Question 1

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) All of the above
F) None of the above

Question 2

A public good

Accepted Answer

A)   can be proﬁtably produced by private ﬁrms.
B)   is characterized by rivalry and excludability.
C)   produces no positive or negative externalities.
D)   is available to all and cannot be denied to anyone.E) B) and D)
F) All of the above

Question 3

Refer to the graphs which show demand curves reﬂecting the prices Alvin and Elmer are willing to pay for a public good, rather than do without it. If the marginal cost of the optimal quantity of this public good is $10, the
Optimal quantity must be

Accepted Answer

A)   1 unit.
B)   2 units.
C)   3 units.
D)   4 units.E) C) and D)
F) A) and B)

Question 4

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

Question 5

(Consider This) Mohair loan subsidies, provided to Angora goat farmers, are an example of regulatory capture.

Accepted Answer

A) True 
 B)False

Question 6

Economists consider governments to be "wasteful"

Accepted Answer

A)   whenever they over- or underallocate resources to a project.
B)   only when they overallocate resources to a project.
C)   only when they underallocate resources to a project.
D)   whenever they attempt to correct a market failure.E) None of the above
F) B) and C)

Question 7

Senator A agrees to vote for Senator K's state project in exchange for Senator K voting for Senator A's state project. This is an example of

Accepted Answer

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

Question 8

A government is considering undertaking a construction project of an increasing scale (ranging from 1, 2, 3, to 4) . The estimated marginal costs and marginal bene?ts of each successive scale of the project are given in the
Table below.
  Project  Marginal Cost  (in millions)   Marginal Benefit  (in millions)  1$8$11211133181742823\begin{array} { | c | c | c | } \hline 	ext { Project } & \begin{array} { c } 	ext { Marginal Cost } \	ext { (in millions)  }\end{array} & \begin{array} { c } 	ext { Marginal Benefit } \	ext { (in millions)  }\end{array} \\hline 1 & \$ 8 & \$ 11 \\hline 2 & 11 & 13 \\hline 3 & 18 & 17 \\hline 4 & 28 & 23 \\hline\end{array} Project 1234​ Marginal Cost  (in millions)  ​$8111828​ Marginal Benefit  (in millions)  ​$11131723​​  What is the total cost and total bene?t of the scale-3 project?

Accepted Answer

A)   Total cost is $18 million, and total bene?t is $19 million.
B)   Total cost is $24 million, and total bene?t is $27 million.
C)   Total cost is $37 million, and total bene?t is $41 million.
D)   Total cost is $65 million, and total bene?t is $66 million. E) A) and B)
F) A) and C)

Question 9

Cost-beneﬁt analysis attempts to

Accepted Answer

A)   compare the real worth, rather than the market values, of various goods and services.
B)   compare the relative desirability of alternative distributions of income.
C)   determine whether it is better to cut government expenditures or reduce taxes.
D)   compare the beneﬁts and costs associated with any economic project or activity.E) A) and D)
F) B) and C)

Question 10

(Consider This)  Government loan subsidies for mohair production illustrate

Accepted Answer

A)   why special-interest effects are often characterized by concentrated beneﬁts and diffuse costs.
B)   why special-interest effects are often characterized by concentrated costs and diffuse beneﬁts.
C)   that larger groups carry greater political weight than smaller groups.
D)   the moral hazard problem.E) None of the above
F) B) and D)

Question 11

For which one of the following goods would we need to sum individual demand curves vertically to obtain the total demand curve?

Accepted Answer

A)   frozen yogurt
B)   bubble gum
C)   microwave popcorn
D)   courts of lawE) A) and C)
F) B) and D)

Question 12

Describe the two characteristics of public goods.

Accepted Answer

The two characteristics of public goods ...

Question 13

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)   the special-interest effect.
B)   the invisible hand of the market.
C)   limited and bundled choice in elections.
D)   the majority voting system.E) C) and D)
F) B) and D)

Question 14

A demand curve for a public good is determined by

Accepted Answer

A)   summing vertically the individual demand curves for the public good.
B)   summing horizontally the individual demand curves for the public good.
C)   combining the amounts of the public good that the individual members of society demand at each price.
D)   multiplying the per-unit cost of the public good by the quantity made available.E) None of the above
F) C) and D)

Question 15

Political corruption occurs in the following instances, except when

Accepted Answer

A)   government oﬃcials use their powers for personal gain.
B)   people pay a government oﬃcial to do what she should be doing.
C)   people pay a bureaucrat to do something that he should not be doing.
D)   businesses pay property taxes and license fees.E) B) and C)
F) B) and D)

Question 16

One primary reason why regulatory capture may occur in an industry is that

Accepted Answer

A)   the government designates unelected oﬃcials to head the various regulatory agencies of different industries.
B)   there is a lot of bribery and corruption going on in all major industries that the government seeks to regulate.
C)   the industry's leaders are the ones who pushed for the government to impose supervision and regulation over their industry.
D)   people who are qualiﬁed to supervise and regulate the industry often come from the industry itself.E) All of the above
F) C) and D)

Question 17

Majority voting may produce economically ineﬃcient outcomes because it

Accepted Answer

A)   does not always lead to fair results.
B)   requires everyone to vote and bear the costs.
C)   does not consider the strength of individual voters' preferences.
D)   does not provide beneﬁts to everyone.E) None of the above
F) A) and D)

Question 18

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) B) and C)

Question 19

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) A) and B)
F) All of the above

Question 20

Assume that Abby, Ben, Clara, Joe, and Matt are the only citizens in a community. A proposed public good has a total cost of $1,000. All ﬁve citizens will share an equal portion of this cost in taxes. The beneﬁt of the public
Good is $220 to Abby, $210 to Ben, $210 to Clara, $180 to Joe, and $120 to Matt. In a majority vote, this
Proposal will most likely be

Accepted Answer

A)   accepted, four in favor and one against.
B)   defeated, one in favor and four against.
C)   accepted, three in favor and two against.
D)   defeated, two in favor and three against.E) B) and D)
F) B) and C)

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

Correct Answer
verified

Senator A agrees to vote for Senator K's state project in exchange for Senator K voting for Senator A's state project. This is an example of

Correct Answer
verified

(Consider This) Mohair loan subsidies, provided to Angora goat farmers, are an example of regulatory capture.

Correct Answer
verified

Correct Answer
verified

Public choice economists

Correct Answer
verified

Political corruption occurs in the following instances, except when

Correct Answer
verified

(Consider This) Government loan subsidies for mohair production illustrate

Correct Answer
verified

Economists consider governments to be "wasteful"

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

Majority voting may produce economically ineﬃcient outcomes because it

Correct Answer
verified

Refer to the graphs which show demand curves reﬂecting the prices Alvin and Elmer are willing to pay for a public good, rather than do without it. If the marginal cost of the optimal quantity of this public good is $10, the Optimal quantity must be

Correct Answer
verified

For which one of the following goods would we need to sum individual demand curves vertically to obtain the total demand curve?

Correct Answer
verified

A demand curve for a public good is determined by

Correct Answer
verified

Describe the two characteristics of public goods.

Correct Answer
verified
The two characteristics of public goods ...
View Answer

Cost-beneﬁt analysis attempts to

Correct Answer
verified

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 Answer
verified

A public good

Correct Answer
verified

Regulatory capture often occurs because of which of the following?

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

One primary reason why regulatory capture may occur in an industry is that

Correct Answer
verified

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

Correct AnswerverifiedShow Answer

Senator A agrees to vote for Senator K's state project in exchange for Senator K voting for Senator A's state project. This is an example of

Correct AnswerverifiedShow Answer

(Consider This) Mohair loan subsidies, provided to Angora goat farmers, are an example of regulatory capture.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Public choice economists

Correct AnswerverifiedShow Answer

Political corruption occurs in the following instances, except when

Correct AnswerverifiedShow Answer

(Consider This) Government loan subsidies for mohair production illustrate

Correct AnswerverifiedShow Answer

Economists consider governments to be "wasteful"

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

Majority voting may produce economically ineﬃcient outcomes because it

Correct AnswerverifiedShow Answer

Refer to the graphs which show demand curves reﬂecting the prices Alvin and Elmer are willing to pay for a public good, rather than do without it. If the marginal cost of the optimal quantity of this public good is $10, the Optimal quantity must be

Correct AnswerverifiedShow Answer

For which one of the following goods would we need to sum individual demand curves vertically to obtain the total demand curve?

Correct AnswerverifiedShow Answer

A demand curve for a public good is determined by

Correct AnswerverifiedShow Answer

Describe the two characteristics of public goods.

Correct AnswerverifiedThe two characteristics of public goods ...View AnswerShow Answer

Cost-beneﬁt analysis attempts to

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

A public good

Correct AnswerverifiedShow Answer

Regulatory capture often occurs because of which of the following?

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

One primary reason why regulatory capture may occur in an industry is that

Correct AnswerverifiedShow Answer

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The two characteristics of public goods ...
View Answer

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