Question 1

Weak government enforcement of contracts and laws tends to:

Accepted Answer

A)   increase economic efficiency by minimizing government interference.
B)   stimulate innovation and investment.
C)   discourage economic activity by encouraging private-sector coercion such as blackmail and extortion.
D)   not affect economic activity,as incentives for theft and deception are low.E) A) and B)
F) C) and D)

Question 2

Monetary policy attempts to change the level of spending by altering interest rates.

Accepted Answer

A) True 
 B)False

Question 3

(Consider This) From an economist's perspective,when is government too big?

Accepted Answer

A)   Government is always too big.
B)   When government activity exceeds 10 percent of gross domestic product.
C)   When the marginal costs from additional government spending exceed marginal benefits.
D)   When the marginal benefits from additional government spending exceed marginal costs.E) C) and D)
F) None of the above

Question 4

Chronic budget deficits can be attributed to:

Accepted Answer

A)   unfunded liabilities.
B)   voters wanting government programs but not wanting to pay taxes.
C)   inappropriate monetary policy.
D)   state budget laws.E) A) and D)
F) A) and C)

Question 5

Because of the force of law and bureaucratic structure,government accountability is less of a problem than in the private sector.

Accepted Answer

A) True 
 B)False

Question 6

How does government's power to coerce behavior tend to reduce private-sector risk?

Accepted Answer

A)   By enforcing contracts and discouraging illegal behavior that threatens private property.
B)   By guaranteeing that the government will financially cover any losses by private-sector firms.
C)   By strictly regulating the allocation of most property resources in the economy.
D)   The coercive power of government only increases private-sector risk.E) A) and B)
F) B) and D)

Question 7

When a nation is in a debt crisis,the government's level of debt is so high that:

Accepted Answer

A)   monetary policy is ineffective.
B)   the government is unable to find willing lenders so it can continue borrowing.
C)   it can only be solved with a fiscal stimulus of lower taxes and more government spending.
D)   other countries will be unwilling to buy goods and services from the nation.E) A) and C)
F) B) and C)

Question 8

Majority voting assures that government will provide a public good if it yields total benefits in excess of total costs.

Accepted Answer

A) True 
 B)False

Question 9

The principle that under some circumstances majority voting fails to make consistent choices reflecting the community's underlying preference is best demonstrated by the:

Accepted Answer

A)   paradox of voting.
B)   concept of logrolling.
C)   median-voter model.
D)   Coase theorem.E) A) and B)
F) All of the above

Question 10

The government's ability to force people to do things can increase economic efficiency.

Accepted Answer

A) True 
 B)False

Question 11

The trading of votes by elected officials to secure favorable outcomes is called:

Accepted Answer

A)   splitting the difference.
B)   social engineering.
C)   logrolling.
D)   grandstanding.E) C) and D)
F) All of the above

Question 12

(Consider This) Smaller groups are sometimes able to achieve political victories against larger groups.This is referred to as the:

Accepted Answer

A)   moral hazard problem.
B)   featherbedding problem.
C)   collective action problem.
D)   pork barrel problem.E) B) and D)
F) A) and B)

Question 13

(Consider This) From an economist's perspective:

Accepted Answer

A)   small government is better than big government.
B)   big government is better than small government.
C)   regardless of size,government is incapable of achieving allocative or productive efficiency.
D)   the size of government doesn't matter,as long as spending occurs up to where MB = MC.E) B) and D)
F) B) and C)

Question 14

Government's unfunded liabilities:

Accepted Answer

A)   result from the political bias toward immediate benefits and deferred costs.
B)   result in more efficient policies in an attempt to satisfy these liabilities.
C)   are caused primarily by market failures.
D)   only occur in democratically elected governments.E) None of the above
F) All of the above

Question 15

An economic analysis of the relationship between proposed legislation affecting major employers in each state and the voting patterns of senators and representatives in Congress on that legislation would fit within the subcategory of economics called:

Accepted Answer

A)   the economics of fiscal policy.
B)   public choice theory.
C)   behavioral economics.
D)   monetarism.E) B) and D)
F) C) and D)

Question 16

The pursuit through government of a transfer of wealth at society's expense is called "rent seeking."

Accepted Answer

A) True 
 B)False

Question 17

Government loan guarantees tend to socialize gains and privatize losses.

Accepted Answer

A) True 
 B)False

Question 18

What is the main problem with government guarantees that socialize losses and privatize gains?

Accepted Answer

A)   They encourage overly risky investments by insulating private investors from any losses.
B)   The investments that do occur never generate production of goods underproduced by the private sector.
C)   They discourage private investment in worthwhile projects.
D)   They tend to benefit foreign companies at the expense of domestic firms.E) None of the above
F) C) and D)

Question 19

Public choice theory focuses on the economics of:

Accepted Answer

A)   fiscal and monetary policy.
B)   the behavior of business firms.
C)   antitrust and regulatory policy.
D)   government decision making,politics,and elections.E) C) and D)
F) A) and B)

Question 20

Government guarantees that socialize losses and privatize gains tend to encourage risky and imprudent investment.

Accepted Answer

A) True 
 B)False

Exam 5: Governments Role and Government Failure

Government's unfunded liabilities:

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An economic analysis of the relationship between proposed legislation affecting major employers in each state and the voting patterns of senators and representatives in Congress on that legislation would fit within the subcategory of economics called:

Correct AnswerverifiedShow Answer

What is the main problem with government guarantees that socialize losses and privatize gains?

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How does government's power to coerce behavior tend to reduce private-sector risk?

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Monetary policy attempts to change the level of spending by altering interest rates.

Correct AnswerverifiedShow Answer

Government loan guarantees tend to socialize gains and privatize losses.

Correct AnswerverifiedShow Answer

(Consider This) From an economist's perspective:

Correct AnswerverifiedShow Answer

When a nation is in a debt crisis,the government's level of debt is so high that:

Correct AnswerverifiedShow Answer

Government guarantees that socialize losses and privatize gains tend to encourage risky and imprudent investment.

Correct AnswerverifiedShow Answer

Weak government enforcement of contracts and laws tends to:

Correct AnswerverifiedShow Answer

The principle that under some circumstances majority voting fails to make consistent choices reflecting the community's underlying preference is best demonstrated by the:

Correct AnswerverifiedShow Answer

Majority voting assures that government will provide a public good if it yields total benefits in excess of total costs.

Correct AnswerverifiedShow Answer

Because of the force of law and bureaucratic structure,government accountability is less of a problem than in the private sector.

Correct AnswerverifiedShow Answer

(Consider This) From an economist's perspective,when is government too big?

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(Consider This) Smaller groups are sometimes able to achieve political victories against larger groups.This is referred to as the:

Correct AnswerverifiedShow Answer

Public choice theory focuses on the economics of:

Correct AnswerverifiedShow Answer

The trading of votes by elected officials to secure favorable outcomes is called:

Correct AnswerverifiedShow Answer

Chronic budget deficits can be attributed to:

Correct AnswerverifiedShow Answer

The pursuit through government of a transfer of wealth at society's expense is called "rent seeking."

Correct AnswerverifiedShow Answer

The government's ability to force people to do things can increase economic efficiency.

Correct AnswerverifiedShow Answer

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