Deck 19: Public Goods and the Tragedy of the Commons

Question 1

Let's check on whether you are rationally ignorant. Which of the following four items is the biggest expenditure in the federal government's budget?

A) Social Security
B) welfare
C) foreign aid
D) health care

Answer 1

A

Question 2

People who spend more time and effort investigating the advantages and disadvantages of different flat-screen televisions when they go to purchase one than they do investigating the strengths and weaknesses of presidential candidates are saying, in effect, that:

A) they do not think it matters who is elected president.
B) they are irrational, because the choice of a president is obviously far more important than the choice of a TV.
C) a good TV is more important to their well-being than a good president.
D) they expect to use the information on the merits of alternative TVs to greater personal advantage than they could information on the merits of alternative presidential candidates.

Answer 2

D

Question 3

The two largest sources of government spending are:

A) defense and foreign aid.
B) welfare and foreign aid.
C) interest on debt and Social Security.
D) defense and Social Security.

Answer 3

D

Question 4

Let's check on whether you are rationally ignorant. Which of the following four items is the smallest in terms of government expenditure?

A) Social Security
B) welfare
C) foreign aid
D) health care

Question 5

What are some reasons why markets are not free and unregulated?

A) bad incentives
B) some people ignore ethical values in making market decisions
C) politicians' election agendas
D) All of the answers are correct.

Question 6

Why do you think voters choose to be rationally ignorant even when it is time to elect a new president? I. Voters are not presented with enough information to make a rational decision. II. Voters often believe that their vote does not make any difference in the political process. III. The process of understanding the electorate system, the candidates' platforms, and critically assessing the candidates' policies takes up more of the voter's time than it is worth.

A) I only
B) II only
C) II and III only
D) I, II, and III

Question 7

It is rational to be ignorant when:

A) the benefits of the information outweigh the costs of acquiring the information.
B) the costs of becoming informed are greater than the benefits of being informed.
C) you have limited mental capacity.
D) dollars or profits do not matter.

Question 8

Studying politics doesn't pay because the outcome:

A) of any election is mostly determined by what other people do, not by what you do.
B) of any election is mostly determined by what you do, not by what other people do.
C) is always inconsistent with the expectation.
D) can be manipulated by politicians.

Question 9

Most voters will tend to be concerned with:

A) most issues since most issues have some impact, however slight, on each citizen.
B) most issues since information on most issues can be obtained at a low cost.
C) only a few special issues (those that have the most impact on the voters' personal welfare).
D) the views of a particular political candidate on all issues.

Question 10

The government spends more on foreign aid than:

A) health care.
B) welfare.
C) Social Security.
D) None of the answers is correct.

Question 11

Which of the following statements seems to be that of a rationally ignorant person?

A) I am not sure which of the soups are more nutritious and I'm in a hurry, so I will opt for the one with more vegetables in it.
B) I always compare prices and buy the good at the store where it has been priced the cheapest.
C) I don't know much about the candidates' views on defense, but he has better charisma than she does and so I will vote for him.
D) The male candidate has a much softer defense strategy than the female candidate, therefore I have decided to vote for her.

Question 12

Ignorance is rational when the benefits of being informed are:

A) greater than the costs of becoming informed.
B) less than the costs of becoming informed.
C) equal to the costs of becoming informed.
D) likely to be quite large but information is costless.

Question 13

Rational ignorance can be seen in which of the following scenarios?

A) A student has a final exam in exactly three hours. He knows from past experience that without at least some sleep he will be useless on the exam. In spite of the fact that he still has four chapters to read for the exam, he decides to sleep for 2.5 hours.
B) You are a worker looking for work in a recessionary environment. You get a phone interview after which you are offered a job and have to start the next day. To secure a paycheck, you accept without doing any further research on the company.
C) You have to fly urgently. You buy the first ticket available and it is expensive, but you pay anyway because you do not have time to research other flights.
D) All of these examples illustrate cases of rational ignorance.

Question 14

Rational ignorance in voting comes from:

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.

Question 15

In which of the following decisions is a person likely to be rationally ignorant?

A) deciding on which car to buy
B) deciding on where to live
C) deciding on which mayoral candidate to vote for
D) deciding on which television show to watch

Question 16

Which of the following would be the most likely outcome if a college professor awards grades based on average test scores and assigns the same grade to everyone in the class?

A) Students will collaborate to get a better grade and achieve higher payoff.
B) Students will study more because studying has a higher payoff.
C) Students will study less because studying has a lower payoff.
D) Students will study the same amount as they did before because their scores will still impact the average score.

Question 17

Rational ignorance 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) 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.
C) fact that most people choose to become just as well informed when making choices as consumers as they do when making choices as voters.
D) 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.

Question 18

Let's check on whether you are rationally ignorant. Which of the following four items is the biggest in terms of government expenditure?

A) defense
B) welfare
C) foreign aid
D) health care

Question 19

Which of the following best explains the term rational ignorance?

A) It is the decision to search for and acquire information only if there is enough time.
B) It is the decision to stay uninformed on certain topics because of the prohibitive cost of gathering information.
C) It is the decision to ignore free information that is vital in making the correct decision.
D) It is the rational weighing of costs versus benefits.

Question 20

Which of the following statements is FALSE?

A) Economists support free and competitive markets.
B) Economists are skeptical about price controls and tariffs.
C) Economists favor command and control regulation.
D) Economists oppose super-high inflation rates.

Question 21

Which of the following statements is NOT true about the sugar quota imposed by the U.S. government?

A) Although sugar consumers are harmed by the quota, few of them even know of the quota's existence.
B) Sugar consumers wouldn't spend much time or effort to oppose the sugar quota even if they know about the quota.
C) Sugar producers are rationally informed and would seek to sustain the quota.
D) The quota is imposed to protect both sugar consumers and producers.

Question 22

The political power of farmers ________ as the share of farmers in the population decreased, because the benefits from farm subsidies became ________ concentrated.

A) increased; less
B) increased; more
C) decreased; less
D) decreased; more

Question 23

Policy A adversely affects 50 million people at a cost of $1 per person. But Policy A also benefits 1,000 people at $30,000 per person. Which of the following statements is true?

A) Policy A will not become law because it hurts more people than it helps.
B) Policy A concentrates all the costs among a small group of people and all the benefits among a large group of people.
C) Policy A is likely to be supported by politicians even though it makes society worse off.
D) Since Policy A negatively affects many people, and so rational ignorance will not be a problem.

Question 24

Sugar quotas:

A) are not an issue in the United States despite rationally ignorant voters.
B) harm U.S. sugar farmers at the benefit of the candy and soda industry.
C) cost the typical family about $6 per year but provide millions of dollars of benefits to Florida sugar producers.
D) lead to lower prices and increased output, and thus are opposed by the sugar industry.

Question 25

Economists say that voters are rationally ignorant about politics because:

A) the procedure of learning politics is too cumbersome.
B) politics is too complicated.
C) the opportunity cost of studying politics is too high.
D) the incentives to be fully informed are low.

Question 26

Which of the following provides the most reasonable explanation for why agricultural interests lobby for higher farm subsidies and price supports?

A) Agricultural interests seek a redistribution of income favoring themselves.
B) Price support programs reduce food costs, which helps the poor.
C) Subsidies promote the efficient use of agricultural resources.
D) Without the farm subsidies, food shortages would result.

Question 27

The ―Bridge to Nowhere‖:

A) cost the local community about $35,000 per person.
B) is a special case in which special interests can maximize society's well-being.
C) would have created large external costs, an example of the inefficient projects proposed by self-interested politicians.
D) connects Cuba to Key West, FloridD.

Question 28

The costs of many government projects (such as bridges, roads, and museums) create:

A) external costs because taxpayers around the country pay for the construction.
B) internal costs because taxpayers around the country pay for the construction.
C) internal benefits because all taxpayers benefit from the construction.
D) external benefits because taxpayers around the country benefit from the construction.

Question 29

The diffusion of costs and concentration of benefits: I. leads to rational ignorance on the part of voters. II. is the formula to which the sugar quota owes its existence. III. is a formula for reelection to political office.

A) I only
B) I and II only
C) II and III only
D) I, II, and III

Question 30

Which of the following programs are the two largest sources of the U.S. government budget?

A) welfare and foreign aid
B) defense and interest on the federal debt
C) health care and Social Security
D) defense and Social Security

Question 31

Which of the following best explains why special interest groups maintain so much power in the U.S. political process?

A) Special interest groups typically represent the largest U.S. companies, and hence get a lot of media attention.
B) Special interest groups stand to gain millions if particular laws are passed and lobby very hard for them; whereas voters stand to lose only a little and don't find opposing them worth their effort.
C) Both special interest groups as well as voters lobby politicians hard regarding certain legislation, however special interest groups typically win out because they have more money.
D) Special interest groups have been powerful in the past because of their ties to wealth; however, their power has been dwindling in recent years.

Question 32

The Fanjuls are:

A) sugar barons who give considerable money to politicians who make decisions on sugar quotas.
B) a consumer advocacy group attempting to ban special interest groups.
C) a new political party based on the opposition to special interest politics.
D) free traders who propose doing away with all tariffs.

Question 33

Why are special interest groups so powerful?

A) Because voters are rationally ignorant about how laws designed to help special interest groups are harmful to everyone else.
B) Because special interest groups have a self-interest in passing favorable legislation-they stand to gain millions of dollars, while each taxpayer loses only several dollars.
C) Neither of these explanations is correct.
D) Both of these explanations are correct.

Question 34

Rational ignorance:

A) makes it difficult for voters to make informed decisions regarding government intervention in the economy.
B) may cause voters to give credit to or blame politicians for things not under their control.
C) may allow special interest groups to take advantage of the uninformed.
D) All of these possibilities are correct.

Question 35

In the public sector, politicians:

A) pursue primarily the general public interest since competition is less intense in the public sector.
B) pursue primarily the general public interest since they are concerned mostly with the collective good.
C) act in the narrow self-interest of their constituents and contributors to remain in office.
D) respond to the broader active political interests even though they choose to be rationally ignorant.

Question 36

An issue that generates substantial benefits to a small group of individuals while imposing a small cost on many others is called a:

A) nonissue.
B) special-interest issue.
C) popular issue.
D) minority issue.

Question 37

Why is rational ignorance important from an economic standpoint? I. Voters might not make informed choices. II. Voters will make decisions based on incorrect or incomplete information. III. Special interest groups may control economic outcomes if they are the only ones who are not rationally ignorant.

A) I only
B) I and II only
C) II and III only
D) I, II, and III

Question 38

Special interest groups have a large incentive to be ________ about legislation that benefits them directly, whereas voters tend to be ________ regarding these issues.

A) rationally informed; irrationally informed.
B) rationally ignorant; irrationally ignorant.
C) rationally informed; rationally ignorant.
D) irrationally informed; rationally ignorant.

Question 39

Which of the following is NOT the reason why ignorance about political matters is important?

A) It is difficult for voters to make informed choices if they are not well informed.
B) Voters who are rationally ignorant will often make decisions for irrational reasons.
C) Voters who are well informed would perceive politics as entertainment.
D) Rational ignorance matters because not everyone is rationally ignorant.

Question 40

One way to achieve political success is to:

A) concentrate costs and diffuse benefits.
B) concentrate benefits and costs.
C) concentrate benefits and diffuse costs.
D) diffuse costs and benefits.

Question 41

Why are voters generally considered myopic?

A) They vote based only on the economic policies of the candidates and not on their normative political policies.
B) They focus on economic conditions in the year of the election not over the entire term of the presidency.
C) They educate themselves thoroughly on the economic policies of the candidates in the election, but not on the political agendas.
D) They educate themselves on issues that influence them personally, but not on issues that influence the larger society.

Question 42

Data for the United States show that the incumbent party tends to win the election if: I. personal disposable income is growing. II. the inflation rate is low. III. the political party has not been in power for too many continuous terms.

A) I only
B) I and II only
C) I and III only
D) I, II, and III

Question 43

The key formula for political success behind the sugar quota is:

A) diffused costs and concentrated benefits.
B) diffused benefits and concentrated costs.
C) diffused costs and benefits.
D) concentrated costs and benefits.

Question 44

Which of the following public policies does NOT fit the diffused costs and concentrated benefits story?

A) agricultural subsidies
B) minimum wage
C) price supports
D) trade quota and tariffs

Question 45

When the battle of presidential elections is done, historians mark one personality and set of issues as having won the day and reflected the will of the:

A) incumbent candidate.
B) challenging candidate.
C) voters.
D) government.

Question 46

When benefits are concentrated and costs are diffused:

A) resources get devoted to projects with high benefits and low costs.
B) resources get wasted on projects with low benefits and high costs.
C) more projects with high benefits and low costs get developeC.
D) fewer projects with low benefits and high costs get developed.

Question 47

What does the evidence from 60 years of U.S. data show regarding the growth rate in personal income in each quarter of a president's term in office?

A) The growth rate holds steady at approximately 1.8 percent.
B) The growth rate increases in the quarters just after election.
C) The growth rate decreases in the quarters just before election.
D) The growth rate increases in the quarters just before election.

Question 48

Just before the 1972 election, ________ sent a letter to 24 million Social Security recipients informing them of increased payment benefits.

A) Richard Nixon
B) Jimmy Carter
C) Ronald Reagan
D) John
F) Kennedy

Question 49

Which of the following explains why the sugar quota is a winning policy for politicians?

A) The people who are harmed by the quota are rationally ignorant.
B) The people who are harmed by the quota have strong incentive to oppose the policy.
C) The people who benefit from the quota are rationally ignorant.
D) The people who benefit from the quota are too small in number to influence the outcome of elections.

Question 50

Presidents have an easier time changing ________ than ________ during an election year.

A) GDP; taxes and transfer payments
B) the overall economy; GDP
C) taxes and transfer payments; GDP
D) GDP; overall economy

Question 51

Which three variables have been shown to have strong predictive power for election results?

A) whether the country is at war, productivity, and the divorce rate
B) education status, life expectancy, corporate profits
C) disposable income, the inflation rate, and years in office for the party in power
D) the savings rate, the trade deficit, and the unemployment rate of single mothers

Question 52

During election years personal disposable income ________ more than at other times, while inflation tends to ________.

A) falls; rise.
B) grows; rise.
C) grows; fall.
D) falls; fall

Question 53

Over the past one hundred years the American voter has voted for the party of the ________ when the economy is doing ________.

A) incumbent; well
B) incumbent; poorly
C) left; well
D) right; poorly

Question 54

Which of the following explains why the sugar quota is a winning policy for politicians?

A) The people who are harmed by the quota are rationally informed.
B) The people who are harmed by the quota have strong incentive to oppose the policy.
C) The people who benefit from the quota are rationally ignorant.
D) The people who benefit from the quota have strong incentive to support the policy.

Question 55

President Nixon increased his popularity just before the 1972 election by:

A) lowering income taxes before the election.
B) lowering taxes after the election.
C) increasing Social Security benefits.
D) removing all price controls from the markets.

Question 56

Voter decisions seem to depend greatly on:

A) economic conditions in the year of an election.
B) the beauty of the candidates.
C) the weather.
D) the amount of campaign contributions.

Question 57

Which of the following variables is the least helpful in predicting presidential elections?

A) growth in personal income in the year of the election
B) inflation in the year of the election
C) the popularity level of the presidential personality
D) the length of time the incumbent party has been in power

Question 58

Evidence suggests that voters will vote for a political party based on the economic conditions that prevail in the year of the election. This behavior is known as:

A) economic dependence.
B) political response.
C) rational ignorance.
D) voter myopia.

Question 59

When government makes it possible to externalize the cost of a good:

A) there will be an optimal quantity of the good.
B) there will be an insufficient quantity of the good.
C) there will be too much of the good.
D) the good will not be produced at all.

Question 60

Voter myopia refers to the fact that voters:

A) are rationally ignorant.
B) respond to incentives.
C) primarily consider economic conditions in the year of the election.
D) look at economic conditions over a president's term.

Question 61

Which of the following conditions best predicts when the incumbent party will NOT win the presidential election?

A) personal disposable income is growing
B) the inflation rate is low
C) the unemployment rate is low
D) the incumbent party has been in power for too many terms in a row

Question 62

When a policy is specialized in its impact, difficult to understand, and affects a small part of the country, it is more likely that:

A) special interests get their way.
B) voters get their way.
C) politicians get their way.
D) government gets its way.

Question 63

Reference: Ref 19-1 (Figure: Kidney Trade Ban Policy Spectrum) Refer to the figure. If there are only two candidates, A and B, and an open market for kidney trading is the only issue being debated in this election, which one of the voters is the median voter?

A) Mariska
B) Tuppence
C) Tommy
D) Agatha

Question 64

Reference: Ref 19-2 (Figure: Smoking Ban Policy Spectrum) Refer to the figure. If A, B, and C are all candidates in the election, and a smoking ban is the only issue being debated, based on the median voter theorem which candidate will win the election?

A) A
B) B
C) C
D) A, B, and C will each receive an equal number of votes.

Question 65

The basic concept behind the median voter theorem is that: I. the median voter is defined as the voter for which half of the other voters want a policy to the left and half of the voters want a policy to the right. II. when voters vote, regardless of whether they vote closest to their preferences or not, the preference of the median voter is sure to win in a majority win election. III. if voters vote closest to their preferences, then the preference of the median voter is sure to win in a majority win election.

A) I only
B) I and II only
C) I and III only
D) III only

Question 66

Reference: Ref 19-1 (Figure: Kidney Trade Ban Policy Spectrum) Refer to figure. If A, B, and C are all candidates in the election, and an open market for kidney trading is the only issue being debated, based on the median voter theorem, which candidate will win the election?

A) A
B) B
C) C
D) A, B, and C will each receive an equal number of votes.

Question 67

Reference: Ref 19-1 (Figure: Kidney Trade Ban Policy Spectrum) Refer to the figure. If there are only two candidates, A and B, and an open market for kidney trading is the only issue being debated in this election, which candidate will win the election?

A) A
B) B
C) Neither A nor B will win this election.
D) Both A and B will receive an equal number of votes.

Question 68

When a policy is highly visible, appears often in the newspapers, and has a major effect on the lives of millions of Americans, very often:

A) special interests get their way.
B) voters get their way.
C) politicians get their way.
D) government gets its way.

Question 69

Evidence suggests that voters are myopic, meaning they are responsive to economic conditions:

A) before the year of an election.
B) in the year of an election.
C) after the year of an election.
D) over the president's entire term.

Question 70

Reference: Ref 19-2 (Figure: Smoking Ban Policy Spectrum) Refer to the figure. If there are only two candidates, A and B, and a smoking ban is the only issue being debated in this election, based on the median voter theorem, which candidate will win the election?

A) A
B) B
C) Neither A nor B will win this election.
D) Both A and B will receive an equal number of votes.

Question 71

The theory of the median voter may not work if: I. voters do not vote. II. voters do not vote for the policy closest to their own positions. III. there is only a single dimension over which the voting occurs.

A) I only
B) II only
C) I and II only
D) I, II, and III

Question 72

The theory of the median voter may not work if: I. voters do not vote. II. voters do not vote for the policy closest to their own positions. III. there are multiple dimensions over which the voting occurs.

A) I only
B) II only
C) I and II only
D) I, II, and III

Question 73

A simple logic underlying the apparent chaos of seemingly unique and momentous elections is that:

A) voters are so unresponsive to economic conditions that the winner of a presidential election cannot be predicted with any accuracy.
B) voters are so responsive to economic conditions that the winner of a presidential election can be predicted with considerable accuracy.
C) pundits scrutinize the daily chronicle of events to divine how the candidates advance and retreat in public opinion.
D) personalities and leadership of the candidates loom large and are reckoned to swing voters one way or another.

Question 74

If voters are myopic, which of the following would we expect to see?

A) Government benefits increase before an election while taxes increase only after an election.
B) Government benefits increase after an election while taxes hardly ever do.
C) Government benefits decrease after an election while taxes increase only before an election.
D) Government benefits decrease before an election while taxes decrease only after an election.

Question 75

Reference: Ref 19-2 (Figure: Smoking Ban Policy Spectrum) Refer to the figure. If there are only two candidates, A and B, and a smoking ban is the only issue being debated in this election, which one of the voters is the median voter?

A) Victoria
B) Edward
C) O'Rourke
D) Abdul

Question 76

Which of the following theories works to explain which voters will get their way in a democratic election?

A) the theory on rational ignorance
B) the median voter theorem
C) the special interests theory
D) the political business cycle theory

Question 77

Politicians have a greater interest in serving the voters' will when:

A) voters are well-informed.
B) special interest groups are nonexistent.
C) the media does not get involved.
D) the policy is highly visible.

Question 78

If voters care about two issues such as taxes and war, then politicians:

A) will form a stable policy on these issues.
B) can pose a policy that will never lose against another policy.
C) must assume that there is no median voter.
D) may never converge on a stable outcome.

Question 79

According to the median voter theorem, when do political outcomes change?

A) when the consensus changes
B) as a result of a compromise
C) when the median voter changes his/her preferences
D) when there is new technology to account for proper voting

Question 80

The median voter theorem holds that the:

A) policy that caters to the median voter will beat any other policy in a majority rule election.
B) policy that adjusts the left of the median voter will beat any policy further to the right.
C) policy that adjusts to the right of the median voter will beat any policy further to the left.
D) median voter's preferences cannot be met.