Question 1

Sugar quotas:

Accepted Answer

Sugar quotas in the United States are designed to limit the amount of sugar that can be imported, thereby keeping domestic sugar prices higher than they would be in a free market. This policy benefits domestic sugar producers, such as those in Florida, by providing them with millions of dollars in benefits through higher prices for their products. However, this comes at a cost to consumers, including the typical family, who end up paying more for sugar and sugar-containing products, estimated at about $6 per year.

Question 2

Which of the following statements is NOT true about the sugarquota imposed by the U.S. government?

Accepted Answer

The statement "The quota is imposed to protect both sugar consumers and producers" is not true. The sugar quota is imposed to protect domestic sugar producers from foreign competition, and as a result, it harms domestic sugar consumers by making them pay higher prices.

Question 3

When government makes it possible to externalize the cost of agood:

Accepted Answer

When a government allows the externalization of the cost of a good, it means that some of the costs associated with producing or consuming the good are not borne by the producer or consumer, but by society at large. This often leads to overproduction or overconsumption of the good, as the market price does not reflect the true cost to society, resulting in too much of the good being produced or consumed.

Question 4

Why are special interest groups so powerful?

Accepted Answer

Special interest groups are powerful because voters often lack detailed knowledge about the negative impacts of laws favoring these groups, and because these groups have a strong financial incentive to push for legislation that benefits them, even if the cost to each taxpayer is relatively small.

Question 5

Rational ignorance:

Accepted Answer

Rational ignorance refers to the decision of individuals to remain ignorant on certain issues because the cost of obtaining information outweighs the expected benefit. This can lead to difficulties for voters in making informed decisions regarding government intervention in the economy (A), as well as causing them to give credit or blame to politicians for things not under their control (B). Special interest groups may also take advantage of the uninformed (C). Therefore, all of these possibilities are correct (D).

Question 6

The costs of many government projects (such as bridges,roads, and museums) create:

Accepted Answer

The construction of government projects creates external costs because taxpayers around the country (including those who may not directly use or benefit from the project) are required to pay for the construction through taxes.

Question 7

The key formula for political success behind the sugar quotais:

Accepted Answer

The key formula for political success behind the sugar quota is diffused costs and concentrated benefits. This means that the costs of the quota are spread out among many consumers and industries, while the benefits are concentrated among a smaller group of sugar producers. This allows the sugar producers to lobby for and protect the quota, while the costs to consumers are not significant enough to outweigh the benefits to the producers.

Question 8

Why is rational ignorance important from an economicstandpoint?
I. Voters might not make informed choices
II.Voters will make decisions based on incorrect orincomplete information
III. Special interest groups may control economic outcomes ifthey are the only ones who are not rationally ignorant.

Accepted Answer

Rational ignorance is important from an economic standpoint because it explains why voters might not make informed choices (due to the cost of acquiring information being higher than the perceived benefit), why they might make decisions based on incorrect or incomplete information (as a result of their rational ignorance), and how special interest groups may end up controlling economic outcomes if they are the ones who invest in being informed, as the general public remains rationally ignorant.

Question 9

Which of the following provides the most reasonableexplanation for why agricultural interests lobby for higherfarm subsidies and price supports?

Accepted Answer

Agricultural interests lobby for higher farm subsidies and price supports because they seek a redistribution of income favoring themselves. These programs provide financial assistance to farmers, which enables them to increase their profits and maintain their livelihoods. Thus, by lobbying for these programs, agricultural interests are advocating for their own economic self-interest.

Question 10

The political power of farmers ________ as the share offarmers in the population decreased, because the benefits fromfarm subsidies became ________ concentrated.

Accepted Answer

The answer of The political power of farmers ________ as...

Question 11

Which of the following best explains why special interestgroups maintain so much power in the U.S. political process?

Accepted Answer

Special interest groups have a strong incentive to lobby for laws that benefit them financially, while individual voters may not find it worthwhile to oppose them due to the relatively small impact on their personal lives.

Question 12

Which of the following explains why the sugar quota is awinning policy for politicians?

Accepted Answer

The sugar quota is a winning policy for politicians because the people who are harmed by it (consumers paying higher prices and industries using sugar as an input) are numerous and each is affected only slightly. This dispersed cost makes them rationally ignorant, as the effort to become informed and oppose the policy outweighs the personal benefit of doing so.

Question 13

Which of the following programs are the two largest sources ofthe U.S. government budget?

Accepted Answer

Defense and Social Security are the two largest sources of the U.S. government budget. In 2019, defense spending accounted for 15% of the federal budget, while Social Security accounted for 24%.

Question 14

Which of the following explains why the sugar quota is awinning policy for politicians?

Accepted Answer

The sugar quota benefits a specific group of people, primarily sugar producers, who have a strong incentive to support the policy. In contrast, the average consumer may not be aware of the specific details of the policy or its impact on prices, and hence are rationally ignorant. Therefore, politicians supporting the sugar quota are likely to gain the support of the powerful sugar lobby and to face minimal opposition from the general public.

Question 15

Policy A adversely affects 50 million people at a cost of $1 perperson. But Policy A also benefits 1,000 people at $30,000 perperson. Which of the following statements is true?

Accepted Answer

Policy A is likely to be supported by politicians because it provides substantial benefits to a small group, who may be more politically active or influential, despite the broader societal costs. This dynamic is common in politics where concentrated benefits and dispersed costs can lead to the adoption of policies that are not beneficial on the aggregate.

Question 16

In the public sector, politicians:

Accepted Answer

Politicians often act in the narrow self-interest of their constituents and contributors to secure their positions and remain in office, reflecting a more pragmatic view of political behavior.

Question 17

Special interest groups have a large incentive to be ________about legislation that benefits them directly, whereas voterstend to be ________ regarding these issues.

Accepted Answer

Special interest groups have a significant incentive to be rational and well-informed about legislation that benefits them directly because it directly affects their interests. On the other hand, voters tend to be rationally ignorant regarding these issues because their individual vote has very little impact on the final outcome. Therefore, voters often do not invest a significant amount of time or effort to become informed on specific legislation.

Question 18

The diffusion of costs and concentration of benefits:
I. leads to rational ignorance on the part of voters
II.is the formula to which the sugar quota owes its existence
III. is a formula for reelection to political office.

Accepted Answer

The diffusion of costs and concentration of benefits can lead to rational ignorance among voters because the costs are spread widely and are often small per individual, making it not worth their time to become informed or to oppose such policies. This principle also explains the existence of policies like the sugar quota, where benefits are concentrated among a small group of producers who have a strong incentive to lobby for its continuation, while the costs are diffused among all consumers. Additionally, this dynamic can be a formula for reelection to political office, as politicians can secure the support of well-organized groups that benefit significantly from certain policies, while the dispersed costs to the general public are less likely to provoke opposition.

Question 19

The Fanjuls are:

Accepted Answer

The Fanjuls are known as sugar barons who have a significant influence on politics related to sugar quotas, and they have donated considerable amounts of money to politicians.

Question 20

Which of the following public policies does NOT fit thediffused costs and concentrated benefits story?

Accepted Answer

The diffused costs and concentrated benefits model typically describes situations where a small group benefits significantly at the expense of a larger group that incurs small, individual costs. Minimum wage policies do not fit this model because they aim to benefit a broad group of low-wage workers, rather than providing concentrated benefits to a small group.

Quiz 19: International Trade

Sugar quotas:

Which of the following statements is NOT true about the sugarquota imposed by the U.S. government?

When government makes it possible to externalize the cost of agood:

Why are special interest groups so powerful?

Rational ignorance:

The costs of many government projects (such as bridges,roads, and museums) create:

The key formula for political success behind the sugar quotais:

Why is rational ignorance important from an economicstandpoint? I. Voters might not make informed choices II.Voters will make decisions based on incorrect orincomplete information III. Special interest groups may control economic outcomes ifthey are the only ones who are not rationally ignorant.

Which of the following provides the most reasonableexplanation for why agricultural interests lobby for higherfarm subsidies and price supports?

The political power of farmers as the share offarmers in the population decreased, because the benefits fromfarm subsidies became concentrated.

Which of the following best explains why special interestgroups maintain so much power in the U.S. political process?

Which of the following explains why the sugar quota is awinning policy for politicians?

Which of the following programs are the two largest sources ofthe U.S. government budget?

Which of the following explains why the sugar quota is awinning policy for politicians?

Policy A adversely affects 50 million people at a cost of $1 perperson. But Policy A also benefits 1,000 people at $30,000 perperson. Which of the following statements is true?

In the public sector, politicians:

Special interest groups have a large incentive to be about legislation that benefits them directly, whereas voterstend to be regarding these issues.

The diffusion of costs and concentration of benefits: I. leads to rational ignorance on the part of voters II.is the formula to which the sugar quota owes its existence III. is a formula for reelection to political office.

The Fanjuls are:

Which of the following public policies does NOT fit thediffused costs and concentrated benefits story?