Question 1

Economists widely support deregulation of industries that tend toward monopoly or generate substantial negative externalities.

Accepted Answer

A) True 
 B)False

Question 2

When a nation is in a debt crisis, the government's level of debt is so high that:

Accepted Answer

A)  monetary policy is ineffective.
B)  the government is unable to find willing lenders so it can continue borrowing.
C)  it can only be solved with a fiscal stimulus of lower taxes and more government spending.
D)  other countries will be unwilling to buy goods and services from the nation.E) A) and B)
F) None of the above

Question 3

Government changes in interest rates to regulate the economy are part of:

Accepted Answer

A)  monetary policy.
B)  fiscal policy.
C)  debt policy.
D)  liability policy.E) None of the above
F) All of the above

Question 4

Which of the following would be the best example of regulatory capture?

Accepted Answer

A)  Starbucks buys up all the available supplies of coffee beans.
B)  Nike executives influence the rules for track and field events.
C)  Federal law makers write and pass legislation that protects domestic companies from foreign competition.
D)  Executives from the Ford, General Motors, and Chrysler companies write the rules regulating automobile safety and fuel requirements.E) B) and C)
F) A) and D)

Question 5

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

Question 6

Public choice theory focuses on the economics of:

Accepted Answer

A)  fiscal and monetary policy.
B)  the behavior of business firms.
C)  antitrust and regulatory policy.
D)  government decision making, politics, and elections.E) B) and D)
F) C) and D)

Question 7

According to the paradox of voting:

Accepted Answer

A)  public goods that cost more than the total benefits they confer may get produced under majority voting.
B)  trading of votes may either add to or subtract from economic efficiency.
C)  the median voter decides what public goods all voters should have.
D)  majority voting fails under some circumstances to make consistent choices that reflect the community's underlying preferences.E) None of the above
F) All of the above

Question 8

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.E) A) and D)
F) A) and C)

Question 9

To reduce politicization of policy making, many countries have given control of ________ to politically independent central banks.

Accepted Answer

A)  fiscal policy
B)  monetary policy
C)  unfunded liabilities
D)  budget deficitsE) A) and D)
F) A) and B)

Question 10

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.E) A) and D)
F) All of the above

Question 11

Pork-barrel legislation that contains funding for hundreds of earmarks throughout numerous states often reflects:

Accepted Answer

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

Question 12

Public choice economists contend public bureaucracies are inefficient primarily because:

Accepted Answer

A)  the value of public goods is more easily measured than is the value of private goods.
B)  of the absence of competitive market pressures.
C)  public sector workers are more security-conscious than are private sector workers.
D)  relatively low pay in government attracts workers of lesser quality.E) B) and C)
F) A) and B)

Question 13

Monetary policy attempts to change the level of spending by altering interest rates.

Accepted Answer

A) True 
 B)False

Question 14

Political corruption occurs whenever:

Accepted Answer

A)  logrolling is used to secure votes for controversial legislation.
B)  government officials use unlawful misdirection of governmental resources for their own personal gain.
C)  special interest groups contribute to elected officials, who in turn support legislation that benefits the special interest group.
D)  there is pork barrel politics involved.E) All of the above
F) A) and B)

Question 15

How does government's power to coerce behavior tend to reduce private-sector risk?

Accepted Answer

A)  By enforcing contracts and discouraging illegal behavior that threatens private property.
B)  By guaranteeing that the government will financially cover any losses by private-sector firms.
C)  By strictly regulating the allocation of most property resources in the economy.
D)  The coercive power of government only increases private-sector risk.E) A) and D)
F) None of the above

Question 16

Fiscal policy is more susceptible to politicization than monetary policy.

Accepted Answer

A) True 
 B)False

Question 17

Deregulation:

Accepted Answer

A)  tends to improve outcomes in industries generating substantial negative externalities.
B)  eliminates regulatory capture and can improve outcomes by increasing competition.
C)  is most appropriate to undertake by government agencies responsible for human safety, financial regulation, and environmental protection.
D)  always generates greater economic efficiency.E) C) and D)
F) None of the above

Question 18

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.E) None of the above
F) C) and D)

Question 19

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.E) A) and B)
F) A) and C)

Question 20

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.E) A) and B)
F) A) and C)

Exam 5: B: Governments Role and Government Failure

Which of the following would be the best example of regulatory capture?

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Deregulation:

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Government fiscal policy involves changing which of the following?

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Fiscal policy is more susceptible to politicization than monetary policy.

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Political corruption occurs whenever:

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Monetary policy attempts to change the level of spending by altering interest rates.

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Government changes in interest rates to regulate the economy are part of:

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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:

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

Correct AnswerverifiedShow Answer

According to the paradox of voting:

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Pork-barrel legislation that contains funding for hundreds of earmarks throughout numerous states often reflects:

Correct AnswerverifiedShow Answer

Public choice theory focuses on the economics of:

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

How does government's power to coerce behavior tend to reduce private-sector risk?

Correct AnswerverifiedShow Answer

To reduce politicization of policy making, many countries have given control of ________ to politically independent central banks.

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

When a nation is in a debt crisis, the government's level of debt is so high that:

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

Economists widely support deregulation of industries that tend toward monopoly or generate substantial negative externalities.

Correct AnswerverifiedShow Answer

Public choice economists contend public bureaucracies are inefficient primarily because:

Correct AnswerverifiedShow Answer

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