Microeconomics Chapter 6—The Economics of Collective Decision-Making
MULTIPLE CHOICE
1. In 2008, the combined expenditures of federal, state, and local governments in the United States were
approximately
a.
14 percent of GDP.
b.
24 percent of GDP.
c.
35 percent of GDP.
d.
44 percent of GDP.
2. Which of the following provides the best summary of the basic idea of public choice analysis?
a.
Public choice analysis applies the principles of economics to political science topics.
b.
Public choice analysis takes the principles of political science and applies them to the
traditional topics of economics.
c.
Public choice analysis uses the principle of majority rule to determine the efficiency of an
action.
d.
Public choice analysis indicates there is a sharp distinction between economic and political
topics.
3. The rational-ignorance effect is a result of
a.
externalities that lead to an excess supply of information.
b.
the limited incentive of the news media to cover political campaigns.
c.
the expectation of individual voters that their vote will not be decisive.
d.
the lack of a college education on the part of most voters in the United States.
4. When voters pay taxes in proportion to the benefits they receive from government projects,
a.
efficient projects will tend to be opposed by a majority of voters.
b.
inefficient projects will often be favored by a majority of voters.
c.
projects that are efficient will tend to be favored by an overwhelming majority of voters.
d.
democratic political decision making can be expected to work poorly.
5. Most voters will likely be concerned with
a.
most issues since most issues have some impact, however slight, on each citizen.
b.
only a few special issues (those that exert the most impact on the voters’ personal welfare).
c.
most issues since information on most issues can be obtained at a low cost.
d.
the views of a particular political candidate on all issues.
6. Special-interest programs are highly attractive to vote-seeking politicians because
a.
these programs are highly efficient, and therefore, they tend to enhance the general welfare
of the populace.
b.
members of special interest groups favoring these programs are less likely to vote than the
taxpayers who pay for them.
c.
low-income recipients are the primary beneficiaries of special-interest programs.
d.
members of special interest groups favoring these programs feel strongly about them while
most other voters are rationally uninformed about them.
7. Current tax rates are insufficient to finance the benefits promised by both the Social Security and
Medicare programs. Are these unfunded promises surprising according to economic theory?
a.
Yes, political representatives have a strong incentive to levy taxes that are sufficient to
cover the cost of all programs they favor.
b.
No, the unfunded promises reflect the shortsighted nature of the political process.
c.
Yes, political representatives generally favor balancing the government budget because
this is best for the economy.
d.
No, even though debt financing often makes sense, politicians are reluctant to use it
because it will damage their chances of being reelected.
8. Public choice theory suggests 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.
middle-income taxpayers to both the rich and the poor.
d.
well-organized businesses and labor groups to consumers.
9. Which of the following explains why managers of government agencies have little incentive to achieve
operational efficiency?
a.
Public-sector managers need not fear bankruptcy when operational efficiency is not
achieved.
b.
Public-sector managers seldom receive personal benefits if they find ways to improve the
efficiency of their operations.
c.
Public-sector agencies typically do not face competition.
d.
All of the above explain why government agencies have little incentive to be efficient.
10. When goods are produced privately, but the cost of their purchase is paid for by the taxpayer or some
other third party,
a.
consumers have a strong incentive to search out those firms offering them the best deal.
b.
private producers of such goods will have little incentive to control costs and provide them
at low prices.
c.
goods and services will only be supplied if consumers are willing to pay an amount
sufficient to cover their production costs.
d.
the invisible hand will direct consumers and producers toward an efficient level of output.
11. In 2010, the combined expenditures of federal, state, and local governments in the United States were
approximately 40 percent of gross domestic product (GDP). Approximately what percentage of GDP
were government expenditures in 1930?
a.
9 percent
b.
19 percent
c.
29 percent
d.
39 percent
12. Combined federal, state, and local government expenditures in the United States were approximately 9
percent of the gross domestic product (GDP) in 1930. How large were government expenditures as a
share of GDP in 2010?
a.
approximately 10 percent
b.
approximately 20 percent
c.
approximately 30 percent
d.
approximately 40 percent
13. Which of the following is true regarding government expenditures in the United States?
a.
As a share of GDP, government expenditures were higher in 1950 than 2010.
b.
Government expenditures were more than 30 percent of GDP in 1930.
c.
Government expenditures as a share of GDP grew rapidly between 1930 and 1980.
d.
In 2010, government expenditures at all levels summed to approximately 10 percent of
GDP.
14. Between 1930 and 1980, government expenditures as a percent of GDP in the United States
a.
more than tripled.
b.
remained constant at 10 percent.
c.
declined from 30 percent to 20 percent.
d.
increased from 30 percent to 40 percent.
15. Of all government spending in the United States, what amount occurs at the federal level?
a.
less than 10 percent
b.
about half
c.
about three-fifths
d.
more than 90 percent
16. Which of the following is accurate regarding government expenditures in the United States?
a.
The federal government spends considerably more than state and local governments
combined.
b.
The federal government spends more than local governments but less than state
governments.
c.
Local governments spend more than state governments, which in turn, spend more than
the federal government.
d.
Since 1930, total government expenditures as a share of GDP have declined.
17. The major categories of federal government spending are
a.
health care, national defense, Social Security, and other income transfers.
b.
law enforcement, environmental protection, and national defense.
c.
public education, garbage collection, and public parks.
d.
health care, public education, and highways.
18. Transfer payments are
a.
payments made to individuals who are employed by the government.
b.
payments made to individuals who provide goods and services to the government.
c.
transfers of income from taxpayers to recipients who do not provide current goods and
services for the payments.
d.
omitted from the government expenditure figures.
19. Which of the following is an example of a transfer payment?
a.
wages paid to military personnel
b.
benefits paid to Social Security recipients
c.
purchase of aircraft by the Department of Defense
d.
payments made to a contractor for construction of a highway
20. Direct income transfers account for approximately what percentage of total government spending?
a.
10 percent
b.
30 percent
c.
50 percent
d.
60 percent
21. Measured as a share of national income, government expenditures on income transfers during the last
70 years have
a.
grown rapidly.
b.
declined substantially.
c.
been virtually unchanged.
d.
increased throughout much of that period, but they have declined substantially since 1980.
22. In 2010, government income transfers redistributed what percentage of national income?
a.
1.5 percent
b.
9.5 percent
c.
19.5 percent
d.
25.5 percent
23. At the most basic level, the distinguishing characteristic of government that makes it different from
private firms is its ability to
a.
use coercive force against adults to modify their behavior or force them to pay for a good
or service.
b.
direct resources in a manner that serves the public interest rather than the private interest
of individuals.
c.
produce goods and services that people value.
d.
escape the constraints imposed by scarcity.
24. Economic theory indicates that the behavior of
a.
government employees differs from the behavior of employees in the private sector
because government employees generally disregard their own personal self-interest when
making decisions.
b.
elected public officials differs from the behavior of all other individuals in society because
they are not influenced by private interests.
c.
individuals when they make decisions about who to vote for is very different from the
behavior of these same individuals when they make other types of choices.
d.
voters, government employees, and public officials is best understood by applying the
same basic principle we use to predict the behavior of people in the private sector—that
incentives matter.
25. Public choice theory indicates that the behavior of people in government
a.
differs from the behavior of people in the private sector because they are motivated by the
public interest rather than their own personal self-interest.
b.
differs from the behavior of people in the private sector because public sector decision
roles do not allow people to pursue their own self-interests.
c.
is the same as people in the private sector only if decisions are made by majority vote.
d.
is best understood by applying the same principles we use to predict the behavior of
people in the private sector.
26. Which one of the following is a major difference between market and collective action through
government?
a.
Individuals are motivated by personal interests when making market choices, but they will
be motivated primarily by the public interest when making collective choices.
b.
Competitive behavior is present when decisions are made in the marketplace, but
competition is absent when choices are made collectively.
c.
Scarcity constrains output when decisions are made in the market sector, but scarcity is
absent when goods are provided by the government.
d.
In the market sector, there is generally a one–to-one link between payment and
consumption; this link is often absent in the government sector.
27. As methods of economic organization, the market and the public sector are similar in which of the
following ways?
a.
Income and power are distributed equally in both sectors.
b.
In both sectors, economic activity is undertaken only when it satisfies the criterion for
economic efficiency.
c.
In both sectors, economic exchange is completely voluntary.
d.
Someone must cover the cost associated with the provision of scarce goods in both sectors.
28. Which of the following is true?
a.
Competitive behavior is present in the market sector but not in the public sector.
b.
Because candidates for public office represent a bundle of views, there is more ability for
individuals to make their preferences count on specific issues than in the market sector.
c.
When decisions are made democratically, the economic and political power of all
individuals will be equal unlike in the market sector.
d.
The reality of the aggregate consumption-aggregate payment link imposed by scarcity is
present in both the market and public sectors.
29. The branch of economics that applies the principles and methodology of economics to the operation of
the political process is known as
a.
private choice analysis.
b.
public choice analysis.
c.
government operations analysis.
d.
policy preference analysis.
30. The branch of economics that attempts to understand the outcomes observed in the public sector by
examining the incentives faced by the individual actors involved (such as voters, politicians, and
bureaucrats) is known as
a.
private choice analysis.
b.
public choice analysis.
c.
government operations analysis.
d.
incentive analysis.
31. The methodology of public choice analysis
a.
develops a logically consistent theory based on how individual actors (such as voters,
politicians, and bureaucrats) respond to incentives.
b.
assumes that all decisions made by individual actors in the public sector are done with the
public interest in mind, rather than their private interests.
c.
assumes that individuals generally react to the incentives they face when making choices
in the private sector but not in the public sector.
d.
focuses on the development of a single theory of government as a whole rather than on
analyzing the choices made by individual agents in the public sector.
32. Public choice analysis
a.
assumes individuals in the public sector seek to serve the public interest rather than their
own personal interests.
b.
is the study of the decision making of individual actors (such as voters, politicians, and
bureaucrats) in the public sector.
c.
suggests that individual voters have a greater incentive to become informed when making
choices among political candidates than when making choices about the products they
consume.
d.
finds that the individuals managing government agencies generally have a much stronger
incentive to be efficient than do individuals managing private businesses.
33. According to the economic way of thinking, personal benefits and costs influence the actions of
a.
consumers in the private sector but not voters in the public sector.
b.
producers in the private sector but not politicians in the public sector.
c.
taxpayers but not recipients of government-provided goods and services.
d.
consumers, producers, voters, and politicians in both the private and the public sectors.
34. When analyzing public sector decision making, economic theory assumes voters, politicians, and
government officials will
a.
respond to changes in personal benefits and costs when making public sector choices.
b.
always pursue the public interest even when it conflicts with their private interests.
c.
generally ignore the personal costs and benefits associated with their choices.
d.
make decisions that seek to maximize the amount of benefits created for society as a
whole.
35. Public choice theory assumes voters, politicians, and other individuals in the public sector are largely
motivated by
a.
a desire to promote the general welfare.
b.
a desire to meet the conditions of economic efficiency for the economy as a whole.
c.
altruism or the good of the public as a whole.
d.
personal self-interest.
36. In a representative democracy, government action results from the
a.
choices of voters.
b.
legislative decisions by politicians.
c.
political action of organized interest groups.
d.
complex interaction of all of the above.
37. Which one of the following economists has played a central role in the development of the “economics
of collective decision making,” better known as public choice analysis?
a.
Alfred Marshall
b.
John Maynard Keynes
c.
James Buchanan
d.
Milton Friedman
38. Public choice theory assumes each voter will tend to support the political candidate who offers
a.
programs with the largest benefits to society.
b.
the highest potential for being a good leader in times of war.
c.
programs that create the most equal distribution of income.
d.
to provide the voter with the most personal benefits at the least personal cost.
39. Public choice analysis suggests that voters considering whether to vote for a candidate will ask,
a.
“What will the candidate do that will promote the general welfare of society?”
b.
“What will the candidate do that will benefit me, and how much will it cost me?”
c.
“Will the candidate pursue only programs that increase economic efficiency?”
d.
“What will the candidate do that will benefit everyone in the country?”
40. Joella is a third-grade public school teacher who doesn’t own a car and uses public transportation.
According to public choice theory, which of the following four politicians for a public office would
Joella be most likely to vote for in the upcoming election?
a.
Politician A proposes increasing the property tax on personal automobiles and using the
money to increase teacher salaries by 10 percent.
b.
Politician B proposes an across-the-board increase in state income tax rates and using the
money to increase the benefits paid to unemployed workers.
c.
Politician C proposes increasing the property tax on personal automobiles and using the
money to increase the benefits paid to unemployed workers.
d.
Politician D proposes an across-the-board increase in state income tax rates and using the
money to improve the highway system.
41. Ginny is the owner of a small business, and she is 35 years old. She doesn’t smoke cigarettes, and she
often spends her weekends with her family camping at the local Greentree state park. According to
public choice theory, which of the following four politicians for a public office would Ginny be most
likely to vote for in the upcoming election?
a.
Politician A proposes increasing the tax on small businesses and using the money to
provide additional benefits for the elderly.
b.
Politician B proposes increasing the tax on small businesses and using the money to
improve the camping facilities at Greentree state park.
c.
Politician C proposes increasing the excise tax on cigarettes and using the money to
improve the camping facilities at Greentree state park.
d.
Politician D proposes increasing the excise tax on cigarettes and using the money to
provide additional benefits for the elderly.
42. According to the shortsightedness effect, politicians tend to favor projects with
a.
short-run benefits and short-run costs.
b.
short-run benefits and long-run costs.
c.
long-run benefits and short-run costs.
d.
long-run benefits and long-run costs.
43. Economists refer to the lack of incentive that voters have to search for and obtain information to help
make better political choices as the
a.
shortsightedness effect.
b.
public-interest effect.
c.
free rider problem.
d.
rational-ignorance effect.
44. The rational-ignorance effect refers to the
a.
lack of incentive voters have to become well-informed about candidates and issues
because their vote is unlikely to affect the outcome of an election.
b.
fact that most people choose to become just as well-informed when making choices as
consumers as they do when making choices as voters.
c.
lack of rational analysis on the part of voters when they choose not to become informed
about candidates and issues even though this knowledge would produce great personal
benefit to them.
d.
problem of not enough information being supplied to voters because politicians are not
spending enough on campaign adds to inform voters of their positions on issues.
45. People who spend more time and effort investigating the advantages and disadvantages of different
automobile models when they go to purchase one than they do investigating the strengths and
weaknesses of presidential candidates are saying, in effect, that
a.
a good car is more important to their well-being than a good president.
b.
they expect to use the information on the merits of alternative cars to greater personal
advantage than they could information on the merits of alternative presidential candidates.
c.
they are irrational, because the choice of a president is obviously far more important than
the choice of a car.
d.
they do not think it matters who is elected president.
46. Despite being a college graduate, Jack Adams cannot name any of his representatives in Congress and
he has no idea which issues are being debated and voted on this week in Congress. According to public
choice analysis, Jack is
a.
irrational.
b.
considering only the welfare of society and not his own personal interests.
c.
not intelligent enough to understand the issues.
d.
making a rational personal choice because knowing these things gives him little personal
benefit.
47. Public choice theory indicates someone who spends more time evaluating which tennis racket to buy
than deciding which U.S. Senate candidate to support
a.
is behaving irrationally.
b.
is behaving rationally, given the structure of incentives confronted.
c.
will likely be responsible for electing the wrong senator.
d.
is failing to maximize his own personal utility.
48. The fact that voters perceive their votes as unlikely to actually change the outcome of an election
causes
a.
voters to have little incentive to become informed about candidates and political issues.
b.
voters to spend a great deal of effort becoming informed about candidates and political
issues.
c.
the percent of people who actually turn out to cast a vote on election day to be very high.
d.
people to be extremely reluctant to “waste” their votes on a third-party candidate.
49. John Smith is a typical citizen. Economic theory suggests that he is likely to make a more informed
choice when he buys a personal computer than when he votes for a congressional candidate. This view
is
a.
false because the actions of legislators will exert a greater impact on Smith’s welfare than
will the purchase of the computer.
b.
false; Smith will tend to choose more carefully when he makes public choices than when
he makes private choices.
c.
uncertain; it would be true if, and only if, Smith’s spending on personal computers exceeds
his tax bill.
d.
true; since Smith can decide what computer to buy, but his individual vote is very unlikely
to decide the outcome of a congressional election, he has more incentive to inform himself
about the computer than the congressional election.
50. Public choice analysis suggests that the primary motivating factor for politicians will be finding the
policies that are most likely to
a.
get them reelected.
b.
improve economic efficiency.
c.
improve the welfare of society as a whole.
d.
anger the interest groups that provide substantial contributions to their campaigns.
51. Which of the following is true?
a.
To remain in office, a politician must try to enact policies that gain him votes for his
reelection and increase the support coming from contributors.
b.
A politician always attempts to pursue policies that are good for society even if they are
strongly opposed by many of her constituents or contributors.
c.
Politicians generally place more weight on how their decisions affect future costs and
benefits than on how they affect present costs and benefits.
d.
The value of being in office is so low that most political candidates spend very little on
campaigns to try to win (or keep) elected office.
52. A politician may be considered an entrepreneur in the sense that
a.
he is always open to bribery.
b.
identical personal characteristics are necessary for success in politics and in business.
c.
the successful politician discovers and offers voters political goods when voter demand is
strong for him.
d.
like the businessman, the politician selfishly attempts to gain at the expense of his
customers.
53. Public choice theory indicates competitive forces 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.
54. Senator Dogood is pushing for the construction of a new military base in his state even though, from
the standpoint of national security, it is clear that there are better places to locate the new military base.
Economic theory would suggest that Senator Dogood is
a.
acting irrationally; he must not know that the base would be better located in a different
state.
b.
acting rationally; he realizes that constructing the base in his state will increase his
chances of getting reelected.
c.
acting rationally if the country is currently at war but is acting irrationally if the country is
not at war.
d.
trying to do what is best for the country.
55. Senator Blacklung represents a state that grows a significant amount of tobacco. Not only do many of
his constituents work for businesses in this industry, but the tobacco firms also make generous
contributions to his reelection campaign. According to public choice theory, which of the following
bills would Senator Blacklung be most likely to support?
a.
a bill proposing an increase in the tax on cigarettes to fund urban renewal programs across
the nation
b.
a bill that would provide substantial subsidies for tobacco growers
c.
a bill proposing increased funding for a national antismoking awareness campaign
financed by an increase in the tax on cigarettes
d.
a bill that would prohibit senators from accepting campaign contributions from firms who
are involved in the production or sale of tobacco products
56. Economic analysis suggests that bureaucrats and public-sector managers have a strong incentive to
a.
make sure that their budgets are as small as possible so more funds will be available for
other government programs.
b.
expand their budgets to sizes beyond what would be considered economically efficient.
c.
ensure that their budgets are exactly the size that would be considered economically
efficient.
d.
economize on their spending and return unspent funds to the general treasury.
57. When the tax to fund a government project is allocated among voters in proportion to the benefits they
receive from the project,
a.
productive (efficient) projects will tend to be opposed by a majority of voters.
b.
counterproductive (inefficient) projects will often be favored by a majority of voters.
c.
projects that are productive (efficient) will tend to be favored by an overwhelming
majority of voters.
d.
democratic political decision making can be expected to work poorly.
58. Which of the following is true?
a.
When the government undertakes an activity, we can be assured that all voters will gain.
b.
If a government activity is favored by most citizens, it must be productive.
c.
If most voters oppose a government activity, it must be counterproductive.
d.
When voters pay in proportion to benefits received, all voters will gain if the government
activity is productive.
59. Which of the following is true of government activities under a system of representative democracy?
a.
If a majority favors an activity, it must be productive.
b.
If a majority opposes an activity, it must be counterproductive.
c.
When voters pay in proportion to benefits received, productive activities undertaken by the
government will be favored by an overwhelming majority of voters.
d.
When voters pay in proportion to benefits received, productive activities will generally be
defeated under a majority rule vote.
60. Payments that users (consumers) are required to make if they want to receive certain services provided
by the government are called
a.
tax deductions.
b.
transfer payments.
c.
user charges.
d.
sales taxes.
61. Which of the following is a distinguishing characteristic of a user charge?
a.
Persons pay roughly in proportion to the extent that they use the good or service.
b.
Persons with high incomes pay a larger amount than persons with lower incomes for the
same good or service.
c.
Persons with high incomes pay a larger percentage of their income than persons with
lower incomes for the same good or service.
d.
Persons with high incomes pay a smaller percentage of their income than persons with
lower incomes for the same good or service.
62. A local government operates a city recreation center with a pool and tennis courts. The center is
financed through $50 annual membership fees (required for members to use it). This type of financing
is an example of a
a.
head tax.
b.
excise fee.
c.
user charge.
d.
progressive tax.
63. A local government operates a city water system and finances it through fees that it charges to water
consumers. This type of financing is an example of a
a.
head tax.
b.
excise fee.
c.
progressive tax.
d.
user charge.
64. In which one of the following situations is the political process most likely to result in both the
acceptance of efficient (productive) programs and the rejection of inefficient (counterproductive)
political activities?
a.
The people who benefit from a government program pay the costs of the program roughly
in proportion to the benefits that each receives.
b.
The benefits are highly concentrated, and the costs are widespread among voters.
c.
The costs are highly concentrated, and the benefits are widespread among voters.
d.
The benefits accrue primarily in the future, while the costs are more visible during the
current period.
65. Public choice theory indicates that representative government yields outcomes more consistent with
economic efficiency when a close relationship exists between the benefits received and the costs borne
by each voter. Which of the following methods of financing a government program will most likely
result in a close relationship between voter benefits and costs?
a.
progressive income tax
b.
retail sales tax
c.
property tax
d.
user charges
66. In which case is the political process most likely to result in the acceptance of efficient projects and
rejection of inefficient projects?
a.
The benefits are highly concentrated, and costs are widespread among voters.
b.
The costs are highly concentrated, and the benefits are widespread among voters.
c.
Both the benefits and costs are widespread among voters.
d.
The benefits accrue primarily in the future, while the costs are more visible during the
current period.
67. Other things constant, if both the benefits and costs of a public-sector activity are widespread among
voters, the political process will generally result in the
a.
rejection of productive activities and acceptance of unproductive activities.
b.
acceptance of both productive and unproductive activities.
c.
rejection of both productive and unproductive activities.
d.
acceptance of productive activities and rejection of unproductive activities.
68. When politicians support policies that benefit small interest groups, such as farmers, at the expense of
unorganized, widely dispersed groups, for example, taxpayers or consumers, this is a reflection of the
a.
tragedy of interest.
b.
special-interest effect.
c.
unorganized interest effect.
d.
shortsightedness effect.
69. Special-interest legislation is characterized by
a.
concentrated costs and concentrated benefits
b.
concentrated benefits and widespread costs
c.
widespread benefits and widespread costs
d.
widespread benefits and concentrated costs
e.
zero costs
70. Which of the following is the most likely explanation for the imposition of a price floor in the market
for corn?
a.
Policymakers have studied the effects of the price floor carefully and they recognize that
the price floor will improve the efficiency of resource use.
b.
Buyers and sellers of corn have agreed that the price floor is good for both of them and
have therefore pressured policy makers into enacting the price floor.
c.
Buyers of corn, recognizing that the price floor is good for them, have pressured policy
makers into enacting the price floor.
d.
Sellers of corn, recognizing that the price floor is good for them, have pressured policy
makers into enacting the price floor.
71. An issue that generates substantial benefits to a small group of individuals while imposing a small cost
on many others is called a
a.
special-interest issue.
b.
minority application.
c.
commons policy.
d.
national service.
72. A special-interest issue is one that
a.
allocates the cost of the activity in accordance with the benefits received.
b.
benefits a small, well-organized interest group at the expense of taxpayers or consumers.
c.
benefits everyone and imposes a cost on everyone.
d.
benefits a small, well-organized interest group but makes that group pay for the cost of the
program.
73. Which of the following provides the most reasonable explanation for why agricultural interests lobby
for higher farm subsidies and price supports?
a.
Without the farm subsidies, food shortages would result.
b.
Subsidies promote the efficient use of agricultural resources.
c.
Agricultural interests seek a redistribution of income favoring themselves.
d.
The price support programs reduce food costs, which helps the poor.
74. If a federal agency requested funds to build a dam on an Idaho river to irrigate nearby farmland used
for growing potatoes, the most active support for the project probably would come from
a.
potato farmers who own land that wouldn’t be irrigated by the project.
b.
taxpayers who would pay for the project.
c.
consumers of potatoes who might benefit from an expansion in supply and slightly lower
potato prices.
d.
potato farmers who own the land to be irrigated.
75. According to the special-interest effect, which of the following groups is least likely to have a
significant influence on the political process?
a.
the American Federation of Labor
b.
the National Association of Manufacturers
c.
nonunion employees
d.
the American Medical Association
76. Restrictions that limit sugar imports, subsidies for the construction of sports stadiums, and federal
spending on programs like the construction of an indoor rain forest in Iowa all provide examples of
government programs
a.
based on careful analysis of benefits relative to cost.
b.
designed to redistribute income from the rich to the poor.
c.
that reflect the political attractiveness of special-interest issues.
d.
that promote the general welfare.
77. Government action will often result in the counterproductive use of resources because
a.
there is often a conflict between winning political elections and adoption of only
productive programs.
b.
many politicians are not interested in how their legislative votes will influence their
chances of winning future elections.
c.
politicians are often unwilling to listen to interest groups that have specialized knowledge.
d.
voter participation is low; if more people voted, the political process would be more
efficient.
78. According to economic theory, it is often rational for a politician to support special interest groups at
the expense of unorganized, widely dispersed groups (for example, taxpayers or consumers)
a.
only when the gains that accrue to the special interest group exceed the costs imposed on
other voters.
b.
when nonspecial-interest voters are unconcerned or uninformed about the issue, and
campaign funds are readily available from the special interest group.
c.
only if the government action is socially efficient.
d.
only if the government action will reduce the monopoly power of business or labor and,
thereby, lead to an improvement in the general welfare of consumers.
79. In which of the following situations is the political process likely to result in the inefficient and
wasteful use of resources?
a.
when the benefits are concentrated and the costs are concentrated
b.
when the benefits are concentrated and the costs widespread
c.
when the benefits are widespread and the costs are concentrated
d.
when the benefits are widespread and the costs are widespread
80. For activities in which the benefits are concentrated and the costs widespread, governments are likely
to undertake
a.
too little of these activities relative to what would be efficient.
b.
too much of these activities relative to what would be efficient.
c.
exactly the amount of these activities that would be efficient.
d.
none of these activities.
81. In which of the following situations is representative democracy most likely to lead to the adoption of
an inefficient government program?
a.
The program provides substantial benefits to a small interest group, and the costs are
widespread among voters.
b.
Both the benefits and costs of the program are widespread among voters.
c.
The program is financed by a user charge that makes the individuals who benefit from the
program pay for its cost.
d.
The program provides widespread benefits to all voters and imposes a significant cost on a
small interest group.
82. Under democratic representative government, spending on a government program will likely be larger
than the amount consistent with economic efficiency when
a.
tax costs are levied in direct proportion with the benefits received.
b.
both the costs and benefits are widespread among the voters.
c.
benefits of the program are highly concentrated, while the costs are widely dispersed
among voters.
d.
costs of the program are highly concentrated, while the benefits are widely dispersed
among voters.
83. Which of the following increases the political power of special interest groups and makes
counterproductive government action more likely?
a.
logrolling and pork barrel legislation
b.
the rational-ignorance effect
c.
public goods
d.
both a and b, but not c
84. 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.
85. 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.
86. 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
87. 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.
88. 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.
89. 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.
90. 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.
91. 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