Question 1

The Bank of Canada,U.S.Federal Reserve,the Bank of Japan,the Bank of England,and the European Central Bank are all in charge of what for the countries they represent?

Accepted Answer

A)   Debt management.
B)   Unfunded liabilities.
C)   Monetary policy.
D)   Fiscal policy.E) A) and C)
F) B) and D)

Question 2

Regulatory capture often occurs because of which of the following?

Accepted Answer

A)   Government officials want stronger control over industry regulation.
B)   Nearly everyone with expertise works in the regulated industry.
C)   Patent law allows firms to gain monopoly power easily and therefore control a market.
D)   Consumer groups are effective at lobbying the government for industry regulation.E) C) and D)
F) A) and D)

Question 3

Answer the question on the basis of this table showing the marginal benefit that 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)   defeat this project and resources will be allocated efficiently.
C)   pass this project and resources will be overallocated to it.
D)   defeat this project and resources will be overallocated to it.E) A) and C)
F) None of the above A

Question 4

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

Question 5

The problem of limited and bundled choices explains why many voters cannot fully express their political preferences.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following would best explain why regulatory capture is a problem?

Accepted Answer

A)   The regulations implemented tend to reduce the profitability of the regulated industry and reduce global competitiveness.
B)   Regulatory capture unduly increases the size and power of government,increasing costs for taxpayers.
C)   Individuals implementing the regulations lack expertise about the industry and therefore make poor regulatory choices.
D)   The regulations implemented serve the private interests of the regulated industry,rather than addressing social interests such as consumer safety and environmental protection.E) C) and D)
F) A) and C) D

Question 7

Logrolling can either increase or diminish economic efficiency.

Accepted Answer

A) True 
 B)False

Question 8

Government loan guarantees tend to socialize gains and privatize losses.

Accepted Answer

A) True 
 B)False

Question 9

Changes in tax rates are a form of monetary policy.

Accepted Answer

A) True 
 B)False

Question 10

Public choice theorists point out that the political process:

Accepted Answer

A)   differs from the marketplace in that voters and congressional representatives often face limited and bundled choices.
B)   is less prone to failure than is the marketplace.
C)   is a much fairer way to allocate society's scarce resources than is the impersonal marketplace,which is dominated by high-income consumers.
D)   involves logrolling,which is always inefficient.E) None of the above
F) A) and B)

Question 11

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

Accepted Answer

A) True 
 B)False  True

Question 12

Monetary stimulus is only helpful to an economy:

Accepted Answer

A)   that is experiencing high inflation.
B)   that is in recession.
C)   experiencing significant negative externalities.
D)   with few public goods.E) B) and C)
F) All of the above

Question 13

The government's ability to coerce can enhance economic efficiency by:

Accepted Answer

A)   eliminating income inequality.
B)   correcting market failures.
C)   preventing resources from going to their most valued uses.
D)   restraining self-interest.E) A) and B)
F) A) and C)

Question 14

In a sporting goods store,you can buy the equipment you want and forgo the rest.But 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) A) and C)

Question 15

As it relates to corporations,the principal-agent problem is that:

Accepted Answer

A)   the goals of the corporate managers (the principals) may not match the goals of the corporate owners (the agents) .
B)   the goals of the corporate managers (the agents) may not match the goals of the corporate owners (the principals) .
C)   the federal government (the agent) taxes both corporate profits and the dividends paid to stockholders (the principals) .
D)   it is costly for the corporate owners (the principals) to obtain a corporate charter from government (the agent) .E) A) and D)
F) B) and C)

Question 16

Weak government enforcement of contracts and laws tends to:

Accepted Answer

A)   increase economic efficiency by minimizing government interference.
B)   stimulate innovation and investment.
C)   discourage economic activity by encouraging private-sector coercion such as blackmail and extortion.
D)   not affect economic activity,as incentives for theft and deception are low.E) B) and C)
F) B) and D)

Question 17

Economists widely support deregulation of industries that tend toward monopoly or generate substantial negative externalities.

Accepted Answer

A) True 
 B)False

Question 18

A situation in which society may not be able to rank its preferences consistently through paired-choice majority voting refers to:

Accepted Answer

A)   logrolling.
B)   the paradox of voting.
C)   the median-voter model.
D)   the special-interest effect.E) A) and B)
F) B) and C)

Question 19

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

Accepted Answer

A) True 
 B)False

Question 20

How does government's power to coerce behavior tend to reduce private-sector risk?

Accepted Answer

A)   By enforcing contracts and discouraging illegal behavior that threatens private property.
B)   By guaranteeing that the government will financially cover any losses by private-sector firms.
C)   By strictly regulating the allocation of most property resources in the economy.
D)   The coercive power of government only increases private-sector risk.E) A) and D)
F) A) and C)

Exam 5: Governments Role and Government Failure

The Bank of Canada,U.S.Federal Reserve,the Bank of Japan,the Bank of England,and the European Central Bank are all in charge of what for the countries they represent?

Correct AnswerverifiedShow Answer

Regulatory capture often occurs because of which of the following?

Correct AnswerverifiedShow Answer

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

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

Correct AnswerverifiedShow Answer

The problem of limited and bundled choices explains why many voters cannot fully express their political preferences.

Correct AnswerverifiedShow Answer

Which of the following would best explain why regulatory capture is a problem?

Correct AnswerverifiedD

Logrolling can either increase or diminish economic efficiency.

Correct AnswerverifiedShow Answer

Government loan guarantees tend to socialize gains and privatize losses.

Correct AnswerverifiedShow Answer

Changes in tax rates are a form of monetary policy.

Correct AnswerverifiedShow Answer

Public choice theorists point out that the political process:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedTrue

Monetary stimulus is only helpful to an economy:

Correct AnswerverifiedShow Answer

The government's ability to coerce can enhance economic efficiency by:

Correct AnswerverifiedShow Answer

In a sporting goods store,you can buy the equipment you want and forgo the rest.But 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

As it relates to corporations,the principal-agent problem is that:

Correct AnswerverifiedShow Answer

Weak government enforcement of contracts and laws tends to:

Correct AnswerverifiedShow Answer

Economists widely support deregulation of industries that tend toward monopoly or generate substantial negative externalities.

Correct AnswerverifiedShow Answer

A situation in which society may not be able to rank its preferences consistently through paired-choice majority voting refers to:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

How does government's power to coerce behavior tend to reduce private-sector risk?

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
A

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
D

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
True

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