Chapter 43 – The Economic Impact of Casino Gambling
Chapter 43 The Economic Impact of Casino Gambling
Multiple Choice
1. The perception that casinos have a dramatic impact on a local economy is
A) without any foundation whatsoever.
B) reasonable, given their size but overstated given the degree of local substitution.
C) reasonable, and in fact, understated.
D) reasonable, and exactly on the mark.
2. U.S. casinos serve ____ people per year
A) 1 million
B) 5 million
C) 50 million
D) 250 million
3. U.S. casinos employ _____ people.
A) 37,000
B) 340,000
C) 1 million
D) 10 million
4. The city in which a new casino is likely to have the greatest economic impact would be
A) Las Vegas (where many already exist).
B) St. Louis (where three already exist).
C) Kansas City (where two already exist).
D) Denton TX (north of Dallas, where no casinos already exist).
5. The city in which a new casino is likely to have the smallest economic impact would be
A) Las Vegas (where many already exist).
B) St. Louis (where three already exist).
C) Kansas City (where two already exist).
D) Denton TX (north of Dallas, where no casinos already exist).
Chapter 43 – The Economic Impact of Casino Gambling
6. The degree to which a new casino will have an economic impact reflects the potential
A) local substitution.
B) the addictiveness of gambling.
C) positive externalities.
D) legislation.
7. If a city, like Denver, that is quite far from the nearest other urban area, were to add a casino,
the “local substitution” argument would suggest that there would be
A) a moderate economic downside.
B) a significant economic upside.
C) a moderate economic upside.
D) a significant economic downside.
8. If “local substitution” is complete, then the economic impact of a casino is
A) significantly negative.
B) zero.
C) moderately negative.
D) moderately positive.
9. If a new casino comes to a city that already has one, which economic impact has little to no
“local substitution” offsets to consider
A) the construction costs.
B) the employment at the casino.
C) the employment at restaurants near the casino.
D) the purchase of souvenirs at the casino.
10. If a casino locates in a small suburban/rural area within 20 miles of a larger city that already
has a casino, the degree of “local substitution” is likely to be
A) nearly zero.
B) nearly complete.
C) actually negative.
D) significant.
Chapter 43 – The Economic Impact of Casino Gambling
11. The evidence of the net economic impact of casino gambling, suggests that it is
A) significantly positive.
B) modestly negative.
C) modestly positive.
D) significantly negative.
12. Economic estimates of a “modest upside” to casino gambling suggest that the “local
substitution” is
A) zero.
B) nearly, but not totally, complete.
C) slight.
D) complete.
13. During the 1990s and early 2000s, the Indiana counties with casino gambling had increases
in personal income ________ the Indiana counties without casino gambling.
A) significantly greater than
B) slightly greater than
C) significantly less than
D) slightly less than
14. Suppose you are debating a proponent of casino gambling and they note that casinos
themselves pay significant state and local taxes, your response could be
A) casinos actually pay only federal taxes.
B) casinos pay no taxes.
C) the revenue mostly displaces taxes that would have been paid by others anyway.
D) the tax rate on gambling profits is less than on restaurant profits.
15. Economists generally do not agree to limit the private and voluntary actions of people, but in
the case of gambling, economists will admit that gambling
A) can be addictive, so regulation could be justified for that reason.
B) teaches people about statistics.
C) has external benefits, so it must be subsidized.
D) is immoral, so it must be prohibited.
Chapter 43 – The Economic Impact of Casino Gambling
16. Economists generally do not agree to limit the private and voluntary actions of people, but in
the case of gambling, economists will admit that gambling
A) is fun.
B) teaches people about statistics.
C) has external costs, so regulation could be justified for that reason.
D) is immoral, so it must be prohibited.
17. The external costs associated with gambling include
A) the losses to gamblers.
B) the cost of security at casinos.
C) the crowd control problems at casinos.
D) the effects on the gamblers’ family.
18. Psychologists note that addicted gamblers typically
A) enjoy the activity.
B) won significant sums their first time at the casino.
C) lost significant sums their first time at the casino.
D) win as often as they lose at a casino.
19. Economists can accept limits on gambling because
A) addiction psychology distorts the gambler’s ability to make rational choices.
B) gamblers impose costs on innocent third parties.
C) no one wins in gambling.
D) addiction psychology distorts the gambler’s ability to make rational choices and gamblers
impose costs innocent third parties.
20. Which of the following would not be an external cost associated with gambling?
A) The increase in homelessness associated with casinos.
B) The increase in crime near casinos.
C) The effects on the gamblers’ family.
D) The cost of security at casinos.
Chapter 43 – The Economic Impact of Casino Gambling
21. Which of the following would not be an external cost associated with gambling?
A) The increase in homelessness associated with casinos.
B) The single gambler’s damaged credit rating.
C) The increase in crime near casinos.
D) The effects on the gamblers’ family.
22. If you compute the odds of winning and losing, the casinos
A) breakeven.
B) lose a small percentage.
C) win a small percentage.
D) lose a large percentage.
23. The 5% of all gambles that casinos are expected to win is called the
A) cost.
B) hit.
C) vig.
D) sugar.
24. Gambling is profitable to casinos because the expected payoff of every gamble (to the
gambler) is ______ the amount gambled.
A) equal to
B) greater than
C) less than
D) unrelated to
25. Gambling is profitable to casinos because the expected payoff of every gamble (to the
casino) is ______ the amount gambled.
A) equal
B) greater than
C) less than
D) unrelated
Chapter 43 – The Economic Impact of Casino Gambling
26. The operating profitability of casinos comes primarily from the fact that
A) they typically charge an enormous amount for alcohol.
B) they typically have a significant cover charge.
C) the expected value of any gamble (to the gambler) is negative.
D) the expected value of any gamble (to the casino) is negative.
27. Casino gambling is a different form of entertainment than a movie in that
A) you sometimes leave a casino with less money than you came in with.
B) you sometimes leave a casino with more money than you came in with.
C) you can get your money back at a casino if you do not have fun.
D) they are not different at all.
28. Each year, Americans visiting casinos gamble a total of
A) $3 million.
B) $30 million.
C) $30 billion.
D) $300 billion.
29. Each year, Americans visiting casinos gamble an average of approximately
A) $750 per gambler.
B) $600 per gambler.
C) $450 per gambler.
D) $200 per gambler.
30. Government tax revenues collected annually from casinos total
A) almost $100 million.
B) just over $500 million.
C) approximately $1 billion.
D) over $5 billion.
Chapter 43 – The Economic Impact of Casino Gambling
31. Government tax revenues collected annually from casinos per gambler amount to roughly
A) $100.
B) $50.
C) $10.
D) $5.
32. The increase in employment associated with operation of a new casino
A) tends to lower the prevailing wage paid to employees in other competing entertainment
venues.
B) is usually a source of rapid employment growth in other competing entertainment venues.
C) is matched in part by reduced employment in other competing entertainment venues.
D) is always entirely offset by reduced employment in other competing entertainment
venues.
33. Unregulated competitive markets for services with negative externalities, such as gambling,
tend to
A) produce too little of the service to be efficient.
B) produce too much of the service to be efficient.
C) produce the efficient quantity of the service.
D) produce too little of the service to satisfy the confirmed addict.
34. Unregulated competitive markets for services with negative externalities, such as gambling,
tend to establish a price for the service that
A) is too low to support efficient use of scarce resources.
B) is too high to support efficient use of scarce resources.
C) supports efficient use of scarce resources.
D) provides a modest stipend for support of recovering addicts.