Question 1

Public choices are government decisions about

Accepted Answer

A) public goods only 
B) taxes only 
C) public goods and taxes 
D) private goods 
E) private services 
A) public goods only 
B) taxes only 
C) public goods and taxes 
D) private goods 
E) private services

Question 2

In order to dispose of nuclear waste created by power plants around the country, the government buys land in Glowing Gulch, Idaho.Citizens of that town organize to block construction of the nuclear waste facility.Which of the following statements is false?

Accepted Answer

A) The benefits of the nuclear waste facility are widespread. 
B) The costs of the nuclear waste facility are concentrated. 
C) The citizens of Glowing Gulch are a special-interest group. 
D) Consumers of the power generated at the nuclear plants are not likely to organize to support construction of the nuclear waste facility. 
E) The citizens of Glowing Gulch are equally concerned about all public issues. 
A) The benefits of the nuclear waste facility are widespread. 
B) The costs of the nuclear waste facility are concentrated. 
C) The citizens of Glowing Gulch are a special-interest group. 
D) Consumers of the power generated at the nuclear plants are not likely to organize to support construction of the nuclear waste facility. 
E) The citizens of Glowing Gulch are equally concerned about all public issues.

Question 3

Which of the following would be considered part of the underground economy?

Accepted Answer

A) tips reported to the IRS by a waitress 
B) a barber giving a person a haircut in exchange for a meal 
C) income earned through selling shares of stock 
D) the portion of a professional athlete's salary that is economic rent 
E) donations received by a local church in their collection plate on Sunday morning 
A) tips reported to the IRS by a waitress 
B) a barber giving a person a haircut in exchange for a meal 
C) income earned through selling shares of stock 
D) the portion of a professional athlete's salary that is economic rent 
E) donations received by a local church in their collection plate on Sunday morning

Question 4

Some of the nation's best minds are occupied with devising schemes to avoid taxes and to transfer income to favored groups at the expense of market efficiency.These activities are called

Accepted Answer

A) rational ignorance 
B) choice of the cyclical majority 
C) rent seeking 
D) competing interest legislation 
E) a zero-sum game 
A) rational ignorance 
B) choice of the cyclical majority 
C) rent seeking 
D) competing interest legislation 
E) a zero-sum game

Question 5

Exhibit 16-5   Exhibit 16-5 represents the market for leaf tobacco.Suppose the government imposes a floor of $1.25 in this market.How much tobacco will be traded in this market?

Accepted Answer

A) 1, 000 lbs. 
B) 2, 000 lbs. 
C) 3, 000 lbs. 
D) 4, 000 lbs. 
E) 5, 000 lbs. 
A) 1, 000 lbs. 
B) 2, 000 lbs. 
C) 3, 000 lbs. 
D) 4, 000 lbs. 
E) 5, 000 lbs.

Question 6

Environmentalists, worried about sulfur dioxide in the air, pressure the government to require bus manufacturers to modify exhaust systems in buses.In this situation,

Accepted Answer

A) benefits of the proposed requirements are more widespread than costs 
B) benefits and costs of the proposed requirements are equally widespread because producers of buses will pass cost increases on to bus companies who will increase fares 
C) pressure for government regulation is unnecessary because those who use buses will stop riding buses if they don't have cleaner emissions 
D) bus riders are more likely to lobby against the proposal than are bus producers 
E) bus riders are more likely to lobby against the proposal than are bus workers 
A) benefits of the proposed requirements are more widespread than costs 
B) benefits and costs of the proposed requirements are equally widespread because producers of buses will pass cost increases on to bus companies who will increase fares 
C) pressure for government regulation is unnecessary because those who use buses will stop riding buses if they don't have cleaner emissions 
D) bus riders are more likely to lobby against the proposal than are bus producers 
E) bus riders are more likely to lobby against the proposal than are bus workers

Question 7

Budget maximization by bureaus leads to

Accepted Answer

A) efficient budgets 
B) budgets greater than those desired by median voters 
C) budgets less than those desired by median voters 
D) budgets equal to those desired by median voters 
E) budgets less than those desired by the majority of voters 
A) efficient budgets 
B) budgets greater than those desired by median voters 
C) budgets less than those desired by median voters 
D) budgets equal to those desired by median voters 
E) budgets less than those desired by the majority of voters

Question 8

The underground economy refers to

Accepted Answer

A) all market activity that goes unreported to the government 
B) all market activity that is not subject to government taxation 
C) all illegal activity 
D) transactions between U.S.citizens and foreign nationals 
E) rent-seeking activities on the part of private citizens 
A) all market activity that goes unreported to the government 
B) all market activity that is not subject to government taxation 
C) all illegal activity 
D) transactions between U.S.citizens and foreign nationals 
E) rent-seeking activities on the part of private citizens

Question 9

Competing-interest legislation involves

Accepted Answer

A) concentrated costs and widespread benefits 
B) both widespread costs and widespread benefits 
C) both concentrated costs and concentrated benefits 
D) widespread costs and concentrated benefits 
E) concentrated costs and either widespread or concentrated benefits 
A) concentrated costs and widespread benefits 
B) both widespread costs and widespread benefits 
C) both concentrated costs and concentrated benefits 
D) widespread costs and concentrated benefits 
E) concentrated costs and either widespread or concentrated benefits

Question 10

Public goods legislation involves

Accepted Answer

A) widespread benefits and concentrated costs 
B) widespread benefits and widespread costs 
C) concentrated benefits and widespread costs 
D) concentrated benefits and costs 
E) regulating natural monopolies to avoid price gouging 
A) widespread benefits and concentrated costs 
B) widespread benefits and widespread costs 
C) concentrated benefits and widespread costs 
D) concentrated benefits and costs 
E) regulating natural monopolies to avoid price gouging

Question 11

Government bureaus, unlike private firms,

Accepted Answer

A) derive their revenue by selling output to the government 
B) have incentives to respond to consumers' desires 
C) price their output by equating marginal cost and marginal revenue 
D) attempt to achieve zero profit 
E) receive little consumer feedback 
A) derive their revenue by selling output to the government 
B) have incentives to respond to consumers' desires 
C) price their output by equating marginal cost and marginal revenue 
D) attempt to achieve zero profit 
E) receive little consumer feedback

Question 12

The median-voter model attempts to explain

Accepted Answer

A) why law partners can seldom agree on the division of costs 
B) why, in a democracy, the preferences of the typical voter often will dominate other choices 
C) why democracies can evolve into dictatorships 
D) elections in which candidates present widely different platforms 
E) conditions under which majority rule is better than market exchange 
A) why law partners can seldom agree on the division of costs 
B) why, in a democracy, the preferences of the typical voter often will dominate other choices 
C) why democracies can evolve into dictatorships 
D) elections in which candidates present widely different platforms 
E) conditions under which majority rule is better than market exchange

Question 13

Special-interest groups, such as the pharmaceutical lobby, often get what they demand because

Accepted Answer

A) politicians are rationally ignorant 
B) voters are rationally ignorant 
C) they engage in logrolling 
D) they represent the median voter 
E) none of the above 
A) politicians are rationally ignorant 
B) voters are rationally ignorant 
C) they engage in logrolling 
D) they represent the median voter 
E) none of the above

Question 14

Exhibit 16-3   At the price floor shown in Exhibit 16-3, which of the following represents the quantity demanded?

Accepted Answer

A) i 
B) j 
C) k 
D) l 
E) m 
A) i 
B) j 
C) k 
D) l 
E) m

Question 15

Rent-seeking behavior imposes no costs on society because it is elected officials who actually make public sector decisions.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following activities would be considered tax avoidance?

Accepted Answer

A) increasing your level of charitable contributions in December 
B) selling illegal drugs on the street 
C) underestimating your income that is subject to taxation 
D) failure of a waitress to report all tips earned on the job 
E) buying a house and neglecting to deduct interest payments 
A) increasing your level of charitable contributions in December 
B) selling illegal drugs on the street 
C) underestimating your income that is subject to taxation 
D) failure of a waitress to report all tips earned on the job 
E) buying a house and neglecting to deduct interest payments

Question 17

Direct majority-rule voting is a form of coercion in the sense that

Accepted Answer

A) all citizens must vote 
B) all registered voters must vote 
C) the median voter's preferences determine the outcome for everyone 
D) the majority gets exactly what they want, but the minority does not. 
E) individuals with higher incomes get more votes 
A) all citizens must vote 
B) all registered voters must vote 
C) the median voter's preferences determine the outcome for everyone 
D) the majority gets exactly what they want, but the minority does not. 
E) individuals with higher incomes get more votes

Question 18

Public choice theory assumes that government makes optimal policies to respond to the shortcomings of private markets.

Accepted Answer

A) True 
 B)False

Question 19

Tax evasion differs from tax avoidance in the sense that evasion

Accepted Answer

A) is easier 
B) can only be done through an accountant 
C) is legal 
D) is illegal 
E) is encouraged by the Internal Revenue Service 
A) is easier 
B) can only be done through an accountant 
C) is legal 
D) is illegal 
E) is encouraged by the Internal Revenue Service

Question 20

The American Association of Retired Persons (AARP)provides checklists summarizing the voting and attendance records of legislators.Which of the following is true?

Accepted Answer

A) If the AARP's members were rational, it wouldn't have to do this. 
B) This policy is useless if AARP members are rationally ignorant. 
C) This policy is intended to reduce voters' rational ignorance by decreasing the cost of information. 
D) If AARP members read this information, their rational ignorance would be eliminated. 
E) If all voters in the nation read this information, their rational ignorance would be eliminated. 
A) If the AARP's members were rational, it wouldn't have to do this. 
B) This policy is useless if AARP members are rationally ignorant. 
C) This policy is intended to reduce voters' rational ignorance by decreasing the cost of information. 
D) If AARP members read this information, their rational ignorance would be eliminated. 
E) If all voters in the nation read this information, their rational ignorance would be eliminated.

Exam 16: Public Goods and Public Choice

Public choices are government decisions about

In order to dispose of nuclear waste created by power plants around the country, the government buys land in Glowing Gulch, Idaho.Citizens of that town organize to block construction of the nuclear waste facility.Which of the following statements is false?

Which of the following would be considered part of the underground economy?

Some of the nation's best minds are occupied with devising schemes to avoid taxes and to transfer income to favored groups at the expense of market efficiency.These activities are called

Exhibit 16-5 Exhibit 16-5 represents the market for leaf tobacco.Suppose the government imposes a floor of $1.25 in this market.How much tobacco will be traded in this market?

Environmentalists, worried about sulfur dioxide in the air, pressure the government to require bus manufacturers to modify exhaust systems in buses.In this situation,

Budget maximization by bureaus leads to

The underground economy refers to

Competing-interest legislation involves

Public goods legislation involves

Government bureaus, unlike private firms,

The median-voter model attempts to explain

Special-interest groups, such as the pharmaceutical lobby, often get what they demand because

Exhibit 16-3 At the price floor shown in Exhibit 16-3, which of the following represents the quantity demanded?

Rent-seeking behavior imposes no costs on society because it is elected officials who actually make public sector decisions.

Which of the following activities would be considered tax avoidance?

Direct majority-rule voting is a form of coercion in the sense that

Public choice theory assumes that government makes optimal policies to respond to the shortcomings of private markets.

Tax evasion differs from tax avoidance in the sense that evasion

The American Association of Retired Persons (AARP)provides checklists summarizing the voting and attendance records of legislators.Which of the following is true?

The Art and Science of Economic Analysis

Appendix--Understanding Graphs

Economic Tools and Economics Systems

Economic Decision Makers

Demand, Supply, and Markets

Elasticity of Demand and Supply

Appendix--Price Elasticity and Tax Incidence

Consumer Choice and Demand

Appendix--Indifference Curves and Utility Maximization

Production and Cost in the Firm

A--Perfect Competition

B--Perfect Competition

A--Monopoly

B--Monopoly

Monopolistic Competition and Oligopoly

Resource Markets

Labor Markets and Labor Unions

Capital, Interest, and Corporate Finance

Transaction Costs, Imperfect Information, and Behavioral Economics

Economic Regulation and Antitrust Policy

Externalities and the Environment

Income Distribution and Poverty

International Trade

International Finance

Economic Development

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