Question 1

Suppose that friends Jennifer, Stephanie, and Megan cannot agree on how much to spend for a bouquet of ﬂowers to send to a person who allowed them to use her 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 B)

Question 2

In 2018, U.S. federal government legislation authorized

Accepted Answer

A)   152 earmarks, totaling $3.3 billion.
B)   232 earmarks, totaling $14.7 billion.
C)   1,160 earmarks, totaling $19.6 billion.
D)   11,700 earmarks, totaling $16.9 billion.E) A) and B)
F) B) and C)

Question 3

The study of public choice theory involves the economic analysis of the following, except

Accepted Answer

A)   government decision making.
B)   actions by elected oﬃcials.
C)   the impact of budget deﬁcits on the public debt.
D)   voting and elections.E) A) and D)
F) None of the above

Question 4

Suppose that Katie and Kelly each expect to receive $500 worth of marginal beneﬁts from a proposed new recreation center, whereas Kerry expects to receive only $100 worth. If the proposed tax levied on each for the
Center would be $400, 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 eﬃciently allocated.
C)   pass this project and resources will be underallocated to it.
D)   pass this project and resources will be overallocated to it.E) A) and B)
F) B) and D)

Question 5

Majority voting fails to incorporate the strength of the preferences of individual voters and therefore

Accepted Answer

A)   reduces the power of the median voter.
B)   is the primary reason for public sector failure.
C)   may produce economically ineﬃcient outcomes.
D)   creates the opportunity for the fallacy of limited decisions.E) B) and C)
F) A) and B)

Question 6

The market demand curve for a public good

Accepted Answer

A)   is derived in the same manner as demand curves for private goods.
B)   is derived by horizontally summing all individual demand curves.
C)   shows the total value that all individuals place on each additional unit of the good.
D)   shows the total number of units that would be produced by the public sector at each possible price.E) A) and D)
F) A) and C)

Question 7

The principal-agent problem is a problem for the private sector but does not apply to political decision making.

Accepted Answer

A) True 
 B)False

Question 8

The following data are for a series of increasingly extensive ?ood-control projects.   Total Cost per Year  Total Benefit per Year  Plan A= Levees $10,000$16,000 Plan B= Small Reservoir 24,00036,000 Plan C= Medium Reservoir 44,00052,000 Plan D= Large Reservoir 72,00064,000\begin{array} { | l | c | c | } \hline & 	ext { Total Cost per Year } & 	ext { Total Benefit per Year } \\hline 	ext { Plan } A = 	ext { Levees } & \$ 10,000 & \$ 16,000 \\hline 	ext { Plan } B = 	ext { Small Reservoir } & 24,000 & 36,000 \\hline 	ext { Plan } C = 	ext { Medium Reservoir } & 44,000 & 52,000 \\hline 	ext { Plan } D = 	ext { Large Reservoir } & 72,000 & 64,000 \\hline\end{array} Plan A= Levees  Plan B= Small Reservoir  Plan C= Medium Reservoir  Plan D= Large Reservoir ​ Total Cost per Year $10,00024,00044,00072,000​ Total Benefit per Year $16,00036,00052,00064,000​​  Plan C entails

Accepted Answer

A)   marginal bene?ts in excess of marginal costs.
B)   fewer spillovers than either Plan A or Plan B.
C)   an overallocation of resources to ?ood control.
D)   an underallocation of resources to ?ood control. E) B) and C)
F) All of the above

Question 9

The information contained in the table illustrates

Accepted Answer

A)   political logrolling.
B)   the median-voter model.
C)   the paradox of voting.
D)   the principal-agent problem theorem.E) B) and D)
F) B) and C)

Question 10

Political logrolling, or vote trading, can turn a potentially ineﬃcient voting outcome into an eﬃcient one.

Accepted Answer

A) True 
 B)False

Question 11

Refer to the provided supply and demand graph for a public good. Which line segment would indicate the amount by which the marginal beneﬁt of this public good exceeds the marginal cost at a certain quantity?

Accepted Answer

A)   de
B)   da
C)   ef
D)   abE) A) and B)
F) A) and C)

Question 12

Suppose three roommates cannot agree on the size of a pizza to order. Domino argues for a medium pizza, Godfather contends a large pizza will be needed, and Little Caesar wants a super-large pizza. Assuming no
Paradox of voting, majority voting will result in a decision to order

Accepted Answer

A)   a medium pizza.
B)   a large pizza.
C)   a super-large pizza.
D)   two medium pizzas.E) B) and D)
F) All of the above

Question 13

"Regulatory capture" refers to the situation where a government agency charged with supervising and regulating a particular industry is

Accepted Answer

A)   strongly inﬂuenced by the ﬁrms in the very industry that it is regulating.
B)   headed by bureaucrats who have a "lock" on their positions, without any rivals.
C)   completely dominating and controlling the actions of ﬁrms in the industry.
D)   headed by unelected government oﬃcials who have no strong desire to regulate.E) B) and D)
F) B) and C)

Question 14

Regulatory capture is said to have occurred when which of the following is true?

Accepted Answer

A)   Rules and enforcement in an industry are heavily inﬂuenced by the industry being regulated.
B)   One ﬁrm controls an entire market, having captured customers away from other ﬁrms.
C)   Government imposes excessive regulations in an industry, resulting in ineﬃciencies.
D)   Consumers make all the rules for an industry, forcing ﬁrms into ineﬃcient production methods.E) A) and D)
F) C) and D)

Question 15

Assume that Abby, Ben, and Clara 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 $400 each to Abby, Ben, and Clara. Based on economic analysis, the public good should

Accepted Answer

A)   be produced, because the beneﬁts are greater than the costs.
B)   not be produced, because the costs are greater than the beneﬁts.
C)   be put to a vote and produced only if voters approve it.
D)   not be produced, even if voters vote in favor of it.E) A) and D)
F) A) and B)

Question 16

A study of hospitals, power plants, and water utilities found that government-owned and operated companies were more likely than private companies to violate health and safety laws. Possible explanations for this
Include the following, except

Accepted Answer

A)   Government-owned companies may have diﬃculty getting taxpayers and politicians to approve the funding needed to improve their facilities.
B)   The health and safety laws appear to be applied much more leniently against government-owned companies than against private companies.
C)   Government-owned companies tend to be run by less qualiﬁed and less competent managers than the private companies.
D)   Government-owned companies are under less pressure to comply with the laws, because ﬁnes for violations are often delayed or even avoided.E) A) and B)
F) All of the above

Question 17

Which would be an avenue for resolving the ineﬃciencies associated with majority voting?

Accepted Answer

A)   the paradox of voting
B)   progressive taxation
C)   proportional taxation
D)   interest groupsE) All of the above
F) A) and D)

Question 18

Nonrivalry in the use or consumption of a good means that only one person is consuming the good without
any rivals.

Accepted Answer

A) True 
 B)False

Question 19

Among the following examples, the one that best illustrates a public good is the

Accepted Answer

A)   laptops used by students in a college or university.
B)   movies produced by Hollywood companies.
C)   bike paths around a city or town.
D)   airline tickets bought by vacationers.E) B) and D)
F) A) and D)

Question 20

The situation where politicians make decisions that will raise their chances of reelection, even if those decisions are detrimental to the general public, is referred to as the

Accepted Answer

A)   moral hazard problem.
B)   principal-agent problem.
C)   adverse selection problem.
D)   common good problem.E) A) and B)
F) C) and D)

Exam 5: Public Goods, Public Choice, and Government Failure

"Regulatory capture" refers to the situation where a government agency charged with supervising and regulating a particular industry is

Correct Answer
verified

The study of public choice theory involves the economic analysis of the following, except

Correct Answer
verified

A study of hospitals, power plants, and water utilities found that government-owned and operated companies were more likely than private companies to violate health and safety laws. Possible explanations for this Include the following, except

Correct Answer
verified

The principal-agent problem is a problem for the private sector but does not apply to political decision making.

Correct Answer
verified

Refer to the provided supply and demand graph for a public good. Which line segment would indicate the amount by which the marginal beneﬁt of this public good exceeds the marginal cost at a certain quantity?

Correct Answer
verified

Among the following examples, the one that best illustrates a public good is the

Correct Answer
verified

Correct Answer
verified

Suppose three roommates cannot agree on the size of a pizza to order. Domino argues for a medium pizza, Godfather contends a large pizza will be needed, and Little Caesar wants a super-large pizza. Assuming no Paradox of voting, majority voting will result in a decision to order

Correct Answer
verified

Political logrolling, or vote trading, can turn a potentially ineﬃcient voting outcome into an eﬃcient one.

Correct Answer
verified

Nonrivalry in the use or consumption of a good means that only one person is consuming the good without any rivals.

Correct Answer
verified

The situation where politicians make decisions that will raise their chances of reelection, even if those decisions are detrimental to the general public, is referred to as the

Correct Answer
verified

Which would be an avenue for resolving the ineﬃciencies associated with majority voting?

Correct Answer
verified

In 2018, U.S. federal government legislation authorized

Correct Answer
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Correct Answer
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The market demand curve for a public good

Correct Answer
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Majority voting fails to incorporate the strength of the preferences of individual voters and therefore

Correct Answer
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Correct Answer
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The information contained in the table illustrates

Correct Answer
verified

Suppose that Katie and Kelly each expect to receive $500 worth of marginal beneﬁts from a proposed new recreation center, whereas Kerry expects to receive only $100 worth. If the proposed tax levied on each for the Center would be $400, a majority vote will

Correct Answer
verified

Regulatory capture is said to have occurred when which of the following is true?

Correct Answer
verified

Exam 5: Public Goods, Public Choice, and Government Failure

"Regulatory capture" refers to the situation where a government agency charged with supervising and regulating a particular industry is

Correct AnswerverifiedShow Answer

The study of public choice theory involves the economic analysis of the following, except

Correct AnswerverifiedShow Answer

A study of hospitals, power plants, and water utilities found that government-owned and operated companies were more likely than private companies to violate health and safety laws. Possible explanations for this Include the following, except

Correct AnswerverifiedShow Answer

The principal-agent problem is a problem for the private sector but does not apply to political decision making.

Correct AnswerverifiedShow Answer

Refer to the provided supply and demand graph for a public good. Which line segment would indicate the amount by which the marginal beneﬁt of this public good exceeds the marginal cost at a certain quantity?

Correct AnswerverifiedShow Answer

Among the following examples, the one that best illustrates a public good is the

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Suppose three roommates cannot agree on the size of a pizza to order. Domino argues for a medium pizza, Godfather contends a large pizza will be needed, and Little Caesar wants a super-large pizza. Assuming no Paradox of voting, majority voting will result in a decision to order

Correct AnswerverifiedShow Answer

Political logrolling, or vote trading, can turn a potentially ineﬃcient voting outcome into an eﬃcient one.

Correct AnswerverifiedShow Answer

Nonrivalry in the use or consumption of a good means that only one person is consuming the good without any rivals.

Correct AnswerverifiedShow Answer

The situation where politicians make decisions that will raise their chances of reelection, even if those decisions are detrimental to the general public, is referred to as the

Correct AnswerverifiedShow Answer

Which would be an avenue for resolving the ineﬃciencies associated with majority voting?

Correct AnswerverifiedShow Answer

In 2018, U.S. federal government legislation authorized

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The market demand curve for a public good

Correct AnswerverifiedShow Answer

Majority voting fails to incorporate the strength of the preferences of individual voters and therefore

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The information contained in the table illustrates

Correct AnswerverifiedShow Answer

Suppose that Katie and Kelly each expect to receive $500 worth of marginal beneﬁts from a proposed new recreation center, whereas Kerry expects to receive only $100 worth. If the proposed tax levied on each for the Center would be $400, a majority vote will

Correct AnswerverifiedShow Answer

Regulatory capture is said to have occurred when which of the following is true?

Correct AnswerverifiedShow Answer

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