Chapter 17 – Asymmetric Information, Voting, and Public Choice
50. Refer to the above table, which shows the ranked preferences of voters for three
alternative projects, with “1” being the top preference. In a paired-choice vote between a jail
and a stadium:
51. Refer to the above table, which shows the ranked preferences of voters for three
alternative projects, with “1” being the top preference. In a paired-choice vote between a park
and a jail:
52. Refer to the above table, which shows the ranked preferences of voters for three
alternative projects, with “1” being the top preference. This situation illustrates the voting
inconsistency where a majority of voters prefer the:
Chapter 17 – Asymmetric Information, Voting, and Public Choice
53. The sometimes inconsistent results coming from a series of paired-choice voting is due
to:
54. Voters are making a choice to spend money on three projects: a dam, a school, or a road.
In the choice between the dam and the school, the majority favors the school. In a choice
between a dam and a road, the majority favors a dam. In a choice between a road and a
school, the majority favors a road. These rankings indicate that majority voting may:
55. It is observed that the person representing the middle position on an issue will most likely
determine the outcome of an election. This view is most closely associated with the:
56. When voters have different opinions about an issue, the position that is most likely to be
adopted is that of the:
57. The median-voter model indicates that political parties will:
58. Assume that voters are asked to vote for either more police protection or more schools in a
community. More schools are likely to win if:
Chapter 17 – Asymmetric Information, Voting, and Public Choice
59. One implication of the median-voter model is that at any point in time, most voters will:
60. As voters “vote with their feet” and move to political districts where the median-voter’s
preference is closer to their own, the median-voter’s preference will:
61. The term government failure refers to the:
Chapter 17 – Asymmetric Information, Voting, and Public Choice
62. The principal-agent problem refers to the problem of:
63. 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:
64. Which statement best describes a special-interest issue?
Chapter 17 – Asymmetric Information, Voting, and Public Choice
65. The special-interest effect is significant because:
66. The so-called pork-barrel politics refers to congressional members:
67. Rent-seeking behavior in public choice theory refers to:
Chapter 17 – Asymmetric Information, Voting, and Public Choice
68. Politicians seeking reelection tend to do the following, except:
69. The concept of limited bundled choice, as used in public choice theory, refers to the fact
that:
70. Rent-seeking behavior refers to:
Chapter 17 – Asymmetric Information, Voting, and Public Choice
71. Lobbying actions that seek government legislation to provide tax breaks to specific
corporations would be an example of:
72. The Tax Reform Act of 1986 contains a clause appropriating tax dollars for “any taxpayer
incorporated on September 7, 1978, which is engaged in the trade or business of
manufacturing dolls and accessories.” This type of appropriation is the result of:
73. The so-called collective action problem is the reason why:
Chapter 17 – Asymmetric Information, Voting, and Public Choice
74. Which of the following countries had the least corruption, as reported in the Global
Corruption Barometer for 2009?
75. Political corruption occurs in the following instances, except:
76. What is a likely explanation for why the budget of a government agency might increase
beyond its optimal size?
Chapter 17 – Asymmetric Information, Voting, and Public Choice
77. Asymmetric information occurs when the two parties in a market transaction do not have
the same amount of information regarding the product or process involved in the transaction.
78. The licensing of doctors and nurses is one way by which the government tries to deal with
inadequate seller information about buyers.
79. Better Business Bureaus exist partly in order to try to deal with inadequate buyer
information about sellers.
80. A moral hazard problem occurs before a transaction — when people alter their behavior
before they sign a contract, imposing costs on the other party.
Chapter 17 – Asymmetric Information, Voting, and Public Choice
81. Adverse selection is when someone with home insurance decides to take the chance that a
dying tree would fall on the garage, rather than spend the money to have the tree cut down.
82. When the government bails out large banks when the banks become unstable, it could lead
to a moral hazard problem.
83. When the government bails out failing banks, it creates a moral hazard problem; but when
the government bails out homeowners who are defaulting, there is no moral hazard problem.
84. When critics of unemployment insurance claim that some of the unemployed are not
exerting much effort to find jobs because of the unemployment benefits, they are referring to
the adverse selection problem.
Chapter 17 – Asymmetric Information, Voting, and Public Choice
85. E-bay and Amazon provide “sellers’ ratings” information based on the experiences of past
buyers. This is to help resolve the adverse selection problem faced by potential buyers.
86. An example of an adverse selection problem is in insurance, where the people most likely
to claim insurance payouts are the people who will seek to buy the most generous policies.
87. Majority voting produces efficient outcomes because it takes into account the strength of
the preferences of individual voters.
88. Majority voting on whether or not a public good should be produced could lead to a result
where a public good whose costs are bigger than the benefits would end up getting approved
by the voters.
Chapter 17 – Asymmetric Information, Voting, and Public Choice
89. If a public good provides social benefits that are greater than its costs, then majority of
voters would always vote in favor of producing the good.
90. Special interest groups result from people with strong preferences on a particular issue
banding together to let policymakers know their preferences.
91. Political logrolling, or vote-trading, can turn a potentially inefficient voting outcome into
an efficient one.
92. If choice A wins over choice B in a majority vote, while choice B wins over choice C in a
majority vote, then we can conclude that choice A would win over choice C.
Chapter 17 – Asymmetric Information, Voting, and Public Choice
93. Political logrolling always produces economically inefficient outcomes.
94. The appeal to government for special benefits at taxpayers’ or someone else’s expense is
the paradox of voting.
95. Even if individual voters have clear preferences, and they stay consistent in their
preferences, we could still end up with the paradox of voting.
96. One consequence of the paradox of voting is that whoever sets the agenda of a vote could
practically predetermine the results of the vote.
Chapter 17 – Asymmetric Information, Voting, and Public Choice
97. In the median-voter model, the median voter refers to the voter who makes her choice at
the midpoint of the voting period.
98. In the median-voter model, half the voters have stronger or more positive preferences than
the median voter, while half of the voters have weaker or more negative preferences.
99. One prediction of the median-voter model is that during elections, candidates will tend to
become “centrists”.
100. One implication of the median-voter model as applied to a vote regarding how much
government involvement to have in the economy is that most voters would find the resulting
government involvement either too large or too small.
Chapter 17 – Asymmetric Information, Voting, and Public Choice
101. It is generally believed that, because of the election process, the incentives and pressures
for internal efficiency are stronger in the public sector than in the private sector.
102. Critics of government contend that the market system creates incentives and pressures
for internal efficiency which are absent in the public sector.
103. Public choice economists argue that the nature of the political process often means that
citizens are less selective in their choice of public goods and services than they would be in
their choice of private goods and services.
104. “Good economics” is about marginal costs and marginal benefits of specific projects;
“good politics” is more about clear benefits and hidden costs.
Chapter 17 – Asymmetric Information, Voting, and Public Choice
105. The “principal-agent problem” often arises in public choice when politicians pursue the
best interests of their constituents.
106. Pork-barrel politics is a very good illustration of the “principal-agent problem”.
107. Pork-barrel politics is a very good illustration of the “clear benefits, hidden costs”
perspective of politicians.
108. The U.S. is among the countries that have very low levels of political corruption, as
reported in the Global Corruption Barometer of 2009.
Chapter 17 – Asymmetric Information, Voting, and Public Choice
109. Because of the so-called “bundled choice” problem, voters often vote for candidates that
they are not entirely happy with.
110. The collective action problem is the reason why there are no lobbyists representing the
interest of general taxpayers or consumers in Washington, DC.
111. The collective action problem makes it hard for voters to counter the influence of
special-interest groups.