Question 1

The Agricultural Marketing Act of 1937 was supposed to encourage competition among farmers.

Accepted Answer

A) True 
 B)False

Question 2

Legislation that provides a price support for dairy farmers is an example of

Accepted Answer

A) public-interest legislation 
B) competing-interest legislation 
C) a positive-sum game 
D) special-interest legislation 
E) concentrated-costs legislation 
A) public-interest legislation 
B) competing-interest legislation 
C) a positive-sum game 
D) special-interest legislation 
E) concentrated-costs legislation

Question 3

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 consumer surplus would be lost as a result of this price support?

Accepted Answer

A) $725 
B) $800 
C) $875 
D) $950 
E) $1025 
A) $725 
B) $800 
C) $875 
D) $950 
E) $1025

Question 4

Rent seeking activities by special interest groups result in

Accepted Answer

A) greater economic activity by promoting efficiency in government 
B) lower economic activity by diverting resources to less-productive or nonproductive uses 
C) a more equal distribution of income and wealth in the nation 
D) lower expenditures by government through an increase in taxes 
E) greater efficiency in the private economy and increased wealth for society 
A) greater economic activity by promoting efficiency in government 
B) lower economic activity by diverting resources to less-productive or nonproductive uses 
C) a more equal distribution of income and wealth in the nation 
D) lower expenditures by government through an increase in taxes 
E) greater efficiency in the private economy and increased wealth for society

Question 5

In a democratic society, the preferences of __________ will often dominate decisions made by direct majority voting.

Accepted Answer

A) elected government representatives 
B) special interest groups 
C) rent seekers 
D) senior citizens 
E) the median voter 
A) elected government representatives 
B) special interest groups 
C) rent seekers 
D) senior citizens 
E) the median voter

Question 6

Exhibit 16-2   Refer to Exhibit 16-2.If the government commits to buying the surplus wool created by the $6 price support, how much will they have to spend?

Accepted Answer

A) $540 million 
B) $360 million 
C) $600 million 
D) $900 million 
E) $300 million 
A) $540 million 
B) $360 million 
C) $600 million 
D) $900 million 
E) $300 million

Question 7

Taxing people according to their marginal valuations of a public good may be efficient, but it may not be fair if the ability to pay differs.

Accepted Answer

A) True 
 B)False

Question 8

The fire department receives its revenues from the government budget, not on a per-fire-extinguished basis.As a result, it is difficult for department officials to know if

Accepted Answer

A) the fire department is even needed 
B) too much or too little fire protection is being supplied 
C) fires should be extinguished 
D) they should raise or lower price 
E) keep the difference between revenues and costs 
A) the fire department is even needed 
B) too much or too little fire protection is being supplied 
C) fires should be extinguished 
D) they should raise or lower price 
E) keep the difference between revenues and costs

Question 9

Exhibit 16-5   Exhibit 16-5 represents the market for leaf tobacco.In the absence of any government intervention what would the market price for leaf tobacco be?

Accepted Answer

A) $.50 per pound 
B) $.75 per pound 
C) $1.00 per pound 
D) $1.25 per pound 
E) $1.50 per pound 
A) $.50 per pound 
B) $.75 per pound 
C) $1.00 per pound 
D) $1.25 per pound 
E) $1.50 per pound

Question 10

We may see government supply social work internally rather than through private firms because

Accepted Answer

A) it is a public good 
B) it is difficult to monitor the quantity and quality of social work provided 
C) private firms would seek to cover their costs 
D) a government bureau would maximize its budget 
E) there is a great demand for such services 
A) it is a public good 
B) it is difficult to monitor the quantity and quality of social work provided 
C) private firms would seek to cover their costs 
D) a government bureau would maximize its budget 
E) there is a great demand for such services

Question 11

The efficient level of public good provision is determined

Accepted Answer

A) where the market demand curve intersects the marginal cost curve 
B) where the sum of individual valuations equals the sum of marginal costs 
C) without regard to economic factors 
D) where marginal revenue product equals marginal factor cost 
E) at the minimum point of the average total cost curve 
A) where the market demand curve intersects the marginal cost curve 
B) where the sum of individual valuations equals the sum of marginal costs 
C) without regard to economic factors 
D) where marginal revenue product equals marginal factor cost 
E) at the minimum point of the average total cost curve

Question 12

If the legislature has a line-item veto on a bureau's budget, the bureau

Accepted Answer

A) can no longer present its entire budget as a package deal for provision of services 
B) will have more power than if the legislature used an overall budget ceiling 
C) will be able to supply its output to the legislature as a monopolist 
D) will try to discourage budget cuts by threatening to make cuts that will cause the legislature the least political trouble 
E) will be free to pursue its own overall objectives 
A) can no longer present its entire budget as a package deal for provision of services 
B) will have more power than if the legislature used an overall budget ceiling 
C) will be able to supply its output to the legislature as a monopolist 
D) will try to discourage budget cuts by threatening to make cuts that will cause the legislature the least political trouble 
E) will be free to pursue its own overall objectives

Question 13

A large U.S.steel firm wants to restrict imports of Japanese steel, but Ford Motor Company wants fewer restrictions on steel so that the price of steel will go down.This can best be described as

Accepted Answer

A) a zero-sum game 
B) a competing-interest situation 
C) a special-interest situation 
D) a situation without widespread costs and benefits 
E) an argument over distribution of a public good 
A) a zero-sum game 
B) a competing-interest situation 
C) a special-interest situation 
D) a situation without widespread costs and benefits 
E) an argument over distribution of a public good

Question 14

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 will tobacco buyers and taxpayers combined spend on tobacco?

Accepted Answer

A) $5250 
B) $5500 
C) $5750 
D) $6000 
E) $6250 
A) $5250 
B) $5500 
C) $5750 
D) $6000 
E) $6250

Question 15

General Motors benefits from tariffs on imported automobiles.Companies that use many automobiles, such as rental agencies, want to get them cheaply.In this case, the issue of tariff legislation involves

Accepted Answer

A) a simple majority because it promises concentrated costs and benefits 
B) competing interests because it promises concentrated costs and benefits 
C) a simple majority because it promises concentrated benefits and widespread costs 
D) competing interests because it promises concentrated benefits and widespread costs 
E) competing interests because it promises concentrated costs and widespread benefits 
A) a simple majority because it promises concentrated costs and benefits 
B) competing interests because it promises concentrated costs and benefits 
C) a simple majority because it promises concentrated benefits and widespread costs 
D) competing interests because it promises concentrated benefits and widespread costs 
E) competing interests because it promises concentrated costs and widespread benefits

Question 16

Exhibit 16-3   At the price floor shown in Exhibit 16-3, which of the following output levels will be produced?

Accepted Answer

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

Question 17

Exhibit 16-1   In Exhibit 16-1, triangle abc

Accepted Answer

A) represents consumer surplus before the price support 
B) represents producer surplus at the support price 
C) does not represent consumer surplus at the support price because the equilibrium price is not $2.50 
D) does not represent consumer surplus at the support price because the consumer also pays for the storage of cheese, butter, and powdered milk as well as the purchase of excess supply 
E) represents consumer surplus after the price support 
A) represents consumer surplus before the price support 
B) represents producer surplus at the support price 
C) does not represent consumer surplus at the support price because the equilibrium price is not $2.50 
D) does not represent consumer surplus at the support price because the consumer also pays for the storage of cheese, butter, and powdered milk as well as the purchase of excess supply 
E) represents consumer surplus after the price support

Question 18

A public good, such as a community's emergency warning sirens, typically

Accepted Answer

A) imposes benefits on only a few individuals but imposes costs on many people 
B) imposes both benefits and costs on relatively few individuals 
C) imposes benefits on many individuals but imposes the costs on relatively few people 
D) imposes both benefits and costs on many individuals 
E) only imposes costs on individuals when logrolling is prevalent in the government 
A) imposes benefits on only a few individuals but imposes costs on many people 
B) imposes both benefits and costs on relatively few individuals 
C) imposes benefits on many individuals but imposes the costs on relatively few people 
D) imposes both benefits and costs on many individuals 
E) only imposes costs on individuals when logrolling is prevalent in the government

Question 19

Rational ignorance helps explain why

Accepted Answer

A) legislators often trade votes on key issues to produce positive-sum games between them 
B) legislators usually disregard the desires of those constituencies that cannot influence their chances for reelection 
C) voters spend considerable time and effort to gather information to protect themselves against legislators with hidden agendas 
D) it is rational for legislators to ignore the wishes and desires of all of their constituents 
E) voters may choose to remain ignorant of issues when there are large costs associated with becoming informed 
A) legislators often trade votes on key issues to produce positive-sum games between them 
B) legislators usually disregard the desires of those constituencies that cannot influence their chances for reelection 
C) voters spend considerable time and effort to gather information to protect themselves against legislators with hidden agendas 
D) it is rational for legislators to ignore the wishes and desires of all of their constituents 
E) voters may choose to remain ignorant of issues when there are large costs associated with becoming informed

Question 20

Rent seekers are those who seek to

Accepted Answer

A) use the government to protect their existing property interests 
B) use the government to change the rules of the market game in their favor 
C) convert public land into private land 
D) convert public resources into private resources 
E) maximize their own private gains from trade 
A) use the government to protect their existing property interests 
B) use the government to change the rules of the market game in their favor 
C) convert public land into private land 
D) convert public resources into private resources 
E) maximize their own private gains from trade

Exam 16: Public Goods and Public Choice

The Agricultural Marketing Act of 1937 was supposed to encourage competition among farmers.

Legislation that provides a price support for dairy farmers is an example of

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 consumer surplus would be lost as a result of this price support?

Rent seeking activities by special interest groups result in

In a democratic society, the preferences of __________ will often dominate decisions made by direct majority voting.

Exhibit 16-2 Refer to Exhibit 16-2.If the government commits to buying the surplus wool created by the $6 price support, how much will they have to spend?

Taxing people according to their marginal valuations of a public good may be efficient, but it may not be fair if the ability to pay differs.

The fire department receives its revenues from the government budget, not on a per-fire-extinguished basis.As a result, it is difficult for department officials to know if

Exhibit 16-5 Exhibit 16-5 represents the market for leaf tobacco.In the absence of any government intervention what would the market price for leaf tobacco be?

We may see government supply social work internally rather than through private firms because

The efficient level of public good provision is determined

If the legislature has a line-item veto on a bureau's budget, the bureau

A large U.S.steel firm wants to restrict imports of Japanese steel, but Ford Motor Company wants fewer restrictions on steel so that the price of steel will go down.This can best be described as

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 will tobacco buyers and taxpayers combined spend on tobacco?

General Motors benefits from tariffs on imported automobiles.Companies that use many automobiles, such as rental agencies, want to get them cheaply.In this case, the issue of tariff legislation involves

Exhibit 16-3 At the price floor shown in Exhibit 16-3, which of the following output levels will be produced?

Exhibit 16-1 In Exhibit 16-1, triangle abc

A public good, such as a community's emergency warning sirens, typically

Rational ignorance helps explain why

Rent seekers are those who seek to

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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