Question 1

Which of the following is a source of government failure?

Accepted Answer

A)  The invisible hand.
B)  The lack of bureaucracy in government.
C)  The enormous size and scope of government.
D)  Excessive flexibility.E) B) and C)
F) A) and D)

Question 2

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

Question 3

A debt crisis refers to how much government spending exceeds tax revenues in a given year.

Accepted Answer

A) True 
 B)False

Question 4

Factors that impede the attainment of economic efficiency in the public sector are called:

Accepted Answer

A)  market failures.
B)  externalities.
C)  government failures.
D)  voting irregularities.E) A) and D)
F) B) and C)

Question 5

As it relates to owners and managers, the principal-agent problem results from the:

Accepted Answer

A)  separation of corporate ownership and control.
B)  double taxation of corporate profit.
C)  limited liability of corporate owners.
D)  differing interests of corporate stockholders and bondholders.E) B) and D)
F) B) and C)

Question 6

Chronic budget deficits can be attributed to:

Accepted Answer

A)  unfunded liabilities.
B)  voters wanting government programs but not wanting to pay taxes.
C)  inappropriate monetary policy.
D)  state budget laws.E) A) and B)
F) B) and C)

Question 7

Refer to the table.In a choice between education and public safety:

Accepted Answer

A)  a majority of voters would favor education.
B)  no voter decision is possible.
C)  a majority of voters would favor public safety.
D)  the outcome would depend on which item was listed first on the ballot.E) A) and D)
F) C) and D)

Question 8

When congressional representatives vote on an appropriations bill, they must vote yea or nay, taking the bad with the good.This statement best reflects the:

Accepted Answer

A)  paradox of voting.
B)  regulatory capture effect.
C)  benefits-received principle.
D)  concept of limited and bundled choices.E) A) and D)
F) All of the above D

Question 9

Proponents of deregulation point to all of the following industries as examples of successful deregulation except for:

Accepted Answer

A)  airlines.
B)  pharmaceuticals.
C)  railroads.
D)  interstate trucking.E) B) and D)
F) A) and C) B

Question 10

A government using fiscal policy in an attempt to stimulate the economy would do which of the following?

Accepted Answer

A)  Raise taxes.
B)  Raise interest rates.
C)  Lower interest rates.
D)  Raise government spending.E) C) and D)
F) A) and B)

Question 11

Majority voting assures that government will provide a public good if it yields total benefits in excess of total costs.

Accepted Answer

A) True 
 B)False

Question 12

The field of economics that analyzes government decision making, politics, and elections is called:

Accepted Answer

A)  public finance.
B)  public choice theory.
C)  collective economics.
D)  political economy.E) None of the above
F) B) and C)

Question 13

(Consider This)  Voter failure describes the situation where:

Accepted Answer

A)  an insufficient number of voters turn out to express their preferences.
B)  voter preferences cannot be adequately captured because of a voting paradox.
C)  voters support policies that would reduce productive and allocative efficiency.
D)  government officials make poor decisions that contradict voter preferences.E) None of the above
F) All of the above

Question 14

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

Accepted Answer

A) True 
 B)False

Question 15

The pursuit through government of a "transfer of wealth" at someone else's expense refers to:

Accepted Answer

A)  logrolling.
B)  rent-seeking behavior.
C)  the paradox of voting.
D)  the median-voter model.E) All of the above
F) A) and B)

Question 16

Economists call the pursuit of a transfer of wealth through government at someone else's expense:

Accepted Answer

A)  the paradox of voting.
B)  adverse selection.
C)  rent-seeking behavior.
D)  the benefits-received principle.E) B) and C)
F) A) and B)

Question 17

According to some economists, the private sector is more efficient than the public sector mainly because:

Accepted Answer

A)  the private sector has a clear test of performance: profit and loss.
B)  wages, salaries, and fringe benefits are higher in the private sector.
C)  worker turnover is higher in the public sector.
D)  of extensive negative externalities in the public sector.E) A) and B)
F) A) and C)

Question 18

The principal-agent problem is a problem for the private sector but does not apply to political decision making.

Accepted Answer

A) True 
 B)False

Question 19

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 C)
F) A) and B)

Question 20

Logrolling can either increase or diminish economic efficiency.

Accepted Answer

A) True 
 B)False

Exam 5: B: Governments Role and Government Failure

Which of the following is a source of government failure?

Correct Answer
verified

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

Correct Answer
verified
B

A debt crisis refers to how much government spending exceeds tax revenues in a given year.

Correct Answer
verified

Factors that impede the attainment of economic efficiency in the public sector are called:

Correct Answer
verified

As it relates to owners and managers, the principal-agent problem results from the:

Correct Answer
verified

Chronic budget deficits can be attributed to:

Correct Answer
verified

Refer to the table.In a choice between education and public safety:

Correct Answer
verified

When congressional representatives vote on an appropriations bill, they must vote yea or nay, taking the bad with the good.This statement best reflects the:

Correct Answer
verified
D

Proponents of deregulation point to all of the following industries as examples of successful deregulation except for:

Correct Answer
verified
B

A government using fiscal policy in an attempt to stimulate the economy would do which of the following?

Correct Answer
verified

Majority voting assures that government will provide a public good if it yields total benefits in excess of total costs.

Correct Answer
verified

The field of economics that analyzes government decision making, politics, and elections is called:

Correct Answer
verified

(Consider This) Voter failure describes the situation where:

Correct Answer
verified

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

Correct Answer
verified

The pursuit through government of a "transfer of wealth" at someone else's expense refers to:

Correct Answer
verified

Economists call the pursuit of a transfer of wealth through government at someone else's expense:

Correct Answer
verified

According to some economists, the private sector is more efficient than the public sector mainly because:

Correct Answer
verified

The principal-agent problem is a problem for the private sector but does not apply to political decision making.

Correct Answer
verified

Correct Answer
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Logrolling can either increase or diminish economic efficiency.

Correct Answer
verified

Exam 5: B: Governments Role and Government Failure

Which of the following is a source of government failure?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedB

A debt crisis refers to how much government spending exceeds tax revenues in a given year.

Correct AnswerverifiedShow Answer

Factors that impede the attainment of economic efficiency in the public sector are called:

Correct AnswerverifiedShow Answer

As it relates to owners and managers, the principal-agent problem results from the:

Correct AnswerverifiedShow Answer

Chronic budget deficits can be attributed to:

Correct AnswerverifiedShow Answer

Refer to the table.In a choice between education and public safety:

Correct AnswerverifiedShow Answer

When congressional representatives vote on an appropriations bill, they must vote yea or nay, taking the bad with the good.This statement best reflects the:

Correct AnswerverifiedD

Proponents of deregulation point to all of the following industries as examples of successful deregulation except for:

Correct AnswerverifiedB

A government using fiscal policy in an attempt to stimulate the economy would do which of the following?

Correct AnswerverifiedShow Answer

Majority voting assures that government will provide a public good if it yields total benefits in excess of total costs.

Correct AnswerverifiedShow Answer

The field of economics that analyzes government decision making, politics, and elections is called:

Correct AnswerverifiedShow Answer

(Consider This) Voter failure describes the situation where:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The pursuit through government of a "transfer of wealth" at someone else's expense refers to:

Correct AnswerverifiedShow Answer

Economists call the pursuit of a transfer of wealth through government at someone else's expense:

Correct AnswerverifiedShow Answer

According to some economists, the private sector is more efficient than the public sector mainly because:

Correct AnswerverifiedShow Answer

The principal-agent problem is a problem for the private sector but does not apply to political decision making.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Logrolling can either increase or diminish economic efficiency.

Correct AnswerverifiedShow Answer

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B

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D

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B

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