Question 1

Logrolling occurs when

Accepted Answer

Logrolling refers to the practice where congressional representatives trade votes to get mutual benefits, often agreeing to support each other's bills.

Question 2

In the private sector where firms compete for profit, if a firm is inefficient, ________. In the public sector, if a government bureau is producing a necessary service and is doing so inefficiently, ________.

Accepted Answer

In the private sector, inefficient firms are often outcompeted and may go out of business due to market forces. In the public sector, inefficiency does not typically result in being driven out of business because public entities do not operate under the same market pressures and are often monopolies in their service provision.

Question 3

The voting paradox demonstrates how majority-rule voting can lead to contradictory and inconsistent results.

Accepted Answer

The answer of The voting paradox demonstrates how majority-rule voting...

Question 4

The voting paradox is an example of the

Accepted Answer

The voting paradox, also related to Arrow's impossibility theorem, demonstrates the difficulty of creating a fair voting system that accurately reflects the preferences of all voters. Arrow's theorem suggests that no voting system can convert the ranked preferences of individuals into a community-wide ranking while also meeting a specific set of fairness criteria.

Question 5

The impossibility theorem is the idea that

Accepted Answer

The impossibility theorem, also known as Arrow's impossibility theorem, states that no voting system can convert the ranked preferences of individuals into a community-wide ranking while also meeting a specific set of criteria (non-dictatorship, unrestricted domain, non-imposition, and independence of irrelevant alternatives), thus highlighting the challenges in creating a voting scheme that respects individual preferences and yields consistent, non-arbitrary outcomes.

Question 6

The most common social decision-making mechanism is majority rule.

Accepted Answer

Majority rule is widely used in democratic systems and various group decision-making processes because it is a simple and efficient method for resolving differences and reaching a consensus among members.

Question 7

Logrolling is a questionable practice that always leads to decidedly inefficient results.

Accepted Answer

Logrolling refers to the practice of exchanging favors, especially in politics by reciprocal voting for each other's proposed legislation. While it can lead to inefficiencies and is often criticized, it does not always lead to inefficient results. In some cases, it can facilitate agreements and legislation that might not otherwise pass, potentially leading to beneficial outcomes.

Question 8

The public choice field in economics views public officials as having a significant capacity to make inefficient choices and to produce bureaucratic waste.

Accepted Answer

Public choice theory in economics posits that public officials, like individuals in the private sector, are motivated by personal interests, which can lead to inefficient choices and bureaucratic waste as they may prioritize personal gain or political objectives over public welfare.

Question 9

If the budget allocation for a government agency depends on the last period's spending alone, agency heads have a clear incentive to

Accepted Answer

When budget allocations depend solely on the previous period's spending, agency heads are incentivized to spend more, even inefficiently, to ensure their future budgets are not reduced. This is because underspending might signal that they can operate with less, potentially leading to budget cuts.

Question 10

The efficiency of a government agency's internal structure depends on how incentives facing workers and agency heads are structured.

Accepted Answer

The efficiency of a government agency's internal structure is significantly influenced by the incentives facing workers and agency heads, as these incentives shape behavior, motivation, and ultimately, the effectiveness of the agency in achieving its goals.

Question 11

Social choice involves all of the following except

Accepted Answer

Social choice theory involves deciding what society wants (A), aggregating over individual preferences (B), and understanding the incentives facing politicians and public servants (C). However, it does not guarantee consistently efficient decisions through the use of majority rule voting (D), as majority rule can lead to outcomes that are not Pareto efficient or that violate conditions of fairness or equity.

Question 12

You and two friends are going out to dinner and are going to one of three restaurants: Amigos, Bongo, or Caliente. You prefer Amigos to Bongo and Bongo to Caliente. One of your friends prefers Bongo to Caliente and Caliente to Amigos. You other friend prefers Caliente to Amigos and Amigos to Bongo. The three of you decide to use majority rule voting to decide which restaurant to visit. If you first have a vote between Caliente and Bongo and then between the winner of that vote and Amigos, then ________ will win. However, if you first vote between Caliente and Amigo and then between the winner of that vote and Bongo, then ________ will win.

Accepted Answer

In the first scenario, between Caliente and Bongo, two friends prefer Caliente over Bongo (you prefer Bongo, but your other two friends prefer Caliente). So, Caliente wins the first round. In the second round, between Caliente and Amigos, two friends prefer Amigos over Caliente (you and your other friend prefer Amigos over Caliente). Thus, Amigos wins. In the second scenario, between Caliente and Amigos, two friends prefer Amigos over Caliente (you and your other friend). So, Amigos wins the first round. In the second round, between Amigos and Bongo, two friends prefer Amigos over Bongo (you and your other friend prefer Amigos over Bongo). Thus, Amigos wins again. However, the question seems to have a mistake in its setup or options, as the explanation leads to Amigos winning in both scenarios, not matching any of the provided choices exactly. The correct interpretation based on the given preferences and voting scenarios should lead to Amigos winning in both cases, indicating a potential error in the question or choices.

Question 13

Industries that lobby public officials for favorable treatment, softer regulation, and or antitrust exemption are engaged in rent-seeking.

Accepted Answer

Rent-seeking refers to the practice of individuals or businesses attempting to gain economic advantage without reciprocating any benefits back to society through wealth creation, often through lobbying for favorable treatment, softer regulation, or antitrust exemptions.

Question 14

You and two friends are going to the movies and are going to one of three movies: A, B, or C. You prefer movie A to movie B and movie B to movie C. One of your friends prefers movie B to movie C and movie C to movie A. You other friend prefers movie C to movie A and movie A to movie B. The three of you decide to use majority rule voting to decide which movie you will see. If you first have a vote between movies A and B and then between the winner of that vote and movie C, then movie ________ will win. However, if you first vote between movies A and C and then between the winner of that vote and movie B, then movie ________ will win. This is an example of the ________.

Accepted Answer

A; C; voting paradoxIn the first scenario, where the vote is between movies A and B, you and your other friend who prefers A to B would vote for A, making A win over B. Then, in a vote between A and C, your friend who prefers C to A and the other friend who prefers C to A would vote for C, making C win. Thus, movie C wins in this scenario.In the second scenario, where the vote is first between movies A and C, you and the friend who prefers A to C would vote for A, making A win over C. Then, in a vote between A and B, you would vote for A, but your two friends would vote for B (since one prefers B to A and the other prefers B to C and A to C, implying a preference for B over A when directly compared), making B win. Thus, movie B wins in this scenario.This situation, where the group's preferences can cycle depending on the order of voting, is known as the voting paradox or Condorcet paradox. It illustrates that majority rule voting can lead to inconsistent outcomes when preferences among three or more options are cyclic.

Question 15

________ occurs when congressional representatives trade votes.

Accepted Answer

Logrolling refers to the practice where legislators exchange support or votes on each other's proposed bills or policies.

Question 16

Rent-seeking behavior is limited to those industries that lobby for government help in preserving monopoly powers.

Accepted Answer

Rent-seeking behavior can occur in any industry where entities seek to gain added economic wealth without contributing to productivity, including but not limited to lobbying for favorable regulations, subsidies, or tariffs, not just for preserving monopoly powers.

Question 17

The impossibility theorem, demonstrated by Paul Samuelson, shows that it is impossible to have public officials behave in a manner consistent with the best interests of society.

Accepted Answer

The impossibility theorem, also known as Arrow's impossibility theorem, was demonstrated by Kenneth Arrow, not Paul Samuelson. It states that no rank-order voting system can be designed to reflect the preferences of individuals in a society while also meeting a specific set of fairness criteria.

Question 18

In the presence of market failure, government involvement will lead to efficient outcomes.

Accepted Answer

Market failures can justify government intervention, but such intervention does not guarantee efficient outcomes due to potential government failures, such as misallocation of resources, inefficiencies in public sector operations, or unintended consequences of policies.

Question 19

Public officials, like voters, often have a lack of incentive to become fully informed about legislative issues.

Accepted Answer

Public officials, like voters, may not always have the incentive to become fully informed about legislative issues due to the time, effort, and resources required to thoroughly understand complex topics, alongside political, personal, or strategic reasons that might prioritize other interests.

Question 20

Voting as a mechanism for public choice is associated with a number of problems including

Accepted Answer

All of the options listed are recognized problems associated with voting as a mechanism for public choice. Majority rule voting can indeed lead to contradictory outcomes, logrolling can distort decision-making processes, and voter disengagement can result in poorly informed choices.

Quiz 19: Public Finance: the Economics of Taxation