Deck 16: Public Goods and Public Choice

Question 1

If a citizen decides he has had enough of big government and launches apersonal campaign to expose big spenders in Congress,

A)he is likely to have his taxes reduced dramatically
B)his taxes are not likely to fall very much
C)he will be thrown in jail
D)he is likely to get elected by other voters
E)he will get the support of many special­interest groups

Answer 1

B

Question 2

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

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

Answer 2

D

Question 3

The median­voter model attempts to explain

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

Answer 3

B

Question 4

The market demand curve for a public good

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 5

The efficient level of public good provision is determined

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 6

A good that is neither rival nor exclusive is called

A)a private good
B)a public good
C)a quasi­private good
D)an external good
E)an open access good

Question 7

Direct majority­rule voting is a form of coercion in the sense that

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 8

One result of voters' rational ignorance is that

A)cyclical majorities are more common
B)vote trading is common
C)majority rules
D)special interests often dominate legislation
E)members of Congress go along with whatever their constituents want

Question 9

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

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 10

If a voter expects to have little effect on government choices, that voter'sbehavior will reflect

A)rational ignorance
B)a cyclical majority
C)rent seeking
D)vote trading
E)a zero­sum game

Question 11

Public choice theory suggests that political candidates try to get elected by

A)appealing to conservatives
B)appealing to liberals
C)appealing to senior citizens
D)appealing to the median voter
E)raising taxes

Question 12

A good that is nonrival but exclusive is called

A)a private good
B)a public good
C)a quasi­private good
D)an external good
E)a normal good

Question 13

Sally, Kelly, and Debbie are roommates deciding on how many cats theywant in the apartment.Sally prefers three cats to two cats to one cat, Kellyprefers two to one to three, and Debbie prefers one to two to three.If theydecide by majority vote (one versus two, two versus three, and so on), howmany cats will they get?

A)none
B)one
C)two
D)three
E)the answer cannot be determined from the information given

Question 14

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

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

Question 15

Many eligible voters do not vote, and many who do vote don't read thebiographies of candidates before they vote.These are examples of

A)the median­voter model
B)representative government
C)rational ignorance
D)stupidity
E)laziness

Question 16

In a direct, majority­rule vote,

A)all voters get what they want
B)a majority of voters get exactly what they want
C)only the median voter is completely satisfied
D)a minority of voters are dissatisfied
E)only the median voter is dissatisfied

Question 17

A good that is rival but nonexclusive is called

A)a private good
B)a public good
C)a quasi­private good
D)an external good
E)an open access good

Question 18

Because information and the time required to acquire and digest it arescarce,

A)consumers concentrate on private choices rather than on public choices
B)consumers concentrate on public choices rather than on private choices
C)it is irrational for consumers to remain ignorant of the costs and benefits of government proposals
D)consumers have greater incentive to gather and act upon information about public choices than to gather
And act upon information about their private choices
E)an individual voter has more incentive to examine the performance records of candidates for public office

Question 19

Why might two presidential candidates appear to have very similar opinionsduring an election year even if they come from different parties?

A)They aim to please special­interest groups.
B)They are logrolling.
C)They try to appeal to the median voter.
D)Republicans and Democrats usually agree on most issues.
E)They don't wish to appear rationally ignorant.

Question 20

Under representative democracy,

A)the median voter's preferences are always satisfied
B)citizens no longer have any influence since they do not vote on each issue
C)representatives may reflect the preferences of the median voter
D)less vote trading will occur than under direct voting
E)vote trading is impossible

Question 21

An example of competing­interest legislation is

A)a quota that limits imports of steel to the United States
B)a subsidy to cigarette producers
C)tax breaks for auto manufacturers
D)a new bridge in Arizona funded by general tax revenues
E)public education subsidies

Question 22

Rationality implies that in order to get what they want, people will spendthe most time and effort

A)making private market decisions
B)getting politically involved
C)investigating political candidates' platforms
D)debating social issues
E)writing to Congress

Question 23

With special­interest legislation,

A)benefits are concentrated but costs are widespread
B)both benefits and costs are concentrated
C)benefits are widespread but costs are concentrated
D)both benefits and costs are widespread
E)there is no predictable relationship between costs and benefits

Question 24

Rational ignorance occurs when

A)voters find the cost of understanding a specific issue is greater than the expected benefit
B)legislation generates large benefits for a few people but imposes costs on many people
C)the preferences of the median voter dominates public choices
D)individuals or firms attempt to obtain favorable treatment from government officials
E)people make public decisions based on emotion rather than a rational analysis

Question 25

Special­interest legislation is legislation where there are both widespreadcosts and benefits.

Question 26

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

A)a zero­sum game
B)a competing­interest situation
C)a special­interest situation
D)a situation without widespread costs and benefits
E)an argument over distribution of a public good

Question 27

Special­interest legislation usually

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 28

The proposed takeover of Tony's Airlines by Plummet Airlines will result inincreased profits for Plummet and increased air fares for consumers.This isan example of

A)widespread distribution of benefits and costs
B)concentrated distribution of costs and benefits
C)concentrated distribution of benefits and widespread distribution of costs
D)concentrated distribution of costs and widespread distribution of benefits
E)logrolling

Question 29

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

A)public­interest legislation
B)competing­interest legislation
C)a positive­sum game
D)special­interest legislation
E)concentrated­costs legislation

Question 30

Special­interest legislation that imposes costs broadly over many taxpayerscan be enacted because

A)taxpayers benefit from this type of legislation
B)taxpayers remain rationally ignorant of the legislation
C)only the wealthy pay these taxes
D)these taxes are actually borne by a minority of taxpayers
E)the Constitution requires special­interest legislation

Question 31

If general tax revenues were used to subsidize production of toothpicks, thegovernment's actions would have

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

Question 32

When the government increases taxes to provide traditional public goods,such as national security, there tends to be

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

Question 33

Competing­interest legislation is characterized by

A)concentrated costs and concentrated benefits
B)concentrated benefits and widespread costs
C)widespread benefits and widespread costs
D)widespread benefits and concentrated costs
E)zero costs

Question 34

Legislation that benefits many individuals at the expense of a few is anatural outcome of representative democracy.

Question 35

Competing­interest legislation is legislation that

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 36

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

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 37

Susie spends more of October thinking about her Halloween costume thanshe spends thinking about a proposed law that will be on the Novemberballot.Which of the following is true?

A)This behavior is rational if she expects a greater benefit from the costume than from any possible effect
Her vote could have on the proposed law.
B)This behavior is rational if she is planning to spend the time from Halloween to Election Day thinking about
The law.
C)This behavior is not rational because the law is more important than the costume.
D)In order for this behavior to be considered rational, it would have to be true that Susie is too ignorant to
Fully understand the law.
E)In order for this behavior to be considered rational, it would have to be true that Susie would not be
Affected by the law.

Question 38

Special­interest legislation is characterized by

A)concentrated costs and concentrated benefits
B)concentrated benefits and widespread costs
C)widespread benefits and widespread costs
D)widespread benefits and concentrated costs
E)zero costs

Question 39

Special­interest groups, such as the pharmaceutical lobby, often get whatthey demand because

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 40

Competing­interest legislation involves

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 41

Consider Exhibit 16­1.Considering government expenditures on surplusmilk but ignoring storage costs, how much do consumers pay per gallon forthe quantity purchased at the support price?

A)$3.00
B)$4.00
C)$5.00
D)$1.00
E)$2.00

Question 42

Dairy price supports result in a redistribution of welfare from consumers todairy farmers.

Question 43

As a result of legislation to establish a floor price for milk, most dairyfarmers will

A)end up earning a normal rate of return in the long run
B)end up earning a zero rate of return in the long run
C)end up earning a negative rate of return in the long run
D)benefit from the increased cost of specialized resources used in dairy farming
E)suffer if they own specialized resources at the time the legislation is passed

Question 44

Refer to Exhibit 16­2.How much of a surplus of wool does the $6 pricesupport generate?

A)100 million pounds
B)60 million pounds
C)150 million pounds
D)90 million pounds
E)$500 million

Question 45

Taxpayers and consumers end up paying for agricultural price supports.

Question 46

Consider Exhibit 16­1.Triangle abc represents the consumer surplus intheface of the price support.

Question 47

) Consider Exhibit 16­1.At the support price, how much of a surplus iscreated?

A)25 gallons
B)75 gallons
C)100 gallons
D)150 gallons
E)unknown from the information given

Question 48

It is not likely that the costly special­interest farm price supports will bereplaced by more efficient direct transfer payments because

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 49

) Refer to Exhibit 16­2.How much more will consumers spend on woolbecause of the $6 price support?

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

Question 50

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

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

Question 51

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

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

Question 52

Agricultural subsidies in the United States are paid for by

A)consumers of the product
B)taxpayers and consumers
C)other industries
D)special taxes
E)import tariffs