Question 1

Special interest legislation generally leads to an increase in social welfare.

Accepted Answer

A) True 
 B)False  False

Question 2

Legal attempts to arrange one's financial decisions so as to pay the least tax possible are known as

Accepted Answer

A)  tax evasion 
B)  logrolling 
C)  tax avoidance 
D)  rent seeking 
E)  underreporting 
A)  tax evasion 
B)  logrolling 
C)  tax avoidance 
D)  rent seeking 
E)  underreporting C

Question 3

NARRBEGIN: Exhibit 16-2
Exhibit 16-2
  
-Refer to Exhibit 16-2. How much more will consumers spend on wool because of the $6 price support?

Accepted Answer

A)  $500 million 
B)  $6 million 
C)  $40 million 
D)  $400 million 
E)  $90 million 
A)  $500 million 
B)  $6 million 
C)  $40 million 
D)  $400 million 
E)  $90 million C

Question 4

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 5

Competing-interest legislation is legislation that

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)  imposes costs only on those individuals who are rationally ignorant 
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)  imposes costs only on those individuals who are rationally ignorant

Question 6

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 7

Legislators often have difficulty passing legislation with widespread benefits, but that imposes concentrated costs because those who bear the costs will __________ the legislation, while those who would reap the benefits will __________ the legislation.

Accepted Answer

A)  protest; actively support 
B)  not protest; not actively support 
C)  not protest; actively support 
D)  protest; not actively support 
E)  protest; protest 
A)  protest; actively support 
B)  not protest; not actively support 
C)  not protest; actively support 
D)  protest; not actively support 
E)  protest; protest

Question 8

Rents represent earnings that

Accepted Answer

A)  exceed marginal cost 
B)  are less than marginal revenue product 
C)  are less than what producers would require to supply products 
D)  exceed opportunity revenue 
E)  exceed opportunity cost 
A)  exceed marginal cost 
B)  are less than marginal revenue product 
C)  are less than what producers would require to supply products 
D)  exceed opportunity revenue 
E)  exceed opportunity cost

Question 9

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 10

The market demand curve for a public good

Accepted Answer

A)  is the horizontal sum of all individual demand curves 
B)  is the vertical sum of all individual demand curves. 
C)  is upward sloping 
D)  is horizontal 
E)  does not exist 
A)  is the horizontal sum of all individual demand curves 
B)  is the vertical sum of all individual demand curves. 
C)  is upward sloping 
D)  is horizontal 
E)  does not exist

Question 11

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 12

Generally, people are more satisfied with private market outcomes than with public voting outcomes because

Accepted Answer

A)  each consumer in the private market can choose the quantity he or she desires 
B)  most people are near the median 
C)  the prices are lower 
D)  markets are involuntary 
E)  there are too many choices to make in the public sector 
A)  each consumer in the private market can choose the quantity he or she desires 
B)  most people are near the median 
C)  the prices are lower 
D)  markets are involuntary 
E)  there are too many choices to make in the public sector

Question 13

It is not likely that the costly special-interest farm price supports will be replaced by more efficient direct transfer payments because

Accepted Answer

A)  farming would cease 
B)  such a proposal would attract public attention and threaten the survival of the program 
C)  the private gains from price supports exceed the costs to society 
D)  a direct transfer program would require too much paperwork 
E)  consumers favor the current legislation 
A)  farming would cease 
B)  such a proposal would attract public attention and threaten the survival of the program 
C)  the private gains from price supports exceed the costs to society 
D)  a direct transfer program would require too much paperwork 
E)  consumers favor the current legislation

Question 14

A limit on special-interest contributions to national political campaigns

Accepted Answer

A)  would give challengers an edge over incumbents 
B)  is usually supported by special-interest groups as a way of saving money 
C)  would involve widespread costs and concentrated benefits 
D)  would reduce the extent of rent seeking 
E)  is an example of competing-interest legislation 
A)  would give challengers an edge over incumbents 
B)  is usually supported by special-interest groups as a way of saving money 
C)  would involve widespread costs and concentrated benefits 
D)  would reduce the extent of rent seeking 
E)  is an example of competing-interest legislation

Question 15

The hiring of a brilliant tax lawyer by a firm that wants to find tax loopholes

Accepted Answer

A)  encourages economic efficiency by moving resources away from the government into the private sector 
B)  encourages economic efficiency only if the firm's profit increases 
C)  is an example of economic inefficiency caused by devoting resources to wealth redistribution rather than to production 
D)  involves the firm in a zero-sum game against other firms 
E)  involves the firm in a zero-sum game against the government 
A)  encourages economic efficiency by moving resources away from the government into the private sector 
B)  encourages economic efficiency only if the firm's profit increases 
C)  is an example of economic inefficiency caused by devoting resources to wealth redistribution rather than to production 
D)  involves the firm in a zero-sum game against other firms 
E)  involves the firm in a zero-sum game against the government

Question 16

Special-interest legislation usually

Accepted Answer

A)  has widespread benefits and costs 
B)  has concentrated benefits and costs 
C)  has concentrated benefits but widespread costs 
D)  concerns the provision of public goods 
E)  concerns the provision of private goods 
A)  has widespread benefits and costs 
B)  has concentrated benefits and costs 
C)  has concentrated benefits but widespread costs 
D)  concerns the provision of public goods 
E)  concerns the provision of private goods

Question 17

Rational ignorance suggests that voters may not spend much time examining candidates before an election because

Accepted Answer

A)  politics is boring 
B)  each voter has virtually no chance of deciding the election 
C)  public choices are not important to society 
D)  candidates are chosen by the electoral college 
E)  candidates are usually so different that it is easy to determine which is better 
A)  politics is boring 
B)  each voter has virtually no chance of deciding the election 
C)  public choices are not important to society 
D)  candidates are chosen by the electoral college 
E)  candidates are usually so different that it is easy to determine which is better

Question 18

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 19

If a market is initially operating competitively and then the government imposes a price floor above the equilibrium price,

Accepted Answer

A)  there will be more resources will be devoted to the production of this product 
B)  quantity demanded will rise 
C)  producer surplus will fall in the short run 
D)  imposition of the floor is probably a positive-sum game 
E)  consumer surplus will fall 
A)  there will be more resources will be devoted to the production of this product 
B)  quantity demanded will rise 
C)  producer surplus will fall in the short run 
D)  imposition of the floor is probably a positive-sum game 
E)  consumer surplus will fall

Question 20

Rent seeking

Accepted Answer

A)  is the attempt to find apartments in a rent-controlled city 
B)  only makes sense in a monopolistically competitive industry 
C)  is a zero-sum game because the public's loss is the rent seeker's gain 
D)  is the expenditure of resources to obtain favorable treatment from government 
E)  occurs because of cyclical majority 
A)  is the attempt to find apartments in a rent-controlled city 
B)  only makes sense in a monopolistically competitive industry 
C)  is a zero-sum game because the public's loss is the rent seeker's gain 
D)  is the expenditure of resources to obtain favorable treatment from government 
E)  occurs because of cyclical majority

Exam 16: Public Goods and Public Choice

Special interest legislation generally leads to an increase in social welfare.

Legal attempts to arrange one's financial decisions so as to pay the least tax possible are known as

NARRBEGIN: Exhibit 16-2 Exhibit 16-2 -Refer to Exhibit 16-2. How much more will consumers spend on wool because of the $6 price support?

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

Competing-interest legislation is legislation that

The median-voter model attempts to explain

Legislators often have difficulty passing legislation with widespread benefits, but that imposes concentrated costs because those who bear the costs will __________ the legislation, while those who would reap the benefits will __________ the legislation.

Rents represent earnings that

Public choices are government decisions about

The market demand curve for a public good

Rent seeking activities by special interest groups result in

Generally, people are more satisfied with private market outcomes than with public voting outcomes because

It is not likely that the costly special-interest farm price supports will be replaced by more efficient direct transfer payments because

A limit on special-interest contributions to national political campaigns

The hiring of a brilliant tax lawyer by a firm that wants to find tax loopholes

Special-interest legislation usually

Rational ignorance suggests that voters may not spend much time examining candidates before an election because

Rational ignorance helps explain why

If a market is initially operating competitively and then the government imposes a price floor above the equilibrium price,

Rent seeking

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

Consumer Choice and Demand

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

Filters

Legislators often have difficulty passing legislation with widespread benefits, but that imposes concentrated costs because those who bear the costs will the legislation, while those who would reap the benefits will the legislation.