Deck 18: Government

Question 1

Which of the following goods is nondiminishable?

A)City street
B)A free concert
C)The use of a lighthouse
D)National parks

Answer 1

C

Question 2

John Doe participates in a welfare program which pays him $6,000 dollars. He can work but he loses 50 cents of the welfare check for every dollar he earns over $5,000, if John wants to live on more than $11,000 per year and he can find a minimum wage job for $8.00/hour, what is his effective wage that he would consider when deciding whether or not to work?

A)$4/hr.
B)$8/hr.
C)$17,000 divided by 2000 hours in a year = $8.5.
D)$0/hr.

Answer 2

A

Question 3

Say a public good is provided to two consumers: John and Jill. John's willingness to pay for the good is P = 10 - Q, and Jill's is P = 20 - 2Q. The marginal cost to provide the good are 2Q. Assume the government must pay for providing this good by taxing Jill and John equally to raise the necessary revenue. If the total costs of providing the public good are $25, then

A)both Jill and John would be willing to vote to approve of providing the good.
B)only Jill would be willing to vote to approve of providing the good.
C)only John would be willing to vote to approve of providing the good.
D)neither Jill nor John would be willing to vote to approve of providing the good.

Answer 3

A

Question 4

According to the text, one of the disadvantages of our current welfare system is that

A)it provides incentives for the poor not to work.
B)it gives the poor too much money.
C)it works in the opposite direction of Rawl's view of justice.
D)it is biased in favor of rich people.

Question 5

Attempts to lobby the government for private gain are referred to by the text as

A)corruption.
B)graft.
C)rent-seeking.
D)collective agreements.

Question 6

Which of the following is the best example of a nonexcludable good?

A)Television broadcast over the air
B)Cable TV
C)National parks
D)Beer

Question 7

Congress has not been able to vote with clarity on a war in country X. It seems like there are three options that they consider. (1) They could negotiate the best agreement they can get and leave the area. (2) They could continue the air campaign. (3) They could continue the air campaign and send ground troops into the area. In terms of expense the options get increasingly expensive. If a representative from Illinois has a preference order of (1), (3), (2), we can say that

A)the median voter rule will not apply.
B)the representative has a single peaked voting preference.
C)the representative does not have a voting preference.
D)it cannot be answered with the information given.

Question 8

If voters are rational, they are more likely to vote

A)in large national elections.
B)if the issues are complex.
C)in small local elections.
D)when they are employed.

Question 9

A negative income tax works by

A)taxing people until they have a negative income.
B)giving people below a certain income level a lump sum and then taxing further income.
C)giving money to everyone in the U.S.
D)not taxing people who make negative income.

Question 10

John Doe participates in a welfare program which pays him $6,000 dollars. He can work but he loses 50 cents of the welfare check for every dollar he earns over $5,000. How much wage income will he have to earn to escape poverty if the poverty line for him is $17,000 per year?

A)$11,000
B)$17,000
C)$14,000
D)$12,000

Question 11

Say a public good is provided to two consumers: John and Jill. John's willingness to pay for the good is P = 10 - Q, and Jill's is P = 20 - 2Q. The marginal cost to provide the good are 2Q. Assume the government must pay for providing this good by taxing Jill and John equally to raise the necessary revenue. When the optimal quantity of this good is provided, Jill's willingness to pay for the good is

A)4.
B)12.
C)48.
D)2.

Question 12

Suppose Congress consists of 5 people who want to spend X% on national defense. Let their preferences be as follows: 1, 3, 20, 21, 25. What amount will most likely be spent?

A)14
B)20
C)3
D)21

Question 13

According to Rawls, individuals placed behind a veil of ignorance would

A)choose a more egalitarian society.
B)choose a less egalitarian society.
C)move from a democracy to an authoritarian form of government.
D)move from an authoritarian to a democratic form of government.

Question 14

The best example of a public good is

A)education.
B)national defense.
C)electricity.
D)automobiles.

Question 15

Which is not a good method of providing public type goods by private means?

A)Funding by donation
B)Private contracts
C)Clubs
D)Free markets with competing entrepreneurs

Question 16

The optimal output of a public good occurs where

A)the total cost of the good equals the cumulated benefits of all consumers.
B)the sum of the marginal benefit of each consumer at a given output equals the marginal cost of the good.
C)the marginal benefit of the consumer who values the good most should equal the marginal cost of the good.
D)the horizontal sum of the consumer benefits of the good should equal the marginal cost of producing the good.

Question 17

Charles Tiebout favors

A)government provision of all public goods.
B)user taxes on public goods.
C)people moving to local communities with others of similar tastes.
D)people of different tastes living in the same place.

Question 18

A public good is described, in part, as a good

A)that is essential to life.
B)that may be depleted if demand is heavy.
C)that has a marginal cost at or near zero.
D)which has all of these characteristics.

Question 19

Say 6 homogenous consumers have individual willingness to pay P = 20 - 4Q. If the marginal cost of providing Q is 6Q, the optimal amount of Q is

A)2.
B)4.
C)6.
D)0.

Question 20

A new fad dramatically increases the demand for donut-holes, the leftovers produced from donut production. According to economic theory, one would expect

A)the price of donuts to rise.
B)the price of donuts to fall.
C)the price of donuts to stay the same.
D)that one cannot tell.

Question 21

According to the text, one of the ways to solve the public good problem is

A)to allow private firms in free markets to provide the good for a fee.
B)for the government to provide the good for free by using a compulsory tax.
C)not to provide the good at all.
D)finding ways of forcing people to pay for the good.

Question 22

The market demand curve for a public good is found by

A)horizontally summing the individual demand curves.
B)vertically summing the individual demand curves.
C)horizontally summing the firm's demand curves.
D)vertically summing the firm's demand curves.

Question 23

Most people will eliminate the F's and any D's that they can before reaching the 2.5 constraint, make an application to the world's income distribution using John Rawl's terms "veil of ignorance," "economic justice," and "poorest of the poor."

Question 24

Each year around July 4 the town of Flagston has a controversy over how big a fireworks display they should have on the holiday. The three citizens have the demand functions for fireworks that are shown here. The cost per firecracker is $18. Elmer has the demand function P = 20 - Q. Ethel's demand equation is P = 12 - .6Q, and Edith has the demand P = 8 - .4Q. If the citizens got together for a city referendum on the issue, and each voted for an amount of fireworks, knowing that each would pay their share (1/3) of the cost, how would the vote come out in a majority rule situation? Why is this not the socially efficient amount?

Question 25

Each year around July 4 the town of Flagston has a controversy over how big a fireworks display they should have on the holiday. The three citizens have the demand functions for fireworks that are shown here. The cost per firecracker is $18. Elmer has the demand function P = 20 - Q. Ethel's demand equation is P = 12 - .6Q, and Edith has the demand P = 8 - .4Q.
Draw a graph of the individual demand equations and the total community demand for fireworks. Sketch in the marginal cost function as well.

Question 26

When the nonexclusion aspect of a public good does not hold, but the nondiminishability component is present, how might the free rider problem be overcome and social efficiency achieved? Give examples from common social practice to illustrate your answer.

Question 27

The grade distribution in this class will fit a bell curve as shown below. You have no knowledge of what your ability level is relative to the other students and you have no idea how hard the test will be for you. You could fall anywhere on the distribution as far as you know at this time. Now your professor makes you an offer. You have the opportunity to alter the grading brackets to make them anything you want. The only constraint is that the overall class GPA must not change from the 2.0 that is the present distribution. Sketch on the graph below your optimal distribution given these constraints and explain why you made any changes.

Question 28

The following is an example of a pure public good

A)Yellowstone National Park.
B)clean air.
C)national defense.
D)public education.

Question 29

According to the negative income tax, the breakeven income level for a program whose tax credit is $3,000 and whose tax rate is 30 percent would be

A)$10,000.
B)$6,000.
C)$4,500.
D)$9,000.

Question 30

Which statement is true?

A)For efficiency to be achieved in the production of a public good everyone should be taxed an amount equal to the value they place on the last unit of the good provided times the quantity of public good provided.
B)The price theory we studied always considers efficient output to be the place where marginal cost equals marginal benefit, even if the good is a pure public good.
C)A pure private good can never be jointly consumed.
D)All of these are true.

Question 31

The marginal benefit reduction rate is the fraction

A)by which government benefits are reduced from some beneficiaries.
B)of income that is given to every person under the negative income tax credit program.
C)by which government reduces the income of every person in order to support government programs.
D)taken from business in order to pay for unemployment insurance programs.

Question 32

Each year around July 4 the town of Flagston has a controversy over how big a fireworks display they should have on the holiday. The three citizens have the demand functions for fireworks that are shown here. The cost per firecracker is $18. Elmer has the demand function P = 20 - Q. Ethel's demand equation is P = 12 - .6Q, and Edith has the demand P = 8 - .4Q. If the fireworks show is left to the private marketplace, what is likely to happen?

Question 33

If you were able to increase the overall class grade point average above the 2.0 to a level of 2.5, what would you do to the distribution?

Question 34

Each year around July 4 the town of Flagston has a controversy over how big a fireworks display they should have on the holiday. The three citizens have the demand functions for fireworks that are shown here. The cost per firecracker is $18. Elmer has the demand function P = 20 - Q. Ethel's demand equation is P = 12 - .6Q, and Edith has the demand P = 8 - .4Q.
What is the total community demand equation for the fireworks display?

Question 35

Each year around July 4 the town of Flagston has a controversy over how big a fireworks display they should have on the holiday. The three citizens have the demand functions for fireworks that are shown here. The cost per firecracker is $18. Elmer has the demand function P = 20 - Q. Ethel's demand equation is P = 12 - .6Q, and Edith has the demand P = 8 - .4Q. If the city father (Elmer), true statesman that he is, tried to work toward efficiency by structuring a user benefit tax on the July 4 display, and if he were able to assess accurately the benefits received, how would he tax the citizens?

Question 36

The sale of by-products of public goods can sometimes help to finance those goods. Which of the following would not be a by-product of a public good?

A)Selling fishing license to fish off of a public bridge.
B)Charging a fee for GPS signals that come from a defense department satellite.
C)Adding software to a computer you are selling in hopes of getting more sales.
D)Having police contract with a newspaper to deliver papers on the morning patrols.

Question 37

Each year around July 4 the town of Flagston has a controversy over how big a fireworks display they should have on the holiday. The three citizens have the demand functions for fireworks that are shown here. The cost per firecracker is $18. Elmer has the demand function P = 20 - Q. Ethel's demand equation is P = 12 - .6Q, and Edith has the demand P = 8 - .4Q.
What is the socially optimal output level?

Question 38

Handicap access to buildings is becoming very expensive for many operators of public buildings. Are the laws mandating such alterations based on social efficiency or some other criteria?

Question 39

Give an example of a case where cyclical voting can lead to differing outcomes depending on how the voting sequence is structured. Use a case where three people (Manny, Mo and Jack) are voting on health care and the options are 1) cover everyone who is now uncovered 2) cover half the people now uncovered 3) cover none who are presently uncovered. Show each one's preference rankings and show how the voting can result in any one of the alternatives. A chart and three groups of voting pairings should answer this well.

Question 40

The median voter is a voter

A)who rationally calculates whether to vote in an election.
B)whose preference represents the middle point of all voters' preferences.
C)who usually never votes.
D)who usually votes based on principle rather than logic.

Question 41

Give an example of a case where cyclical voting can lead to differing outcomes depending on how the voting sequence is structured. Use a case where three people (Manny, Mo and Jack) are voting on health care and the options are 1) cover everyone who is now uncovered 2) cover half the people now uncovered 3) cover none who are presently uncovered. Explain why the cyclical voting occurs and what that means for the political process of public decisions.