Question 1

Answer the question on the basis of the following table that shows the total costs and total benefits facing a city of five different potential baseball stadiums of increasing size.All figures are in millions of dollars.  Refer to the table.The marginal cost and marginal benefit of stadium B (relative to A)  are:

Accepted Answer

A)  $20 million and $50 million, respectively.
B)  $100 million and $200 million, respectively.
C)  $30 million and $50 million, respectively.
D)  $20 million and $60 million, respectively.

Question 2

Government fiscal policy involves changing which of the following?

Accepted Answer

A)  Interest rates.
B)  Taxes and government spending.
C)  Regulations on business.
D)  The amount of money in circulation.

Question 3

The political tendency to favor spending priorities with immediate benefits but deferred costs results in:

Accepted Answer

A)  chronic budget deficits.
B)  misdirection of stabilization policy.
C)  unfunded liabilities.
D)  all of these.

Question 4

Suppose that Steve and Susie each perceives $200 of marginal benefit from a proposed new park, whereas Elizabeth perceives $800.If the proposed tax levied on each for the park would be $300, 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 efficiently allocated.
C)  pass this project and resources will be underallocated to it.
D)  pass this project and resources will be overallocated to it.

Question 5

An economic analysis of the relationship between proposed legislation affecting major employers in each state and the voting patterns of senators and representatives in Congress on that legislation would fit within the subcategory of economics called:

Accepted Answer

A)  the economics of fiscal policy.
B)  public choice theory.
C)  behavioral economics.
D)  monetarism.

Question 6

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.

Question 7

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.

Question 8

Some people argue that the three main television networks all have similar programming.If true, this observation might best be explained by the:

Accepted Answer

A)  paradox of voting.
B)  median-voter model.
C)  law of diminishing marginal utility.
D)  ability-to-pay principle.

Question 9

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.

Question 10

Which of the following will tend to socialize losses and privatize gains?

Accepted Answer

A)  Lowering interest rates to encourage private borrowing and investment.
B)  Government regulation to promote human safety and environmental protection.
C)  Government creating projects rather than supporting private efforts.
D)  Government guarantees to private investors that they will get their money back even if the company fails.

Question 11

The government's ability to coerce can enhance economic efficiency by:

Accepted Answer

A)  eliminating income inequality.
B)  correcting market failures.
C)  preventing resources from going to their most valued uses.
D)  restraining self-interest.

Question 12

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.

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.

Question 14

As it relates to corporations, the principal-agent problem is that:

Accepted Answer

A)  the goals of the corporate managers (the principals)  may not match the goals of the corporate owners (the agents) .
B)  the goals of the corporate managers (the agents)  may not match the goals of the corporate owners (the principals) .
C)  the federal government (the agent)  taxes both corporate profits and the dividends paid to stockholders (the principals) .
D)  it is costly for the corporate owners (the principals)  to obtain a corporate charter from government (the agent) .

Question 15

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.

Question 16

Suppose that in a series of paired-choice votes a new park is preferred to a new recreation center and a new recreation center is preferred to street widening.Also suppose that street widening is preferred to a new park.This set of votes is an example of the:

Accepted Answer

A)  principal-agent problem.
B)  benefits-received principle.
C)  median-voter model.
D)  paradox of voting.

Question 17

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.

Question 18

The many layers of the federal government in Canada:

Accepted Answer

A)  lead to economic inefficiencies because of difficulty aggregating and conveying information.
B)  enhance government's ability make effective decisions quickly.
C)  better allow the invisible hand to direct government resources to their best uses.
D)  improve accountability of government officials, thus leading to more efficient policies.

Question 19

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.

Question 20

Because of the force of law and bureaucratic structure, government accountability is less of a problem than in the private sector.

Accepted Answer

A) True 
 B)False

Exam 5: Part B: Governments Role and Government Failure

Suppose that Steve and Susie each perceives $200 of marginal benefit from a proposed new park, whereas Elizabeth perceives $800.If the proposed tax levied on each for the park would be $300, a majority vote will:

Correct Answer
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Because of the force of law and bureaucratic structure, government accountability is less of a problem than in the private sector.

Correct Answer
verified

The political technique called logrolling:

Correct Answer
verified

Suppose that in a series of paired-choice votes a new park is preferred to a new recreation center and a new recreation center is preferred to street widening.Also suppose that street widening is preferred to a new park.This set of votes is an example of the:

Correct Answer
verified

Public choice theorists point out that the political process:

Correct Answer
verified

Under what circumstances would government loan guarantees be socially beneficial?

Correct Answer
verified

Some people argue that the three main television networks all have similar programming.If true, this observation might best be explained by the:

Correct Answer
verified

An economic analysis of the relationship between proposed legislation affecting major employers in each state and the voting patterns of senators and representatives in Congress on that legislation would fit within the subcategory of economics called:

Correct Answer
verified

Information problems create inefficient outcomes in:

Correct Answer
verified

The government's ability to coerce can enhance economic efficiency by:

Correct Answer
verified

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 Answer
verified

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

Correct Answer
verified

As it relates to corporations, the principal-agent problem is that:

Correct Answer
verified

Which of the following will tend to socialize losses and privatize gains?

Correct Answer
verified

The political tendency to favor spending priorities with immediate benefits but deferred costs results in:

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
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Government fiscal policy involves changing which of the following?

Correct Answer
verified

The many layers of the federal government in Canada:

Correct Answer
verified

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

Correct Answer
verified

Exam 5: Part B: Governments Role and Government Failure

Suppose that Steve and Susie each perceives $200 of marginal benefit from a proposed new park, whereas Elizabeth perceives $800.If the proposed tax levied on each for the park would be $300, a majority vote will:

Correct AnswerverifiedShow Answer

Because of the force of law and bureaucratic structure, government accountability is less of a problem than in the private sector.

Correct AnswerverifiedShow Answer

The political technique called logrolling:

Correct AnswerverifiedShow Answer

Suppose that in a series of paired-choice votes a new park is preferred to a new recreation center and a new recreation center is preferred to street widening.Also suppose that street widening is preferred to a new park.This set of votes is an example of the:

Correct AnswerverifiedShow Answer

Public choice theorists point out that the political process:

Correct AnswerverifiedShow Answer

Under what circumstances would government loan guarantees be socially beneficial?

Correct AnswerverifiedShow Answer

Some people argue that the three main television networks all have similar programming.If true, this observation might best be explained by the:

Correct AnswerverifiedShow Answer

An economic analysis of the relationship between proposed legislation affecting major employers in each state and the voting patterns of senators and representatives in Congress on that legislation would fit within the subcategory of economics called:

Correct AnswerverifiedShow Answer

Information problems create inefficient outcomes in:

Correct AnswerverifiedShow Answer

The government's ability to coerce can enhance economic efficiency by:

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

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

Correct AnswerverifiedShow Answer

As it relates to corporations, the principal-agent problem is that:

Correct AnswerverifiedShow Answer

Which of the following will tend to socialize losses and privatize gains?

Correct AnswerverifiedShow Answer

The political tendency to favor spending priorities with immediate benefits but deferred costs results in:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Government fiscal policy involves changing which of the following?

Correct AnswerverifiedShow Answer

The many layers of the federal government in Canada:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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