Question 1

Politicians who have to go through elections tend to focus on the short-term net benefits of projects because of:

Accepted Answer

A)   Voters' tendency to more easily see short term benefits rather than long-term ones
B)   The special-interest effect of specific groups among the electorate
C)   The ability of government to coerce people to do things involuntarily
D)   "Pork-barrel" politics and the principal-agent problemE) B) and D)
F) A) and D)

Question 2

One key is difference between government activities and private transactions is that:

Accepted Answer

A)   Government can enforce involuntary transactions, whereas private transactions are mostly voluntary
B)   Government can only produce services, whereas private producers can produce both goods and services
C)   Government does not run any production operations, whereas private firms have the main purpose of running production operations
D)   Government does not earn revenues from its activities, whereas private firms aim to earn revenues and profitsE) B) and C)
F) B) and D)

Question 3

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

Accepted Answer

A) True 
 B)False

Question 4

To make up for a shortfall in its annual budget, the government must:

Accepted Answer

A)   Issue government (Treasury)  bonds
B)   Buy government (Treasury)  bonds
C)   Reduce its total public debt
D)   Sell government stocksE) A) and D)
F) A) and B)

Question 5

Voters are making a choice to spend money on three projects: a dam, a school, or a road. In the choice between the dam and the school, the majority favors the school. In a choice between a dam and a road, the majority favors a dam. In a choice between a road and a school, the majority favors a road. These rankings indicate that majority voting may:

Accepted Answer

A)   Result in economically efficient outcomes because of rent-seeking behavior
B)   Reflect irrational preferences
C)   Produce inconsistent choices
D)   Lead to consistent choices in spite of irrational community preferencesE) B) and D)
F) A) and B)

Question 6

The difficulties in managing government in a market economy include the following, except:

Accepted Answer

A)   The need for complex bureaucracy of various levels
B)   The need for detailed paperwork and inflexibility
C)   The close resemblance of government to the "invisible hand"
D)   The lack of accountability in governmentE) A) and D)
F) None of the above

Question 7

The sometimes inconsistent results coming from a series of paired-choice voting is due to:

Accepted Answer

A)   Voters changing their preferences
B)   Irrational preferences among some voters
C)   A normal consequence of majority voting
D)   Voters not having a good idea of their preferencesE) A) and B)
F) All of the above

Question 8

Monetary and fiscal policies are tools that the government can use to try to stabilize the economy.

Accepted Answer

A) True 
 B)False

Question 9

It is observed that the person representing the middle position on an issue will most likely determine the outcome of an election. This view is most closely associated with the:

Accepted Answer

A)   Fallacy of limited decisions
B)   Special-interest effect
C)   Paradox of voting
D)   Median-voter modelE) None of the above
F) C) and D)

Question 10

Even in a democratic government, elected officials may end up pursuing policies that go against the preferences of the people due to the following reasons, except:

Accepted Answer

A)   Special-interest effect
B)   The invisible hand of the market
C)   Limited and bundled choice in elections
D)   Majority voting systemE) A) and B)
F) B) and C)

Question 11

The situation where "the few who yell the loudest gets heard" is referred to as the:

Accepted Answer

A)   Special-interest effect
B)   Principal-agent problem
C)   Moral hazard problem
D)   Adverse selection effectE) None of the above
F) A) and B)

Question 12

In the U.S. market economy, the government performs the following prominent roles, except:

Accepted Answer

A)   Provide public goods and services
B)   Promote economic stability and growth
C)   Set prices for most resources
D)   Modifies the distribution of incomeE) B) and D)
F) A) and B)

Question 13

As voters "vote with their feet" and move to political districts where the median-voter's preference is closer to their own, the median-voter's preference will:

Accepted Answer

A)   Strengthen
B)   Weaken
C)   Shift
D)   StagnateE) A) and C)
F) A) and B)

Question 14

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 15

The U.S. is among the countries that have very low levels of political corruption, as reported in the Global Corruption Barometer of 2010-11.

Accepted Answer

A) True 
 B)False

Question 16

Many state and local governments in the U.S. have balanced-budget laws in order to prevent politicians from:

Accepted Answer

A)   Creating a "small government" economy
B)   Succumbing to voters' strong preference for budget deficits
C)   Facing a principal-agent problem
D)   Collecting too much taxesE) C) and D)
F) A) and B)

Question 17

Assume that Matt, Joe, and Teresa are the only citizens in a community. A proposed public good has a total cost of $1000. 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 againstE) None of the above
F) A) and B)

Question 18

One implication of the median-voter model is that at any point in time, most voters will:

Accepted Answer

A)   Be happy with the amount of government involvement in the economy
B)   Find government involvement in the economy to be too much
C)   Find government involvement in the economy to be too little
D)   Be unhappy with the amount of government involvement in the economyE) C) and D)
F) B) and C)

Question 19

Assume that Abby, Ben, and Clara are the only citizens in a community. A proposed public good has a total cost of $1000. All three citizens will share an equal portion of this cost in taxes. The benefit of the public good is $400 each to Abby, Ben, and Clara. 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 outcomeE) C) and D)
F) B) and D)

Question 20

"Good economics" is about marginal costs and marginal benefits of specific projects; "good politics" is more about clear benefits and hidden costs.

Accepted Answer

A) True 
 B)False

Exam 5: Governments Role and Government Failure

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

Correct Answer
verified

The difficulties in managing government in a market economy include the following, except:

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
verified

The situation where "the few who yell the loudest gets heard" is referred to as the:

Correct Answer
verified

Correct Answer
verified

One key is difference between government activities and private transactions is that:

Correct Answer
verified

"Good economics" is about marginal costs and marginal benefits of specific projects; "good politics" is more about clear benefits and hidden costs.

Correct Answer
verified

One implication of the median-voter model is that at any point in time, most voters will:

Correct Answer
verified

The U.S. is among the countries that have very low levels of political corruption, as reported in the Global Corruption Barometer of 2010-11.

Correct Answer
verified

Monetary and fiscal policies are tools that the government can use to try to stabilize the economy.

Correct Answer
verified

Even in a democratic government, elected officials may end up pursuing policies that go against the preferences of the people due to the following reasons, except:

Correct Answer
verified

Politicians who have to go through elections tend to focus on the short-term net benefits of projects because of:

Correct Answer
verified

Correct Answer
verified

As voters "vote with their feet" and move to political districts where the median-voter's preference is closer to their own, the median-voter's preference will:

Correct Answer
verified

Many state and local governments in the U.S. have balanced-budget laws in order to prevent politicians from:

Correct Answer
verified

To make up for a shortfall in its annual budget, the government must:

Correct Answer
verified

In the U.S. market economy, the government performs the following prominent roles, except:

Correct Answer
verified

The sometimes inconsistent results coming from a series of paired-choice voting is due to:

Correct Answer
verified

It is observed that the person representing the middle position on an issue will most likely determine the outcome of an election. This view is most closely associated with the:

Correct Answer
verified

Exam 5: Governments Role and Government Failure

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

Correct AnswerverifiedShow Answer

The difficulties in managing government in a market economy include the following, except:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The situation where "the few who yell the loudest gets heard" is referred to as the:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

One key is difference between government activities and private transactions is that:

Correct AnswerverifiedShow Answer

"Good economics" is about marginal costs and marginal benefits of specific projects; "good politics" is more about clear benefits and hidden costs.

Correct AnswerverifiedShow Answer

One implication of the median-voter model is that at any point in time, most voters will:

Correct AnswerverifiedShow Answer

The U.S. is among the countries that have very low levels of political corruption, as reported in the Global Corruption Barometer of 2010-11.

Correct AnswerverifiedShow Answer

Monetary and fiscal policies are tools that the government can use to try to stabilize the economy.

Correct AnswerverifiedShow Answer

Even in a democratic government, elected officials may end up pursuing policies that go against the preferences of the people due to the following reasons, except:

Correct AnswerverifiedShow Answer

Politicians who have to go through elections tend to focus on the short-term net benefits of projects because of:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

As voters "vote with their feet" and move to political districts where the median-voter's preference is closer to their own, the median-voter's preference will:

Correct AnswerverifiedShow Answer

Many state and local governments in the U.S. have balanced-budget laws in order to prevent politicians from:

Correct AnswerverifiedShow Answer

To make up for a shortfall in its annual budget, the government must:

Correct AnswerverifiedShow Answer

In the U.S. market economy, the government performs the following prominent roles, except:

Correct AnswerverifiedShow Answer

The sometimes inconsistent results coming from a series of paired-choice voting is due to:

Correct AnswerverifiedShow Answer

It is observed that the person representing the middle position on an issue will most likely determine the outcome of an election. This view is most closely associated with the:

Correct AnswerverifiedShow Answer

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