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| 1 | |
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 voting paradox. |
| | B) | adverse selection. |
| | C) | limited and bundled choices. |
| | D) | pork-barrel politics. |
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| 2 | |
The city council composed of six people is considering three different park expansion proposals. Two council members prefer a bigger park to any smaller park; two others prefer a smaller park to anything bigger. The final two prefer a moderate-size park to either extreme. The final outcome of the vote will: |
| | A) | depend on which pair of alternatives is voted on first. |
| | B) | be the largest park. |
| | C) | be the smallest park. |
| | D) | be the moderate size park. |
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| 3 | |
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 |
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| 4 | |
As the election nears, the positions of the major presidential candidates tend to converge. This is an implication of: |
| | A) | adverse selection. |
| | B) | the median voter model. |
| | C) | political logrolling. |
| | D) | government failure. |
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| 5 | |
Which of the following would be an example of an attempt to reduce the adverse selection problem? |
| | A) | An employer requires all employees to participate in its company-subsidized health insurance plan |
| | B) | The government subsidizes the use of recycled inputs |
| | C) | The government imposes a tax on tailpipe emissions for automobiles |
| | D) | An employer monitors her workers to ensure they are not shirking |
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| 6 | |
The alleged inefficiency of public bureaucracies arises primarily because: |
| | A) | the voting paradox leads to too little public output. |
| | B) | special interests work to assure the passage of projects whose costs exceed their benefits. |
| | C) | public sector workers have less training than their private sector counterparts. |
| | D) | competitive pressures of the market are largely absent. |
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| 7 | |
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. |
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| 8 | |
Firms will likely provide the economically efficient level of workplace safety if: |
| | A) | monopoly profits provide sufficient resources to cover the cost. |
| | B) | workers are constrained from readily changing jobs. |
| | C) | wages are inflexible. |
| | D) | markets are competitive and workers are informed of safety risks. |
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| 9 | |
Which of the following best exemplifies the moral hazard problem? |
| | A) | Kevin, who knows his new car is a lemon, attempts to sell it to an unsuspecting buyer |
| | B) | Given the choice of better family medical coverage or increased paid time away in the company's benefits program, Kelsey selects the former |
| | C) | After buying the extended coverage on her rental car agreement, Melissa drives more recklessly than she would in her own car |
| | D) | David watches his favorite shows on public television, but never contributes to their pledge drives |
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| 10 | |
Suppose the only three members of society will receive marginal benefits from a proposed public project equal to $300, $500, and $800, respectively. However, each must pay taxes of $400 to pay for the total cost. In the absence of vote trading, a majority rule vote will: |
| | A) | pass this project and resources will be allocated efficiently. |
| | B) | pass this project and resources will be overallocated to the project. |
| | C) | defeat this project and resources will be allocated efficiently. |
| | D) | defeat this project and resources will be underallocated to the project. |
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