Deck 19: International Trade

Question 1

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.

Answer 1

B

Question 2

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 2

D

Question 3

Why do you think voters choose to be rationally ignorant evenwhen it is time to elect a new president?
I) Voters are not presented with enough information to make arational decision
II)Voters often believe that their vote does not make anydifference in the political process
III) The process of understanding the electorate system, thecandidates' 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

Answer 3

C

Question 4

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.(True Answer )Correct
D)Economists oppose super-high inflation rates.

Question 5

What are some reasons why markets are not free andunregulated?

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

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 7

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

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

Question 8

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 9

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

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

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

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

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

Question 12

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

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

Question 13

Which of the following statements seems to be that of arationally 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 14

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 15

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.(True Answer )Correct
C)equal to the costs of becoming informed.
D)likely to be quite large but information is costless.

Question 16

Which of the following would be the most likely outcome if acollege professor awards grades based on average test scoresand 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

Economists say that voters are rationally ignorant aboutpolitics 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.(True Answer )Correct

Question 18

People who spend more time and effort investigating theadvantages and disadvantages of different flat-screentelevisions when they go to purchase one than they doinvestigating the strengths and weaknesses of presidentialcandidates 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.

Question 19

Which of the following best explains the term rationalignorance?

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.(True
Answer )Correct
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

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 21

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 22

Which of the following statements is NOT true about the sugarquota 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 23

When government makes it possible to externalize the cost of agood:

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 24

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.(True Answer )Correct

Question 25

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 26

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 27

The key formula for political success behind the sugar quotais:

A)diffused costs and concentrated benefits.(True Answer )Correct
B)diffused benefits and concentrated costs.
C)diffused costs and benefits.
D)concentrated costs and benefits.

Question 28

Why is rational ignorance important from an economicstandpoint?
I) Voters might not make informed choices
II)Voters will make decisions based on incorrect orincomplete information
III) Special interest groups may control economic outcomes ifthey 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 29

Which of the following provides the most reasonableexplanation for why agricultural interests lobby for higherfarm 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 30

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

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

Question 31

Which of the following best explains why special interestgroups 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

Which of the following explains why the sugar quota is awinning 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 33

Which of the following programs are the two largest sources ofthe 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 34

Which of the following explains why the sugar quota is awinning 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 35

Policy A adversely affects 50 million people at a cost of $1 perperson. But Policy A also benefits 1,000 people at $30,000 perperson. 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 36

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 37

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

A)rationally informed; irrationally informed.
B)rationally ignorant; irrationally ignorant.
C)rationally informed; rationally ignorant.(True Answer )Correct
D)irrationally informed; rationally ignorant.

Question 38

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 39

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 40

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

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

Question 41

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 42

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

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

Question 43

Which of the following variables is the least helpful inpredicting 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 (True Answer )Correct
D)the length of time the incumbent party has been in power

Question 44

Politicians have a greater interest in serving the voters' willwhen:

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 45

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

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

Question 46

Which of the following conditions best predicts when theincumbent 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 47

A simple logic underlying the apparent chaos of seeminglyunique 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 48

Which of the following theories works to explain which voterswill 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 49

If voters are myopic, which of the following would we expectto 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 50

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 51

Over the past one hundred years the American voter has votedfor the party of the ________ when the economy is doing________.

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

Question 52

Which three variables have been shown to have strongpredictive 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 53

Data for the United States show that the incumbent partytends 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 manycontinuous terms.

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

Question 54

When a policy is specialized in its impact, difficult tounderstand, and affects a small part of the country, it is morelikely that:

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

Question 55

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

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

Question 56

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.(True
Answer )Correct
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 57

Voter decisions seem to depend greatly on:

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

Question 58

What does the evidence from 60 years of U.S. data showregarding the growth rate in personal income in each quarterof 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 59

Evidence suggests that voters are myopic, meaning they areresponsive 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 60

President Nixon increased his popularity just before the 1972election 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 61

(Figure: Economic Freedom and Living Standards) Refer tothe figure. Based on the data in this chart, the country with thelowest level of economic freedom is:

A)Angola
B)Venezuela
C)Hong Kong
D)Haiti

Question 62

According to the median voter theorem, when do politicaloutcomes change?

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

Question 63

(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 kidneytrading is the only issue being debated, based on the median votertheorem, 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 64

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

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

Question 65

(Figure: Economic Freedom and Living Standards) Refer tothe figure. Based on this chart, we can conclude that:

A)greater economic freedom causes a higher standard of living.
B)there is a positive relationship between economic freedom and GNI per capita.
C)higher GNI per capita raises the level of democracy.
D)the wealthiest countries in the world are all democracies.

Question 66

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 ownpositions
III) there are multiple dimensions over which the votingoccurs.

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

Question 67

(Figure: Kidney Trade Ban Policy Spectrum) Refer to the figure. Ifthere are only two candidates, A and B, and an open market for kidneytrading is the only issue being debated in this election, which candidatewill 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

How are democracy and wealth related?

A)Once people's basic needs have been met, there is an increased demand for democracy and political
Participation.
B)Democracy is associated with institutions (free press, private property rights, lower levels of corruption) that are favorable
Towards growth and wealth accumulation.
C)Neither of these explanations is correct.
D)Both of these explanations are correct.(True Answer )Correct

Question 69

There is a strong correlation between economic freedom and:

A)personal freedom.
B)religious freedom.
C)living standards.
D)economic instability.

Question 70

(Figure: Smoking Ban Policy Spectrum) Refer to the figure. If there areonly two candidates, A and B, and a smoking ban is the only issue beingdebated in this election, based on the median voter theorem, whichcandidate 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

Democracy typically brings about more efficient outcomesbecause:

A)democracies create a demand for wealth.
B)democracies are common practice in developed countries.
C)citizens in democracies are rationally ignorant.
D)citizens in democracies are better informed and have power to vote.

Question 72

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.

Question 73

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 ownpositions
III) there is only a single dimension over which the votingoccurs.

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

Question 74

The most important assumption of the median voter theoremis that:

A)voters vote for the policy furthest from their ideal.
B)voters vote for the policy closest to their ideal.(True Answer )Correct
C)half the voters vote for their ideal, but the other half do not.
D)there are several voting dimensions.

Question 75

(Figure: Smoking Ban Policy Spectrum) Refer to the figure. If A, B, andC are all candidates in the election, and a smoking ban is the only issuebeing debated, based on the median voter theorem which candidate willwin the election?

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

Question 76

Government ownership of the media:

A)is uncommon in African countries.
B)causes an even greater degree of rational ignorance than private ownership.
C)reduces rational ignorance because governments usually require a greater number of news broadcasts.
D)decreases the effectiveness of special interest groups.

Question 77

(Figure: Economic Freedom and Living Standards) Refer tothe figure. Based on the data in this chart, two countries thathave about the same level of economic freedom but verydifferent standards of living are:

A)Venezuela and Niger
B)Congo and Luxembourg
C)Haiti and Niger
D)Luxembourg and the United States

Question 78

Evidence from an important study of media ownershipconcludes that:

A)private ownership of the press restricts information flows to the public, which reduces the quality of the
Government.
B)public ownership of the press increases information flows to the public, which increases the quality of the
Government.
C)government ownership of the press restricts information flows to the public, which reduces the quality of the
Government.
D)there is little correlation between media ownership and the efficiency of government.

Question 79

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

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.(True Answer )Correct

Question 80

(Figure: Smoking Ban Policy Spectrum) Refer to the figure. If there areonly two candidates, A and B, and a smoking ban is the only issue beingdebated in this election, which one of the voters is the median voter?

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