Question 1

Unlike the market process, in the political market it is possible for some individuals to receive very large benefits from the political process without any significant impact on their tax bills.

Accepted Answer

This is because the political process involves decision-making by elected officials who may allocate resources and benefits in a way that benefits certain groups or individuals, such as through subsidies or tax exemptions, without necessarily increasing the tax burden on those groups or individuals. In contrast, the market process involves voluntary exchanges between buyers and sellers, and any benefits or costs are typically borne by those directly involved in the exchange.

Question 2

Local governments in Canada receive most of their revenue from

Accepted Answer

The answer of Local governments in Canada receive most of...

Question 3

What is the relationship between market failure and government failure?

Accepted Answer

The answer of What is the relationship between market failure...

Question 4

An example of an excise tax in Canada is

Accepted Answer

Excise taxes are taxes levied on specific goods or services, such as cigarettes, gasoline, and alcoholic drinks. In Canada, an example of an excise tax would be the extra tax you pay for alcoholic drinks.

Question 5

The largest source of revenue for the federal government of Canada

Accepted Answer

According to the Government of Canada's 2020-2021 Main Estimates, individual income taxes are projected to yield over $160 billion in revenue for the federal government, making it the largest source of revenue. Tariffs on imported goods, property taxes, and sales taxes are also sources of revenue but generate significantly less income compared to individual income taxes.

Question 6

One important difference between the political process and the market process is that

Accepted Answer

The political process involves government decision-making and regulations that affect everyone in a society and may require mandatory participation. In contrast, the market process involves voluntary actions based on individual choices and preferences, allowing individuals to participate or not. The market process does not impose obligations or force individuals to engage in any particular economic activity.

Question 7

Some economists who use the public choice model to explain the ways government intervenes in the economy believe that regulatory capture results when an agency or commission is given authority over a particular industry or product.Which of the following is the best example of regulatory capture?

Accepted Answer

The firms running taxi services have influenced local governments to restrict the number of taxi licenses in their cities, making it difficult for new competitors to enter the market. This is an example of regulatory capture because the existing firms have used their influence to limit competition and protect their own interests, rather than promoting a competitive market that benefits consumers.

Question 8

The public choice model asserts that the self-interest of policymakers is likely to cause them to take actions that are inconsistent with the preferences of voters, even where those preferences are clear.

Accepted Answer

The public choice model suggests that policymakers may prioritize their own self-interest over the preferences of voters, leading to actions that may be inconsistent with those preferences.

Question 9

When the majority of voters have preferences very different from those of the median voter, then the median voter theorem will lead to accurate predictions of the outcomes of elections.

Accepted Answer

The median voter theorem assumes that voters have single-peaked preferences, meaning that their preferences are arranged along a single issue dimension. If the majority of voters have widely different preferences on multiple issues, then the median voter theorem may not accurately predict election outcomes.

Question 10

Logrolling may result in

Accepted Answer

Logrolling involves trading votes to pass legislation that benefits specific interests, often at the expense of the broader public, leading to outcomes where a small group's interests are prioritized over the majority's.

Question 11

Table 15.2
 $\begin{array}{|l|c|c|c|} 
\hline & \begin{array}{c}
\text { Highway } \
\text { Improvements }
\end{array} & \begin{array}{c}
\text { Employment } \
\text { Insurance Benefits }
\end{array} & \begin{array}{c}
\text { Social } \
\text { Safetynet } \
\text { Reform }
\end{array} \
\hline \text { Bart } & \text { 1st } & \text { 3rd } & \text { 2nd } \
\hline \text { Lisa } & \text { 2nd } & \text { lst } & \text { 3rd } \
\hline \text { Maggie } & \text { 3rd } & \text { 2nd } & \text { 1st } \
\hline
\end{array}$
-Refer to Table 15.2.The table above outlines the rankings of three members of Parliament on three spending alternatives.Assume that Parliament can spend additional revenue on only one of the three spending alternatives and that Bart, Lisa, and Maggie, all members of Parliament, participate in a series of votes in which they are to determine which of the spending alternatives should receive funding.Three votes will be taken: (1)Highway Improvements and Employment Insurance Benefits (2)Highway Improvements and Social Safetynet Reform and (3)Employment Insurance Benefits and Social Safetynet Reform.
Show the results of each vote and determine whether the voting paradox will occur as a result of these votes.

Accepted Answer

The answer of Table 15.2
 \(\begin{array}{|l|c|c|c|} 
\hline & \begin{array}{c}
\text {...

Question 12

Rational ignorance

Accepted Answer

Rational ignorance refers to the idea that individuals will not invest time or resources in acquiring information that will not have a significant impact on their decisions. In the case of rent seeking by special interest groups, individuals may not invest the effort to fully understand the implications of government policies or regulations, which can lead to those groups benefiting at the expense of others.

Question 13

What is logrolling?

Accepted Answer

Logrolling refers to a situation where policymakers vote for a bill they might not necessarily support in exchange for favorable votes from their colleagues on other bills. It is a way of securing support for one's own legislative agenda by trading votes with other legislators. The term comes from the practice of neighbors helping each other roll logs that were too heavy for one person to move alone. Similarly, legislators help each other with votes that are too difficult to pass alone.

Question 14

A situation where a Member of Parliament votes to approve a bill in exchange for favorable votes from other members on other bills is called

Accepted Answer

This situation is called logrolling, which refers to the practice of exchanging favors, such as votes on different bills, among elected officials. It is a form of political bargaining and can lead to the passage of bills with little consideration for their merit or the public interest. Rent seeking refers to the pursuit of private gain through the manipulation of government policies, while regulatory capture refers to the influence of regulated industries on the agencies that are supposed to oversee them. Special interest legislation refers to bills that benefit a particular group or industry at the expense of others.

Question 15

What is the difference between the voting paradox and the Arrow impossibility theorem?

Accepted Answer

The answer of What is the difference between the voting...

Question 16

What is meant by the term "rational ignorance"?

Accepted Answer

Rational ignorance refers to the idea that voters might not have an economic incentive to become fully informed about a pending legislation because the cost of acquiring information through research or attending meetings might exceed the payoff they expect to receive from voting.

Question 17

If voters lack an economic incentive to become informed about pending legislation, then their preferences become a constraint on legislators voting for rent-seeking legislation.

Accepted Answer

This statement is backwards. If voters lack an economic incentive to become informed, it becomes easier for legislators to vote for rent-seeking legislation, as they will not face electoral consequences for doing so. When voters are well-informed, they can use their voices and votes to hold legislators accountable for their actions, providing a disincentive for rent-seeking behavior.

Question 18

What is regulatory capture?

Accepted Answer

Regulatory capture is a situation in which a regulated firm successfully influences the actions of the regulatory agency to benefit its own interests, rather than the public interest. This can happen through lobbying efforts, financial incentives, or other means of exerting influence on the regulatory agency. The result is that the agency's decisions may not reflect the best interests of the public, but rather those of the regulated firms.

Question 19

Define logrolling.Explain why logrolling often results in legislation that benefits the economic interests of a few, while harming the interests of a larger group of people.

Accepted Answer

The answer of Define logrolling.Explain why logrolling often results in...

Question 20

Is a typical person likely to gather more information when buying a new computer or when voting for a member of Parliament? Why?

Accepted Answer

The answer of Is a typical person likely to gather...

Quiz 15: Public Choice, Taxes, and the Distribution of Income