81. Logrolling refers to
a.
vote trading among legislators.
b.
the tendency of voters to free-ride on the payment for public goods.
c.
the power of well-organized interest groups.
d.
the tendency of legislators to favor the interests of the timber (logging) industry.
82. The term logrolling describes
a.
government spending programs financed with user charges.
b.
the exchange between legislators of their votes on issues.
c.
the actions of legislators who are willing to trade their political votes for campaign
contributions from special interest groups.
d.
government spending programs that primarily benefit loggers and other forest workers.
83. Which of the following refers to when legislators trade votes on legislation?
a.
the shortsightedness effect
b.
the special-interest effect
c.
rational-ignorance effect
d.
logrolling
84. The term pork-barrel legislation refers to
a.
government spending programs financed with user charges.
b.
the exchange between legislators of their votes on issues.
c.
legislation that bundles together a number of projects, each benefiting local interests at the
expense of general taxpayers.
d.
the actions of legislators who are willing to trade their political votes for campaign
contributions from special interest groups.
85. Legislators often gain by bundling a number of projects benefiting local districts at the expense of
general taxpayers together on a single bill. Such legislation is called
a.
market failure legislation.
b.
the rational-ignorance effect.
c.
public-goods legislation.
d.
pork-barrel legislation.
86. Legislation that contains a number of projects benefiting local interests at the expense of the general
taxpayer is called
a.
balanced-budget legislation.
b.
pork-barrel legislation.
c.
voucher legislation.
d.
public-goods legislation.
87. Pork-barrel legislation typically bundles the pet projects of several special interest groups. Such
legislation
a.
is frequently enacted, even though the overall benefits to society are less than the overall
costs to society.
b.
seldom benefits special interest groups.
c.
usually, if successful, helps the majority of taxpayers.
d.
seldom passes because social benefits are far smaller than social costs.
88. Which of the following explains why pork-barrel spending is often approved, even when the spending
is inefficient?
a.
Each representative has little incentive to oppose pork-barrel spending since the tax
savings would accrue to taxpayers throughout the nation.
b.
General opposition to pork-barrel spending by a legislator would make it more difficult for
the legislator to arrange for pork-barrel projects that provide concentrated benefits for his
district.
c.
Logrolling increases the likelihood that pork-barrel projects will be approved.
d.
All of the above are correct.
89. Legislation that offers immediate and easily recognized benefits, at the expense of costs that are
observable only in the distant future, is often enacted even when economic inefficiency results. This
can be expected because of
a.
a lack of incentive for operational efficiency in the public sector.
b.
market failure.
c.
the special-interest effect.
d.
the shortsightedness effect.
90. The shortsightedness effect suggests that
a.
politicians have a strong incentive to support projects that yield immediate and easily
recognized benefits, especially when the costs of the projects are difficult to identify and
are observable only in the distant future.
b.
politicians have a strong incentive to support projects that yield benefits in the distant
future, especially when the costs of the project must be paid for in the current period.
c.
voters will tend to weigh future costs and benefits more heavily than current costs and
benefits.
d.
legislators will be unwilling to trade votes on issues, especially when those issues benefit
only special interest groups.
91. Government decisions tend to be biased toward actions that have
a.
current costs and future benefits that are both easily observable.
b.
future costs that are difficult to identify and current benefits that are easily observable.
c.
future costs and future benefits that are both difficult to identify.
d.
current costs that are easily observable and future benefits that are difficult to identify.
92. Government decisions tend to be biased against actions that have
a.
current costs and future benefits that are both easily observable.
b.
future costs that are difficult to identify and current benefits that are easily observable.
c.
future costs and future benefits that are both difficult to identify.
d.
current costs that are easily observable and future benefits that are difficult to identify.
93. Which of the following is an example of political action that reflects the shortsightedness effect?
a.
budget surpluses
b.
the promise of future benefits without providing for their funding
c.
spending on roads and highways
d.
spending on programs that transfer income from the rich to the poor
94. Which of the following explains why elected representatives will find borrowing to be an attractive
method of financing current government programs?
a.
the shortsightedness effect
b.
pork-barrel politics
c.
the invisible hand principle
d.
the public goods argument for government spending programs
95. In economics, actions by individuals and interest groups designed to influence public policy in a
manner that will either directly or indirectly redistribute more income to themselves are known as
a.
logrolling.
b.
rent seeking.
c.
influence peddling.
d.
redistribution searching.
96. As more politically directed spending leads to more rent-seeking activity,
a.
the spending will increase GDP, but only if it is directed toward productive activity.
b.
the spending will decrease GDP, but only if it is directed toward unproductive activity.
c.
resources will be channeled toward unproductive activity and away from productive
activity.
d.
resources will be channeled toward productive activity and away from unproductive
activity.
97. When resources are allocated politically, rent-seeking will
a.
channel resources toward government programs that generate large benefits relative to
costs.
b.
reduce GDP because it results in the wasteful use of resources.
c.
lead to wasteful, rather than productive, use of resources.
d.
improve the efficiency of resource use.
98. Subsidizing coal mining and orange growing have both been found to be economically inefficient in
that the costs outweigh the benefits. However, a subsidy on coal mining would help the coal
producers in West Virginia and a subsidy on orange growing would help the orange farmers in Florida.
So the senator from West Virginia approaches the senator from Florida and says that he will vote for
the orange subsidy if the Florida senator votes for the coal-mining subsidy. The Florida senator
agrees. Which term best describes what just happened?
a.
the shortsightedness effect
b.
logrolling
c.
the use of user charges
d.
the political voter theory
99. Dairy farmers hold an annual Capitol Hill ice cream social that provides free ice cream for
congressional staffers during which time representatives from the industry discuss issues with, and
provide information to, congressional staff. This is an example of
a.
logrolling.
b.
rent seeking.
c.
pork-barrel legislation.
d.
the shortsightedness effect.
100. In 2006, the American Association of Retired Persons (AARP) spent over $70 million on
lobbying-related expenses in an attempt to get policies enacted that would benefit retirees. In
economics, the term used to describe such activity is
a.
logrolling.
b.
rent seeking.
c.
influence peddling.
d.
redistribution searching.
101. Producers tend to be better represented in lobbying efforts and other elements of the political process
than consumers because
a.
producers are generally more intelligent and, therefore, better informed.
b.
producers are generally better organized than consumers.
c.
producers are better educated than consumers.
d.
the number of producers affected by the outcome of a particular political issue is usually
greater than the number of consumers affected.
102. As both the budget and regulatory powers of government grow, public choice analysis indicates that
individuals and groups will find it in their interest to
a.
increase their efforts devoted toward market production.
b.
spend less time attempting to secure redistribution through government.
c.
spend more time informing themselves about political issues, so they can cast a
well-informed vote.
d.
spend more time rent seeking.
103. Which of the following is a predictable side effect of increased government activity (for example,
taxes and subsidies) designed to redistribute income among citizens?
a.
improvement in the operational efficiency of government agencies
b.
budget surpluses
c.
reduction in the poverty rate
d.
an increase in rent-seeking activity
104. When governments become more heavily involved in taxing one group in order to provide benefits to
other groups, which of the following will be encouraged?
a.
rapid economic growth
b.
rent-seeking activity
c.
an improvement in the efficiency of government bureaucracies
d.
competitive private markets
105. From the standpoint of society as a whole, rent seeking is
a.
counterproductive because it takes resources away from the creation of wealth in the
private sector.
b.
counterproductive because it fails to alter public policy.
c.
productive because each interest group gains more than they spend on rent-seeking
activities.
d.
productive because the resources used in rent seeking have no opportunity cost to society.
106. Which of the following factors explains why managers of government agencies (the public sector)
have little incentive to operate efficiently?
a.
It is relatively easy for voters to detect operational inefficiency in the public sector and do
something to correct it.
b.
Public-sector managers face fierce competition.
c.
Public-sector managers have no fear of losses and bankruptcy when operational efficiency
is not achieved.
d.
All of the above explain why government agencies have little incentive to be efficient.
107. Which of the following represents why private production tends to be more efficient then government
production?
a.
Politicians have a strong incentive to support projects that have immediate and easily
recognized benefits and distant and unidentifiable costs, even if the total costs outweigh
the total benefits.
b.
Politicians have a strong incentive to support programs where the benefits are highly
concentrated on special interest groups and the costs are widely dispersed among voters,
even if the total costs outweigh the benefits.
c.
Private companies face a profit motive that keeps them operating efficiently, government
bureaucracies use taxpayer money and, therefore, do not face this profit motive.
d.
All of the above are reasons why private production tends to be more efficient then
government production.
108. Public choice theory suggests that politicians will be most likely to favor redistribution of income from
a.
the rich to the poor.
b.
unorganized taxpayers to well-organized interest groups.
c.
well-organized business groups to consumers.
d.
none of the above.
109. Which of the following is true?
a.
The incentives to engage in rent-seeking activities increase with the ease with which the
political process can provide personal gain at the expense of others.
b.
The amount of resources devoted toward rent seeking generally has no impact on the
economic prosperity of a nation.
c.
Income transfers directed toward the poor constitute about half of all income transfers in
the United States.
d.
All of the above are correct.
110. Most income transfer programs in the United States
a.
are means-tested programs that transfer income to the poor.
b.
allocate income to small businesses and small farmers.
c.
are designed to help those with very little economic and political power.
d.
allocate income to concentrated interest groups, such as the elderly, large farmers, and
business interests.
111. According to public choice theory, which of the following groups will likely benefit the most from
government income transfers under a system of representative democracy?
a.
the poor
b.
consumers
c.
small businesses
d.
concentrated interest groups
112. Public choice analysis indicates
a.
most income transfers will be directed toward the poor.
b.
rent-seeking activities will improve the efficiency of resource allocation and promote
economic growth.
c.
rent seeking will be less attractive if the nation’s legal (or constitutional) structure makes it
difficult to use the political process to take the property or income of others.
d.
politicians will consistently oppose programs favored by rent seekers if those programs
reduce the welfare of society.
113. Economic theory implies that the incentive for a manager of a publicly operated firm (for example, a
state university or the post office) to promote internal efficiency of their operations would be
a.
strong because inefficiency is easily detected and leads to the loss of voter support.
b.
strong because public officials are unconcerned about personal gain.
c.
weak because government employees are less educated than employees who work in the
private sector.
d.
weak because it is difficult for voters to detect inefficiency and for public officials to gain
from actions that would improve the efficiency of government.
114. Which of the following factors explains why managers of government agencies have little incentive to
achieve operational efficiency?
a.
Public-sector managers have no fear of bankruptcy when operational efficiency is not
achieved.
b.
Public-sector managers face fierce competition.
c.
It is relatively easy for voters to detect operational inefficiency in the public sector and do
something to correct it.
d.
All of the above explain why government agencies have little incentive to be efficient.
115. Crony capitalism is present when
a.
businesses are either implicitly or explicitly prohibited from making donations to
political candidates.
b.
businesses either implicitly or explicitly provide political decision-makers with
contributions and other forms of political support in “exchange” for government favors
that will improve their profitability.
c.
rule of law is present and government officials treat all citizens alike.
d.
government officials spend taxpayer funds only on productive projects.
116. If new regulations make it illegal to sell older model electrical appliances, then
a.
producers of new models that meet the regulations will see demand for their output rise.
b.
consumers who might have purchased to older appliances are clearly made better off.
c.
consumers are helped, but the profits of appliance producers are not affected.
d.
consumers will certainly gain from the change.
117. Economics indicates that government funding of special interest projects and favoritism of some
business firms relative to others will lead to
a.
efficient allocation of resources because the government action will correct the failures of
the market.
b.
the funding of productive projects that will improve the well-being of most citizens.
c.
economic inefficiency because the funding will be driven by political rather than
economic considerations.
d.
a decline in political contributions and a reduction in the quality of the candidates willing
to run for political office.
118. Which of the following is most likely to result in an increase in crony capitalism?
a.
a reduction in entry barriers and an increase in the competitiveness of markets.
b.
an increase in government spending and growth of government regulation
c.
a reduction in the size of government
d.
an increase in the share of the population voting in elections
119. An analysis of market failure and government failure indicates
a.
government decision making is always preferable to using markets.
b.
market decision making is always preferable to public-sector action.
c.
government action is necessary whenever market failure occurs.
d.
both the market and the government may fail to meet conditions of economic efficiency;
in each individual case, the choice of market or public-sector action requires careful
evaluation.
120. Which of the following factors weakens the case for government provision of goods and services
relative to private-sector provision?
a.
monopoly
b.
externalities
c.
public goods
d.
the special-interest effect
121. Which of the following factors weakens the case for private-sector provision of goods and services
relative to public-sector provision?
a.
externalities
b.
the rational-ignorance effect
c.
the shortsightedness effect
d.
well-informed consumers
122. Which of the following factors weakens the case for private-sector provision of goods and services
relative to public-sector provision?
a.
constitutional rules
b.
the shortsightedness effect
c.
the special-interest effect
d.
public goods
123. Public choice analysis indicates
a.
politicians under representative democracy are led as if by an invisible hand to adopt
legislation that enhances the wealth of a nation.
b.
political structures consistent with economic efficiency tend to emerge naturally from the
ordinary political process.
c.
constitutional rules establishing procedures and limiting the ability of the political process
to engage in redistributive activities can improve the economic efficiency of government.
d.
all of the above are correct.
Use the figure below to answer the following question(s).
Figure 6-1
124. Figure 6-1 illustrates the four possibilities of the distribution of costs and benefits among voters for a
government project. A tariff on imported steel to protect jobs in the domestic steel industry that raises
the cost of many products for consumers would be considered which type of project?
a.
type A
b.
type B
c.
type C
d.
type D
125. Figure 6-1 illustrates the four possibilities of the distribution of costs and benefits among voters for a
government project. Programs that give subsidies to a small group of producers at general taxpayer
expense would be considered
a.
type A projects, and the government would be likely to undertake these projects if they
were efficient and to reject them if they were inefficient.
b.
type B projects, and the government would be likely to undertake many of these projects
even when they were counterproductive (inefficient).
c.
type C projects, and the government would be likely to fail to undertake many of these
projects even when they were productive (efficient).
d.
type D projects, and the government would be likely to undertake these projects if they
were efficient and to reject them if they were inefficient.
126. Figure 6-1 illustrates the four possibilities of the distribution of costs and benefits among voters for a
government project. For which type would the government most likely undertake many projects that
would be considered inefficient or counterproductive (in other words, do too many of them relative to
economic efficiency)?
a.
type A
b.
type B
c.
type C
d.
type D
127. Figure 6-1 illustrates the four possibilities of the distribution of costs and benefits among voters for a
government project. For which type would the government most likely fail to undertake many projects
that would be considered efficient or productive (in other words, do too few of them relative to
economic efficiency)?
a.
type A
b.
type B
c.
type C
d.
type D
128. Figure 6-1 illustrates the four possibilities of the distribution of costs and benefits among voters for a
government project. For which types of projects would government action most likely work well,
undertaking only efficient projects and rejecting inefficient ones?
a.
types A and B
b.
types B and D
c.
types B and C
d.
types A and D
Figure 6-2
129. Figure 6-2 illustrates the four possibilities of the structure of production and consumption for a good or
service. In which case is the incentive of producers and consumers to economize the strongest?
a.
A
b.
B
c.
C
d.
D
130. Figure 6-2 illustrates the four possibilities of the structure of production and consumption for a good or
service. In which case is the incentive of producers to be efficient and the incentive for consumers to
economize the weakest?
a.
A
b.
B
c.
C
d.
D
131. Figure 6-2 illustrates the four possibilities of the structure of production and consumption for a good or
service. When the structure of production and consumption for a good places it in quadrant B,
a.
consumers have little incentive to search out and patronize low-cost suppliers.
b.
private producers of such goods will have little incentive to operate efficiently and to keep
prices low.
c.
goods and services will only be supplied if consumers are willing to pay an amount
sufficient to cover their production costs.
d.
both a and b, but not c, will be true.
132. When the government both provides a service and covers its costs through taxation,
a.
the government has a strong incentive to supply consumers with desired goods at a low
cost.
b.
consumers are in a weak position to either discipline the suppliers or alter the quantity or
quality of the service provided.
c.
the invisible hand will direct decision makers toward the most efficient level of output.
d.
Consumers have strong incentive to be cost conscious.
133. In the case of a private good, which of the following forms of economic organization will result in the
strongest incentive for consumers and producers to economize?
a.
The good is produced privately and taxes are used to provide it to consumers free of
charge.
b.
The good is produced privately and consumers purchase it with their own money.
c.
The good is produced by government enterprises and the cost of its production is covered
by taxes.
d.
The good is produced by government enterprises and consumers purchase it with their
own money.
134. Which of the following is an example of a good that is produced by the public sector but consumers
purchase it in proportion to the benefit received?
a.
milk
b.
public education
c.
first-class mail delivery from the U.S. Post Office
d.
national defense
135. Which of the following statements is false?
a.
Political activities consistent with economic efficiency tend to emerge naturally from the
unconstrained democratic political process.
b.
Constitutional rules establishing procedures and limiting the ability of the political process
to engage in redistributive activities can improve the economic efficiency of government.
c.
Rent-seeking activity tends to retard the economic prosperity of a nation because it takes
resources away from productive private sector activities.
d.
Unconstrained democratic governments often enact special-interest programs that waste
resources and impair the standard of living of a country.
136. Which of the following factors weakens the case for private-sector provision of goods and services as
opposed to public-sector provision?
a.
weak incentives for operational efficiency
b.
rent-seeking
c.
the shortsightedness effect
d.
externalities
137. Market allocation and the political process differ in that
a.
competition is present in the market sector but not in the political sector.
b.
scarcity is a constraint in the market sector but not the political sector.
c.
there is a one-to–one link between payment for and receipt of a good in the market sector,
but this is often not true in the political sector.
d.
in the political sector, voters have a strong incentive to acquire information that will help
them make better decisions, but in the market sector, consumers do not have much
incentive to acquire information.
138. Public choice analysis suggests that bureaucrats and public-sector managers have a strong incentive to
a.
economize on their spending so more funds will be available for other government
programs.
b.
ensure that their budget is exactly the size that would be considered economically
efficient.
c.
expand their budgets to sizes beyond what would be considered economically efficient.
d.
keep individual legislators fully informed as to every expenditure.
139. Which of the following is true of government activities under a system of representative democracy?
a.
When voters pay in proportion to benefits received, all voters will gain if the government
activity is productive.
b.
If a majority opposes an activity, it must be counterproductive.
c.
When voters must pay in proportion to benefits received for an activity undertaken by the
government, the activity will most likely be rejected by the majority of voters.
d.
Government activities must be productive in order to be eligible for vote.
140. Legislation that offers immediate and easily recognized benefits, at the expense of costs that are
observable only in the distant future, is often enacted, even when economic inefficiency results. In
economics this is referred to as the
a.
long-term effect.
b.
political-fallacy effect.
c.
shortsightedness effect.
d.
inefficiency effect.
141. Public choice analysis
a.
assumes individuals in the public sector act in their own self-interests.
b.
assumes individuals seek to serve the public interest rather than their own personal
interests.
c.
is the study of decision making in the formation and operation of private organizations.
d.
assumes the government is a corrective device that takes the necessary action to offset
economic inefficiency arising from market failure.
142. Government decisions tend to be biased toward actions that have
a.
current benefits that are easily observable and future costs that are difficult to identify.
b.
current benefits and future costs that are both difficult to identify.
c.
future costs that are easily observable.
d.
clear benefits to the poor at no costs to the wealthy.
143. Which of the following is a predictable side effect of increased government activity (for example,
taxes and subsidies) designed to redistribute income among citizens?
a.
improvement in the operational efficiency of government agencies
b.
rapid economic growth
c.
a reduction in the amount of lobbying
d.
an increase in rent-seeking activity
144. Assume that you are a member of the U.S. House of Representatives from your home state and district.
Which of the following best explains why you have a strong incentive to get the federal government to
finance pork-barrel projects in your district?
a.
Most of the benefits of pork-barrel projects within your district will accrue to your
constituents, while most of the costs will be imposed on voters from other districts.
b.
Most of the costs of pork-barrel projects within your district will be imposed on your
constituents, while most of the benefits will accrue to voters from other districts.
c.
Pork producers are a powerful political lobby that will influence the actions of legislators
in all districts.
d.
This is a trick question; in a representative democracy, there is little incentive for
legislators to support pork-barrel projects.
145. At the most basic level, the distinguishing characteristic of government that makes it different from
private firms is
a.
the difference in incentive structure motivating economic activity.
b.
its ability to direct resources in a manner that is more economically efficient.
c.
its ability to produce goods and services that people value.
d.
its ability to use coercive force against people to modify their behavior or force them to
pay for a good or service whether they benefit from it or not.
ESSAY
146. A survey of income by county revealed that four of the five wealthiest counties were located in the
suburbs surrounding Washington, D.C. Why?
147. Congressman Localstuff always votes for a balanced budget amendment to the U.S. Constitution. He
also always votes for spending bills supported by the leadership of his political party. Is this rational?
148. How does a voting structure that relies on unanimity for an action guarantee that no one will be
adversely affected? Why isn’t this type of decision making used more frequently?
ANS:
149. The park in Hammerhead, Florida, built to honor the city’s founding father, General Hammerhead, is
starting to deteriorate. It would take about $5,000 to restore the General’s statue, repair the benches,
and repair the fountain, but the city budget is tight. Also, the deterioration is not that noticeable. Mayor
Grouper suggests delaying the repair until after the election, three years away. City Councilwoman
Halibut notes that by then the park will be dilapidated, and repairs will cost $25,000. From a public
choice perspective, what is the likely outcome of this debate?
150. Young John recently took a job with the U.S. Department of Agriculture. His supervisor gave him an
assignment and a two-week deadline. He finished the job in three days and turned it in. Now his
coworkers are mad at John. Why?
151. Suppose domestic automobiles were allocated in the United States the way public education is
allocated. Describe how this system might work.
152. Is calling a voter rationally ignorant the same as calling her irrational? Explain.
153. With a strong and active federal government, why do we need state and local governments?
154. Suppose we coupled the pay of Congress with the federal budget, so that for every billion dollars of
deficit spending, a lawmaker’s pay would be reduced $1,000. How would this affect fiscal policy?