Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

The idea of government failure includes all of the following except:

Accepted Answer

A)  special-interest effect.
B)  bureaucratic inefficiency.
C)  pressure by special-interest groups.
D)  extensive positive externalities from public and quasi-public goods.E) All of the above
F) B) and D)

Question 3

The appeal to government for special benefits at taxpayers' or someone else's expense is called:

Accepted Answer

A)  rent seeking.
B)  rent expense.
C)  rent revenue.
D)  land rent.E) C) and D)
F) B) and D)

Question 4

Answer the question on the basis of this table showing the marginal benefit 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)  pass this project and resources will be allocated efficiently.
C)  pass this project and resources will be overallocated to it.
D)  pass this project and resources will be underallocated to it.E) A) and B)
F) All of the above

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

The government's ability to coerce:

Accepted Answer

A)  can never be beneficial.
B)  can have economic benefits.
C)  is also available to private corporations.
D)  should frequently be applied to free markets.E) A) and D)
F) A) and C)

Question 7

In a market economy, the government's power to coerce can:

Accepted Answer

A)  undermine economic efficiency by increasing private-sector risk.
B)  improve economic efficiency by directing all resources to their most valued uses.
C)  reduce private-sector risk and increase economic efficiency.
D)  cause significant negative externalities.E) A) and B)
F) None of the above

Question 8

Suppose that Katie and Kelly each expects 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) All of the above

Question 9

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) C) and D)
F) A) and D)

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

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

Question 12

Refer to the table.The inconsistency illustrated by the table is that, while a majority of voters prefer the:

Accepted Answer

A)  highway to the lighthouse and the submarine to the highway, they also prefer the lighthouse to the submarine.
B)  lighthouse to the highway and the lighthouse to the submarine, they also prefer the submarine to the highway.
C)  highway to the lighthouse and the submarine to the lighthouse, they also prefer the submarine to the highway.
D)  lighthouse to the submarine and the highway to the submarine, they also prefer the highway to the lighthouse.E) A) and C)
F) A) and B)

Question 13

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) C) and D)
F) All of the above

Question 14

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

Accepted Answer

A) True 
 B)False

Question 15

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) A) and B)
F) B) and D)

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) A) and C)
F) A) and B)

Question 17

In a sporting goods store, you can buy the equipment you want and not buy the rest.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) A) and D)

Question 18

Individual accountability within the government bureaucracy:

Accepted Answer

A)  tends to be greater than in private firms, making government more efficient than private firms.
B)  is not a problem because government bureaucrats are not affected by the self-interest that affects private sector individuals.
C)  is easy to monitor because of the small size and scope of government.
D)  tends to be lacking because of civil service protections and the complexity of government.E) B) and C)
F) A) and B)

Question 19

Which of the following impacts would economists expect to result from chronic budget deficits?

Accepted Answer

A)  Greater economic efficiency resulting from the abundance of public goods produced.
B)  Permanently high levels of output and continued economic growth.
C)  Greater political control over monetary policy.
D)  Government control of an inefficiently large share of the economy's resources.E) B) and C)
F) A) and D)

Question 20

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

Exam 5: B: Governments Role and Government Failure

Suppose that Katie and Kelly each expects 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

In a market economy, the government's power to coerce can:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The appeal to government for special benefits at taxpayers' or someone else's expense is called:

Correct AnswerverifiedShow Answer

Answer the question on the basis of this table showing the marginal benefit 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 AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Individual accountability within the government bureaucracy:

Correct AnswerverifiedShow Answer

The information contained in the table illustrates:

Correct AnswerverifiedShow Answer

Public choice theorists point out that the political process:

Correct AnswerverifiedShow Answer

Weak government enforcement of contracts and laws tends to:

Correct AnswerverifiedShow Answer

The government's ability to coerce:

Correct AnswerverifiedShow Answer

The idea of government failure includes all of the following except:

Correct AnswerverifiedShow Answer

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

Government loan guarantees tend to have the effect of:

Correct AnswerverifiedShow Answer

Which of the following impacts would economists expect to result from chronic budget deficits?

Correct AnswerverifiedShow Answer

In a sporting goods store, you can buy the equipment you want and not buy the rest.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

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

Correct AnswerverifiedShow Answer

A special-interest issue is one whose passage yields:

Correct AnswerverifiedShow Answer

Refer to the table.The inconsistency illustrated by the table is that, while a majority of voters prefer the:

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 AnswerverifiedShow Answer

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