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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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written consent of McGraw-Hill Education.
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
5-65
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
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
5-66
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written consent of McGraw-Hill Education.
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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written consent of McGraw-Hill Education.
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
5-68
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written consent of McGraw-Hill Education.
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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Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
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
5-70
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
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
5-71
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
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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written consent of McGraw-Hill Education.
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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written consent of McGraw-Hill Education.
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
5-75
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
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
5-76
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
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
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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written consent of McGraw-Hill Education.
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
5-80
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written consent of McGraw-Hill Education.
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
