Question 1

What is the main problem with government guarantees that socialize losses and privatize gains?

Accepted Answer

A)   They encourage overly risky investments by insulating private investors from any losses.
B)   The investments that do occur never generate production of goods underproduced by the private sector.
C)   They discourage private investment in worthwhile projects.
D)   They tend to benefit foreign companies at the expense of domestic firms.E) None of the above
F) A) and C)

Question 2

The invisible hand guides government's economic activity just as it does with private economic activity.

Accepted Answer

A) True 
 B)False

Question 3

Under what circumstances would government loan guarantees be socially beneficial?

Accepted Answer

A)   When the guarantees socialize losses and privatize gains.
B)   When the guarantees stimulate production of goods generating significant spillover costs.
C)   When the guarantees promote production of goods otherwise underproduced by the private sector.
D)   When the guarantees increase company profits.E) A) and B)
F) None of the above

Question 4

Public choice economists contend public bureaucracies are inefficient primarily because:

Accepted Answer

A)   the value of public goods is more easily measured than is the value of private goods.
B)   of the absence of competitive market pressures.
C)   public sector workers are more security-conscious than are private sector workers.
D)   relatively low pay in government attracts workers of lesser quality.E) A) and B)
F) B) and D)

Question 5

Pork-barrel legislation that contains funding for hundreds of earmarks throughout numerous states often reflects:

Accepted Answer

A)   the paradox of voting.
B)   logrolling.
C)   the benefits-received principle.
D)   adverse selection.E) A) and B)
F) None of the above

Question 6

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 behavior.E) B) and D)
F) B) and C)

Question 7

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

Question 8

A special-interest issue is one whose passage yields:

Accepted Answer

A)   private benefits equal to external benefits.
B)   large external benefits compared to private benefits.
C)   small economic losses to a small number of people and large economic losses to a large number of people.
D)   large economic gains to a small number of people and small economic losses to a large number of people.E) C) and D)
F) A) and C)

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

Government loan guarantees tend to have the effect of:

Accepted Answer

A)   socializing losses and privatizing gains.
B)   socializing gains and privatizing losses.
C)   socializing both gains and losses.
D)   privatizing both gains and losses.E) A) and B)
F) A) and C)

Question 11

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

Question 12

The paradox of voting is that under majority voting rules the median voter decides the election outcome.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following is an activity of government that is not an activity of private firms?

Accepted Answer

A)   Enforcing involuntary transactions.
B)   Paying equitable wages.
C)   Creating positive externalities.
D)   Pursuing economic efficiency.E) B) and D)
F) B) and C)

Question 14

Information problems create inefficient outcomes in:

Accepted Answer

A)   the private sector but not the public sector.
B)   the public sector but not the private sector.
C)   neither the private nor the public sector.
D)   both the private and the public sectors.E) A) and B)
F) All of the above

Question 15

The Road Runner Club contributes money to Senator Sly's reelection campaign fund,and Senator Sly helps pass legislation to add more jogging paths across the state.From this we can definitively conclude:

Accepted Answer

A)   that political corruption has occurred.
B)   that logrolling has occurred.
C)   that a principal-agent problem has occurred.
D)   nothing;the Road Runner Club may have donated to Senator Sly because he already supported the jogging paths.E) None of the above
F) All of the above

Question 16

Government's unfunded liabilities:

Accepted Answer

A)   result from the political bias toward immediate benefits and deferred costs.
B)   result in more efficient policies in an attempt to satisfy these liabilities.
C)   are caused primarily by market failures.
D)   only occur in democratically elected governments.E) B) and D)
F) B) and C)

Question 17

In what way,if any,does the invisible hand affect government resource allocation?

Accepted Answer

A)   It enhances government efficiency by promoting competition for resources within government.
B)   It does not help resource allocation,as there are no competitive forces within government that automatically direct resources to their best uses.
C)   It rewards government bureaucrats who are most efficient at implementing public policies.
D)   It reduces government efficiency by sending market signals that interfere with government decision making.E) B) and C)
F) A) and D)

Question 18

The median-voter model implies that a political office seeker will:

Accepted Answer

A)   adopt more extreme views when seeking his or her party's nomination than when running against the other party's opponent.
B)   adopt less extreme views when seeking his or her party's nomination than when running against the other party's opponent.
C)   favor extensive government spending because demand curves for public goods are added vertically rather than horizontally.
D)   favor the private resolution of externality problems rather than governmental intervention.E) None of the above
F) B) and C)

Question 19

Because majority voting fails to incorporate the strength of the preferences of individual voters,it:

Accepted Answer

A)   creates negative externalities.
B)   under some circumstances produces economically inefficient outcomes.
C)   leads to market failure.
D)   leads to politics dominated by special interest groups.E) B) and D)
F) B) and C)

Question 20

The political technique called logrolling:

Accepted Answer

A)   always increases economic efficiency.
B)   always decreases economic efficiency.
C)   involves trading votes to secure favorable outcomes that otherwise could be rejected.
D)   is an example of the paradox of voting.E) C) and D)
F) A) and D)

Exam 5: Governments Role and Government Failure

The invisible hand guides government's economic activity just as it does with private economic activity.

Correct Answer
verified

Government loan guarantees tend to have the effect of:

Correct Answer
verified

Public choice economists:

Correct Answer
verified

In what way,if any,does the invisible hand affect government resource allocation?

Correct Answer
verified

The paradox of voting is that under majority voting rules the median voter decides the election outcome.

Correct Answer
verified

A special-interest issue is one whose passage yields:

Correct Answer
verified

The median-voter model implies that a political office seeker will:

Correct Answer
verified

Correct Answer
verified

The Road Runner Club contributes money to Senator Sly's reelection campaign fund,and Senator Sly helps pass legislation to add more jogging paths across the state.From this we can definitively conclude:

Correct Answer
verified

Because majority voting fails to incorporate the strength of the preferences of individual voters,it:

Correct Answer
verified

What is the main problem with government guarantees that socialize losses and privatize gains?

Correct Answer
verified

Information problems create inefficient outcomes in:

Correct Answer
verified

Public choice economists contend public bureaucracies are inefficient primarily because:

Correct Answer
verified

Which of the following is an activity of government that is not an activity of private firms?

Correct Answer
verified

The political technique called logrolling:

Correct Answer
verified

Government's unfunded liabilities:

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

Pork-barrel legislation that contains funding for hundreds of earmarks throughout numerous states often reflects:

Correct Answer
verified

Under what circumstances would government loan guarantees be socially beneficial?

Correct Answer
verified

Exam 5: Governments Role and Government Failure

The invisible hand guides government's economic activity just as it does with private economic activity.

Correct AnswerverifiedShow Answer

Government loan guarantees tend to have the effect of:

Correct AnswerverifiedShow Answer

Public choice economists:

Correct AnswerverifiedShow Answer

In what way,if any,does the invisible hand affect government resource allocation?

Correct AnswerverifiedShow Answer

The paradox of voting is that under majority voting rules the median voter decides the election outcome.

Correct AnswerverifiedShow Answer

A special-interest issue is one whose passage yields:

Correct AnswerverifiedShow Answer

The median-voter model implies that a political office seeker will:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The Road Runner Club contributes money to Senator Sly's reelection campaign fund,and Senator Sly helps pass legislation to add more jogging paths across the state.From this we can definitively conclude:

Correct AnswerverifiedShow Answer

Because majority voting fails to incorporate the strength of the preferences of individual voters,it:

Correct AnswerverifiedShow Answer

What is the main problem with government guarantees that socialize losses and privatize gains?

Correct AnswerverifiedShow Answer

Information problems create inefficient outcomes in:

Correct AnswerverifiedShow Answer

Public choice economists contend public bureaucracies are inefficient primarily because:

Correct AnswerverifiedShow Answer

Which of the following is an activity of government that is not an activity of private firms?

Correct AnswerverifiedShow Answer

The political technique called logrolling:

Correct AnswerverifiedShow Answer

Government's unfunded liabilities:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Pork-barrel legislation that contains funding for hundreds of earmarks throughout numerous states often reflects:

Correct AnswerverifiedShow Answer

Under what circumstances would government loan guarantees be socially beneficial?

Correct AnswerverifiedShow Answer

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