of the following impacts would economists expect to result from chronic budget deficits?

Accepted Answer

A)  Greater economic efficiency resulting from the abundance of public goods produced.
B)  Permanently high levels of output and continued economic growth.
C)  Greater political control over monetary policy.
D)  Government control of an inefficiently large share of the economy's resources.E) B) and C)
F) A) and D)

Question 15

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

Question 16

Political corruption occurs whenever:

Accepted Answer

A)  logrolling is used to secure votes for controversial legislation.
B)  government officials use unlawful misdirection of governmental resources for their own personal gain.
C)  special interest groups contribute to elected officials, who in turn support legislation that benefits the special interest group.
D)  there is pork barrel politics involved.E) A) and B)
F) A) and C)

Question 17

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

Question 18

(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 19

The Ontario Securities Commission supervision of Bay Street financial firms is a possible example of regulatory capture.

Accepted Answer

A) True 
 B)False

Question 20

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

Accepted Answer

A) True 
 B)False

Exam 5: Part B: Governments Role and Government Failure

Factors that impede the attainment of economic efficiency in the public sector are called:

Correct Answer
verified

Public choice economists:

Correct Answer
verified

The Ontario Securities Commission supervision of Bay Street financial firms is a possible example of regulatory capture.

Correct Answer
verified

The pursuit through government of a transfer of wealth at society's expense is called "rent seeking."

Correct Answer
verified

Correct Answer
verified

Political corruption occurs whenever:

Correct Answer
verified

According to the paradox of voting:

Correct Answer
verified

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

Correct Answer
verified

(Consider This) Voter failure describes the situation where:

Correct Answer
verified

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

Correct Answer
verified

Which of the following impacts would economists expect to result from chronic budget deficits?

Correct Answer
verified

Suppose Canadian winemakers convince the federal government to issue a directive to serve only domestically produced wine at government functions.This would be an example of:

Correct Answer
verified

In a market economy, the government's power to coerce can:

Correct Answer
verified

Regulatory capture occurs when government exerts excessive control over an industry.

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

Answer the question on the basis of this table showing the marginal benefit 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

According to some economists, the private sector is more efficient than the public sector mainly because:

Correct Answer
verified

Correct Answer
verified

Deregulation:

Correct Answer
verified

Exam 5: Part B: Governments Role and Government Failure

Factors that impede the attainment of economic efficiency in the public sector are called:

Correct AnswerverifiedShow Answer

Public choice economists:

Correct AnswerverifiedShow Answer

The Ontario Securities Commission supervision of Bay Street financial firms is a possible example of regulatory capture.

Correct AnswerverifiedShow Answer

The pursuit through government of a transfer of wealth at society's expense is called "rent seeking."

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Political corruption occurs whenever:

Correct AnswerverifiedShow Answer

According to the paradox of voting:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

(Consider This) Voter failure describes the situation where:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following impacts would economists expect to result from chronic budget deficits?

Correct AnswerverifiedShow Answer

Suppose Canadian winemakers convince the federal government to issue a directive to serve only domestically produced wine at government functions.This would be an example of:

Correct AnswerverifiedShow Answer

In a market economy, the government's power to coerce can:

Correct AnswerverifiedShow Answer

Regulatory capture occurs when government exerts excessive control over an industry.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Answer the question on the basis of this table showing the marginal benefit 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

According to some economists, the private sector is more efficient than the public sector mainly because:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Deregulation:

Correct AnswerverifiedShow Answer

Correct Answer
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