Economics (McConnell), AP* Edition, 20th Edition

Chapter 5: Government's Role and Government Failure

Quiz

1
Government's right to coerce economic activity can be beneficial to society in which of the following circumstances?
A)The competitive market is too efficient
B)The competitive market under-provides or over-provides the good
C)The competitive market is too competitive
D)The competitive market relies on the pricing mechanism
2
Democratic governments face a number of challenges in directing and supervising government actions. Which of the following is NOT a primary challenge?
A)The government's massive size and scope
B)Information aggregation issues from bottom to top
C)Determining the appropriate prices for a majority of private goods and services
D)The need for bureaucracy to manage a large number of employees
3
The alleged inefficiency of public bureaucracies arises primarily because:
A)the private market provides too much output as a result of bureaucratic regulation
B)special interest groups work to assure the passage of projects whose benefits exceed their costs
C)public sector workers have less training than their private sector counterparts
D)competitive pressures of the market are largely absent
4
Your job as a government employee is to assess the efficiency of a current government program. Which of the following criteria should you use in guiding your decision?
A)If the program is a large percentage of government spending then it should be eliminated.
B)If the program is a small percentage of government spending then it should be expanded.
C)If marginal benefit of the current program is less than the marginal cost, then the program should be reduced.
D)If marginal benefit of the current program is less than its marginal cost, then the program should be expanded.
5
In a corporation, one primary principal–agent relationship is exemplified by:
A)owner–stockholder
B)stockholder–manager
C)hourly worker–salaried employee
D)bond holder–stockholder
6
According to public choice theorists, which of the following circumstances will most likely lead to approval of a given public project?
A)Immediate costs and benefits
B)Delayed costs and benefits
C)Immediate benefits and delayed costs
D)Delayed benefits and immediate costs
7
Political office holders must typically take stands on and make decisions regarding hundreds of different issues, but voters typically vote for one of only two candidates. This problem reflects:
A)the market paradox
B)adverse selection
C)limited and bundled choices
D)pork-barrel politics
8
The U.S. social security system's projected cost (payouts to future and current retirees) exceeds the amount of projected tax revenue required to fund the system (the current and future payroll tax revenue). This is known as:
A)the special interest effect
B)an earmark
C)logrolling
D)an unfunded liability
9
Smaller groups can achieve political victories against larger groups because larger groups are more difficult and more expensive to organize. This is known as:
A)the collective action problem
B)the irrational democracy problem
C)the political earmarking problem
D)the government contamination problem
10
Assume a government agency is subject to regulatory capture. Which of the following problems below is most likely to arise in this industry?
A)Regulation results in less tax revenue
B)Regulation is in the best interest of the industry rather than the consumer
C)Regulation is in the best interest of the consumer rather than the industry
D)Regulation results in excessive government control
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