Question 1

The government's ability to force people to do things can increase economic efficiency.

Accepted Answer

A) True 
 B)False

Question 2

Inefficiencies associated with majority voting may get resolved through

Accepted Answer

A)   using the median-voter model.
B)   bureaucratic inefficiency.
C)   the paradox of voting.
D)   political logrolling.E) C) and D)
F) All of the above

Question 3

Governments try to smooth business cycles by using the following policies, except

Accepted Answer

A)   tax policies.
B)   interest rate policies.
C)   wage rate policies.
D)   government-spending policies.E) C) and D)
F) B) and D)

Question 4

The principal-agent problem refers to the problem of

Accepted Answer

A)   communication between sports and entertainment stars with their agents.
B)   how to split profits between labor and management.
C)   the interests of delegates deviating from the interests of the delegators.
D)   how stockholders of a corporation can elect a board of directors.E) A) and B)
F) None of the above

Question 5

When the government provides loan guarantees and in effect "socializes losses and privatizes gains" of a project or firm, it can lead to a

Accepted Answer

A)   moral hazard problem among investors.
B)   regulatory capture problem.
C)   principal-agent problem within the firm.
D)   limited and bundled choice problem.E) A) and D)
F) B) and C)

Question 6

In making sure that laws are uniformly enforced and applied, one consequence is that government creates inflexibility.

Accepted Answer

A) True 
 B)False

Question 7

Which statement best describes a special-interest issue?

Accepted Answer

A)   It is a program or policy that is adopted during a special session of Congress or a state legislature.
B)   It is a policy issue in which both the supporters and opponents employ paid lobbyists to represent their interests.
C)   It is a program or policy which one political party strongly supports and other political parties strongly oppose.
D)   It is a program or policy in which a large number of people will suffer small costs, while a small number will receive large gains.E) C) and D)
F) None of the above

Question 8

In thinking about the "principal-agent problem" in a democratic government, we assign the role of "principal" to the government.

Accepted Answer

A) True 
 B)False

Question 9

The U.S. is among the countries that have very low levels of political corruption, as reported in the Global Corruption Barometer of 2013.

Accepted Answer

A) True 
 B)False

Question 10

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) A) and C)

Question 11

The unlawful misdirection of governmental resources for personal gain is known as

Accepted Answer

A)   political corruption.
B)   logrolling.
C)   adverse selection.
D)   the special-interest effect.E) C) and D)
F) A) and C)

Question 12

Government's ability to force people to do things involuntarily is

Accepted Answer

A)   unconstitutional in the United States and other market economies.
B)   always going to lead to lower economic efficiency.
C)   beneficial if it is used to improve economic efficiency.
D)   always beneficial in reducing the deadweight loss in the economy.E) B) and D)
F) A) and B)

Question 13

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. In a majority vote, this proposal will most likely be

Accepted Answer

A)   accepted; the public good is produced, even though it is economically inefficient.
B)   defeated; the public good is not produced, even though it would have been efficient to do so.
C)   accepted; the public good is produced, which is economically efficient.
D)   defeated; the public good is not produced, which is the proper outcome.E) None of the above
F) A) and C)

Question 14

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) B) and C)

Question 15

Government loan guarantees tend to socialize gains and privatize losses.

Accepted Answer

A) True 
 B)False

Exam 5: 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 Answer
verified

The government's ability to force people to do things can increase economic efficiency.

Correct Answer
verified

When the government provides loan guarantees and in effect "socializes losses and privatizes gains" of a project or firm, it can lead to a

Correct Answer
verified

Government's ability to force people to do things involuntarily is

Correct Answer
verified

In thinking about the "principal-agent problem" in a democratic government, we assign the role of "principal" to the government.

Correct Answer
verified

The political technique called logrolling

Correct Answer
verified

The principal-agent problem refers to the problem of

Correct Answer
verified

Which statement best describes a special-interest issue?

Correct Answer
verified

The U.S. is among the countries that have very low levels of political corruption, as reported in the Global Corruption Barometer of 2013.

Correct Answer
verified

The unlawful misdirection of governmental resources for personal gain is known as

Correct Answer
verified

Governments try to smooth business cycles by using the following policies, except

Correct Answer
verified

Government loan guarantees tend to socialize gains and privatize losses.

Correct Answer
verified

Correct Answer
verified

In making sure that laws are uniformly enforced and applied, one consequence is that government creates inflexibility.

Correct Answer
verified

Inefficiencies associated with majority voting may get resolved through

Correct Answer
verified

Exam 5: 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

The government's ability to force people to do things can increase economic efficiency.

Correct AnswerverifiedShow Answer

When the government provides loan guarantees and in effect "socializes losses and privatizes gains" of a project or firm, it can lead to a

Correct AnswerverifiedShow Answer

Government's ability to force people to do things involuntarily is

Correct AnswerverifiedShow Answer

In thinking about the "principal-agent problem" in a democratic government, we assign the role of "principal" to the government.

Correct AnswerverifiedShow Answer

The political technique called logrolling

Correct AnswerverifiedShow Answer

The principal-agent problem refers to the problem of

Correct AnswerverifiedShow Answer

Which statement best describes a special-interest issue?

Correct AnswerverifiedShow Answer

The U.S. is among the countries that have very low levels of political corruption, as reported in the Global Corruption Barometer of 2013.

Correct AnswerverifiedShow Answer

The unlawful misdirection of governmental resources for personal gain is known as

Correct AnswerverifiedShow Answer

Governments try to smooth business cycles by using the following policies, except

Correct AnswerverifiedShow Answer

Government loan guarantees tend to socialize gains and privatize losses.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

In making sure that laws are uniformly enforced and applied, one consequence is that government creates inflexibility.

Correct AnswerverifiedShow Answer

Inefficiencies associated with majority voting may get resolved through

Correct AnswerverifiedShow Answer

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