135. Refer to Scenario 6-1. This statement is probably
a.
incorrect because voters are well informed on a wide range of political issues.
b.
incorrect because the political process dilutes the influence of special interest groups,
because like other citizens, their members have only one vote.
c.
correct because the well-informed voter will favor policies that cater to the views of small
groups of people.
d.
correct because voters who have a strong personal interest in an issue will tend to support
candidates who cater to their views, whereas most other voters ignore the issue.
136. Which of the following groups does the quotation in Scenario 6-1 suggest would have the most
influence on public sector action?
a.
taxpayers
b.
nonunion workers
c.
special interest groups
d.
consumers
137. Economists use the term shortsightedness effect to describe which one of the following phenomena?
a.
Politicians tend to support actions that have immediate and easily recognized current
benefits.
b.
Individuals are apt to spend their income on goods that bring immediate personal benefits.
c.
Voters elect politicians on the basis of campaign promises, regardless of what they may do
once they are in office.
d.
Politicians support the programs of special interest groups in order to get elected;
however, special interest support may be detrimental later, costing politicians popularity
after the programs are implemented.
138. Economic theory leads us to expect that the typical voter will be uninformed on many issues because
a.
most issues are so complex that voters will be unable to understand them.
b.
even though information is free, most voters do not care.
c.
information is costly, and the individual voter casting a well-informed vote can expect
negligible personal benefit.
d.
citizen apathy about political matters is inevitable, except when decisions are made by
referendum.
139. Public choice theory suggests that politicians will be most likely to favor redistribution of income from
a.
the rich to the poor.
b.
disorganized individuals to well-organized special interest groups.
c.
middle-income taxpayers to both the rich and the poor.
d.
well-organized business and labor groups to consumers.
140. Giving local governments more power is less dangerous than giving the same power to the national
government because
a.
local governments generally have more strict constitutional rules they must operate under.
b.
it is easier to vote in local elections than national elections.
c.
only national-level governments are allowed to use coercive force.
d.
higher exit options exist at the local level—it is easier for people to move away from a bad
local government.
141. 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, whereas 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, whereas 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.
142. The theory of public choice
a.
analyzes the likelihood that various public sector alternatives will be instituted.
b.
assumes that economic incentives influence the choices of voters.
c.
applies the tools of economics to the collective decision-making process.
d.
is all of the above.
143. When analyzing public sector decision making, economic theory assumes that voters, politicians, and
government officials will
a.
respond to changes in personal benefits and costs when making public sector choices.
b.
pursue the public interest even when it conflicts with their private interests.
c.
pursue primarily public interests because competition is less intense in the public sector.
d.
do none of the above.
144. Public choice theory indicates that competitive forces between candidates in elections provide a
politician with a strong incentive to offer voters a bundle of political goods that she believes
a.
is best for the economic and political situations the country faces.
b.
will most likely clear the legislative process.
c.
will increase the welfare of society.
d.
will increase her chances of winning elections.
145. When voters pay in proportion to the benefits received from an economic action of the government, if
the government activity is productive,
a.
all voters will gain.
b.
only a smaller proportion of voters will gain.
c.
less than a simple majority of voters will gain.
d.
approximately 50 percent of the voters will gain.
146. In which case is the political process most likely to result in the acceptance of productive programs
and rejection of unproductive political activities?
a.
when the benefits are highly concentrated and costs widespread among voters
b.
when the costs are highly concentrated and the benefits widespread among voters
c.
when both the benefits and costs are widespread among voters
d.
when the benefits accrue primarily in the future, whereas the costs are more visible during
the current period
147. When is representative democracy most likely to lead to the adoption of an inefficient government
program?
a.
when the program provides substantial benefits to a small proportion of voters and the
costs are widespread among voters
b.
when both the benefits and costs of the program are widespread among voters
c.
when the program is financed by a user charge
d.
when a close relationship exists between the personal benefits received from the program
and the tax cost imposed on each voter
148. Legislators often gain by bundling a number of projects benefiting local districts at the expense of
general taxpayers. Such legislation is called
a.
market failure legislation.
b.
the rational ignorance effect.
c.
public goods legislation.
d.
pork-barrel legislation.
149. Which of the following refers to when legislators trade votes on legislation?
a.
logrolling
b.
the special interest effect
c.
rational ignorance
d.
the shortsightedness effect
150. Which of the following is a predictable side effect of increased government activity (e.g., 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
151. Legislation that offers immediate and easily recognized benefits, at the expense of uncertain costs that
are in the distant future (such as financing by government debt), 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.
152. Public choice analysis indicates that
a.
because government action provides public goods, it always increases the wealth of the
citizenry.
b.
unconstrained democratic governments often enact special-interest programs that waste
resources and impair the standard of living.
c.
constitutional rules limiting public-sector activity generally lower the economic efficiency
of the overall economy.
d.
Politicians and voters are better able to judge the public interest than their own private
interest.
153. Which of the following is true about the market and public sectors?
a.
Competitive behavior is present in both sectors.
b.
The public sector utilizes the price mechanism more than the private sector.
c.
In both sectors, individuals always pay for the goods and services they consume.
d.
There is more free choice for individual consumers in the public sector than in the private
sector.
154. Despite many differences, the market and public sectors are similar in which one of the following
respects?
a.
In both sectors, income (or power) is distributed on the basis of the same criterion.
b.
Consumers in the market sector and voters in the public sector are equally well informed.
c.
Voluntary exchange, rather than compulsion, is characteristic of both sectors.
d.
It will be costly to use scarce goods, whether through the private or the public sector.
155. Which of the following is legally permitted to use coercive force to modify the actions of adults
against their will?
a.
banks
b.
corporations
c.
governments
d.
all of the above
156. Senator Spendall is able to use his position on an important committee to set aside government funding
specifically for a new bridge in his hometown. This is an example of
a.
earmarking.
b.
logrolling.
c.
pork-barrel legislation.
d.
the invisible hand principle.
157. 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.
158. 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.
159. 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
160. 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.
161. 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
162. According to the Bureau of Economic Analysis, government income transfer payments amounted to
approximately what percent of national income?
a.
5 percent
b.
16 percent
c.
28 percent
d.
50 percent
163. 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.
164. 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.
165. 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.
166. 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.
167. 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.
168. 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.
169. 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
170. 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.
171. 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
172. A survey of income by county revealed that four of the five wealthiest counties were located in the
suburbs surrounding Washington, D.C. Why?
173. 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?
174. 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:
175. 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?
176. 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?
177. Suppose domestic automobiles were allocated in the United States the way public education is
allocated. Describe how this system might work.
178. Is calling a voter rationally ignorant the same as calling her irrational? Explain.
179. With a strong and active federal government, why do we need state and local governments?
180. 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?