978-1259723223 Test Bank TBChap005 Part 4

154.

Refer to the provided graph. Suppose that it shows the S and D graphs in a market where

production entails a significant amount of pollution. In this case, the government should use its

coercive power to make

155.

Refer to the provided graph. Suppose that it shows the S and D graphs in a market where the

product has all the characteristics of a public good. In this case, the government should use its

coercive power to make

156.

Refer to the provided graph. Suppose that it shows the S and D graphs in a market where usage

of the product generates a lot of external benefits. In this case, the government should use its

coercive power to make

157.

The difficulties in managing government in a market economy include the following, except

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AACSB: Knowledge Application

Accessibility:

Keyboard Navigation

Blooms: Understand

Dif f i c u lty:

02 Medium

Learning Objective: 05–01 Describe how governments power to coerce can be

economically beneficial and list some of the difficulties associated with managing and

directing the government.

Test Bank: II

Topic:

Governments Economic Role

158.

Government laws and policies need to be uniformly enforced. But this leads to all of the

following problems, except

159.

The problem of effectively aggregating and conveying information from bottom layers to

top layers in massive government bureaucracies makes it hard for the high-level officials to

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Topic:

Governments Economic Role

160.

Even in democratic governments, we tend to have a problem with accountability due to the

following reasons, except

161.

In assessing the efficiency of government policy, economic analysis would focus on

162.

The term government failure refers to the

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neighborhoods.

163.

The principal-agent problem refers to the problem of

164.

The situation where politicians make decisions that will raise their chances of reelection,

even if those decisions are detrimental to the general public, is referred to as the

165.

In the corporate world of business, the principal-agent problem arises between

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B. managers and stockholders.

C.

stockholders and bondholders.

D.

corporations and their banks.

166.

Which statement best describes a special-interest issue?

167.

The special-interest effect in government decision making is significant because

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Topic:

Government Failure

168.

The situation where “the few who yell the loudest get heard” is referred to as the

169.

The so-called collective-action problem refers to the fact that

170.

The so-called pork-barrel politics refers to congressional members

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Test Bank: II

Topic:

Government Failure

171.

Rent-seeking behavior in public choice theory refers to

172.

The so-called collective action problem helps explain why

173.

The so-called collective action problem is the reason why

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Dif f i c u lty:

02 Medium

Learning Objective: 05–02 Discuss government failure and explain why it happens.

Test Bank: II

Topic:

Government Failure

174.

Lobbying actions that seek government legislation to provide tax breaks to specific

organizations or industries would be an example of

175.

Politicians seeking reelection tend to do the following, except

176.

Politicians who have to go through elections tend to focus on the short-term net benefits of

projects because of

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AACSB: Knowledge Application

Accessibility:

Keyboard Navigation

Blooms: Understand

Dif f i c u lty:

02 Medium

Learning Objective: 05–02 Discuss government failure and explain why it happens.

Test Bank: II

Topic:

Government Failure

177.

“Unfunded liability” refers to a government commitment to

178.

The government’s budget deficit refers to the

179.

To make up for a shortfall in its annual budget, the government must borrow money by

180.

The government adds to its overall public debt whenever it

181.

The government would be running a budget surplus if

182.

Many governments end up with chronic budget deficits because

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C.

some resources are not available from within, so they have to be bought from other nations.

D.

businesses do not want to have “big government” around too much.

183.

The public (or national) debt refers to the

184.

Chronic budget deficits can lead to all of the following, except

185.

Many state and local governments in the U.S. have balanced-budget laws in order to

prevent politicians from

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A. creating a “small government” economy.

B. succumbing to voters’ strong preference for budget deficits.

C.

facing a principal-agent problem.

D.

collecting too much taxes.

186.

All of the following are consequences of a government’s having to deal with a “debt crisis,”

except

187.

In the U.S., the Federal government runs a chronic budget deficit, whereas many state and

local governments do not, because

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Learning Objective: 05–02 Discuss government failure and explain why it happens.

Test Bank: II

Topic:

Government Failure

188.

So-called business cycles refer to the multiyear periods

189.

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

190.

Monetary policy refers to the government’s attempt at smoothing business cycles through

the use of changes in

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Accessibility:

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Blooms: Understand

Dif f i c u lty:

02 Medium

Learning Objective: 05–02 Discuss government failure and explain why it happens.

Test Bank: II

Topic:

Government Failure

191.

Fiscal policy refers to the government’s attempt at stabilizing the economy through the use

of changes in

192.

During a period when output and employment are falling, the government will try to

193.

When fiscal and monetary policies become highly politicized, these policies tend to

194.

To prevent monetary policy from becoming highly politicized, many countries have

195.

The concept of limited and bundled choice, as used in public choice theory, refers to the

fact that

196.

In presidential elections, voters often find that they do not agree with any single candidate

on all the issues that matter to them (the voters). This is known as the

197.

Some economists contend that government agencies are generally less efficient than private

businesses due to the following reasons, except

198.

A 2015 study of hospitals, power plants, and water utilities found that government-owned

and operated companies were more likely than private companies to violate health and safety

laws. Possible explanations for this include the following, except

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C. Government-owned companies tend to be run by less qualified and less competent managers

than the private companies.

D. Government-owned companies are under less pressure to comply with the laws, because

fines for violations are often delayed or even avoided.

199.

“Regulatory capture” refers to the situation where a government agency charged with

supervising and regulating a particular industry is

200.

One primary reason why regulatory capture may occur in an industry is that

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Learning Objective: 05–02 Discuss government failure and explain why it happens.

Test Bank: II

Topic:

Government Failure

201.

Deregulation can solve the problem of regulatory capture and increase economic efficiency

202.

Loan guarantees provided by the government for specific private-sector investments tend to

203.

When the government provides loan guarantees and in effect “socializes losses and

privatizes gains” of a project or firm, it can lead to a