Question 1

The pursuit through government of a transfer of wealth at society's expense is called "rent seeking."

Accepted Answer

Rent seeking refers to the use of resources to obtain economic gain from others rather than through the creation of new wealth. It often involves lobbying the government to create policies or regulations that benefit one's own interests at the expense of others.

Question 2

What is the main problem with government guarantees that socialize losses and privatize gains?

Accepted Answer

The main problem with government guarantees that socialize losses and privatize gains is that they encourage overly risky investments by insulating private investors from any losses. This leads to a situation where private investors benefit from successful ventures, but if things go wrong, then taxpayers are left to foot the bill. This distorts the market, creates moral hazard, and can lead to systemic risk.

Question 3

(Consider This)Subsidies for mohair production illustrate:

Accepted Answer

Subsidies for mohair production are a classic example of special-interest effects where the benefits (subsidies) are concentrated among a small group of mohair producers, while the costs (taxes used to fund the subsidies) are spread out among the general population, making it a case of concentrated benefits and diffuse costs.

Question 4

(Consider This)Government passes a law requiring all domestic clothing factories to pay workers at least $20 per hour.As a result,domestic clothing companies move their operations overseas,leaving domestic workers unemployed.This situation illustrates the problem of:

Accepted Answer

This situation demonstrates unintended consequences, as the intended goal of ensuring workers receive a higher wage leads to the unintended consequence of domestic workers becoming unemployed as companies move their operations overseas to avoid the higher wage requirement.

Question 5

(Last Word)In 2004,Congress passed a corporate tax relief bill with 276 provisions for tax breaks to groups such as restaurant owners,Hollywood producers,and NASCAR track owners.This is an example of the:

Accepted Answer

The passage describes a situation where certain groups received tax breaks that were specific to their industry or interests. This is an example of the special-interest effect, where particular groups benefit from policies that may not be in the best interest of society as a whole. The benefits-received principle is related to taxation based on the level of government services received, while the paradox of voting and principal-agent problem relate to broader issues of collective decision-making and delegation of authority.

Question 6

Government's ability to enforce laws and contracts increases private-sector economic risks.

Accepted Answer

Government's ability to enforce laws and contracts actually reduces private-sector economic risks by providing a stable and reliable framework for businesses to operate within. Without this enforcement, businesses may be more vulnerable to fraud, breach of contract, and other types of economic uncertainty.

Question 7

The size and scope of government inhibit the flow of information to decision makers,leading to inefficient outcomes.

Accepted Answer

When the government is too large, it becomes harder for information to be communicated effectively among decision makers. This can lead to delays in decision making and inefficient outcomes.

Question 8

The invisible hand guides government's economic activity just as it does with private economic activity.

Accepted Answer

The invisible hand refers to the concept in which self-interest and competition in a market economy automatically lead to the desired outcomes, without government intervention. However, government economic activity is guided by laws, regulations, and policies, which are deliberately designed to achieve certain goals, such as reducing unemployment or promoting economic growth. Therefore, the invisible hand does not guide government economic activity to the same extent as it does with private economic activity.

Question 9

The government's ability to force people to do things can increase economic efficiency.

Accepted Answer

Government intervention, such as regulations and taxes, can correct market failures and promote public goods, leading to increased efficiency in the allocation of resources. However, excessive government intervention or misuse of power can also lead to inefficiencies and unintended consequences.

Question 10

(Consider This)The collective action problem refers to:

Accepted Answer

The collective action problem refers to the difficulty in organizing and motivating large groups to achieve desired outcomes. This can occur because individuals may not have enough incentive to participate or contribute to the collective effort, or there may be barriers to communication and coordination among group members. As a result, collective action may not be taken, or may be taken inefficiently or ineffectively.

Question 11

(Consider This)Smaller groups are sometimes able to achieve political victories against larger groups.This is referred to as the:

Accepted Answer

The collective action problem refers to the difficulty of coordinating large groups to achieve a common goal, while smaller groups can more easily mobilize and achieve their objectives. This phenomenon is seen in politics, where small interest groups may have more success in influencing policy than larger, diffuse groups.

Question 12

(Consider This)From an economist's perspective,when is government too big?

Accepted Answer

From an economist's perspective, government is considered too big when the marginal costs of additional spending exceed the marginal benefits. In other words, the government is spending more money than it is worth, and the cost of providing its services is too high. This view is in line with the principle of diminishing returns, where the more resources that are put into government services, the less effective they become. Therefore, the optimum size of government should be at a point where the marginal benefits of its services are equal to the marginal cost of providing them.

Question 13

(Last Word)In 2011,Congress funded a sanctuary for white squirrels,a giant roadside coffee pot,and an antique bicycle museum.This is an example of:

Accepted Answer

This is a clear example of pork barrel politics, where Congress allocates funds for projects that primarily benefit the districts of individual members, regardless of their overall importance or merit. This practice can lead to wasteful spending and government inefficiency, highlighting the need for reform in the political process.

Question 14

The unlawful misdirection of governmental resources for personal gain is known as:

Accepted Answer

Political corruption refers to the misuse of public resources or power by government officials or politicians for personal gain, which is the definition given in the question. Logrolling is a practice where two or more parties agree to support each other's agendas, which is not necessarily for personal gain. Adverse selection is a situation where one party in a transaction has information that the other party doesn't have, leading to unequal outcomes. The special-interest effect refers to the ability of a small group with a vested interest to exert disproportionate influence over policymaking. None of these options fits the definition given in the question.

Question 15

(Last Word)In their effort to provide disaster relief after Hurricane Katrina,the Federal Emergency Management Agency (FEMA)made payouts on as many as 900,000 claims with invalid Social Security numbers or false names and addresses.This example illustrates:

Accepted Answer

The example of FEMA making payouts on claims with invalid Social Security numbers or false names and addresses illustrates bureaucratic inefficiency, as it shows a failure in the agency's processes and procedures for verifying and processing claims.

Question 16

Because of the force of law and bureaucratic structure,government accountability is less of a problem than in the private sector.

Accepted Answer

This statement is false. While government accountability may be enforced by laws and bureaucratic structures, it is still possible for accountability to be a problem in the public sector. Political pressure, corruption, and lack of transparency can all contribute to a lack of accountability in government. Similarly, the private sector may also be held accountable through laws and regulations, as well as market forces such as consumer demand and competition.

Question 17

Political corruption occurs whenever:

Accepted Answer

Political corruption involves unlawful use of government resources for personal gain, which is described in option B. The other options listed involve tactics or actions that may be considered unethical or controversial, but do not necessarily involve corruption.

Question 18

(Consider This)From an economist's perspective:

Accepted Answer

This statement aligns with the concept of "efficient government," where the focus is on optimizing the use of resources rather than emphasizing the size of the government. As long as government spending is allocated up to the point where marginal benefit equals marginal cost, resources are being used efficiently regardless of the size of government.

Question 19

(Consider This)Unintended consequences leading to inefficient outcomes are more likely with government programs than in the private sector because:

Accepted Answer

In the private sector, the profit motive drives individuals and firms to maximize efficiency and allocate resources in a way that maximizes profits. This is guided by the invisible hand of the market, which encourages competition and innovation. On the other hand, government programs are typically not driven by a profit motive, and may have different incentives that can lead to unintended consequences and inefficiencies.

Question 20

The Road Runner Club contributes money to Senator Sly's reelection campaign fund,and Senator Sly helps pass legislation to add more jogging paths across the state.From this we can definitively conclude:

Accepted Answer

The information given does not definitively prove any of the other options (A, B, C) but suggests that the Road Runner Club might have supported Senator Sly due to shared interests, which is a common occurrence in politics.

Quiz 5: Governments Role and Government Failure

The pursuit through government of a transfer of wealth at society's expense is called "rent seeking."

What is the main problem with government guarantees that socialize losses and privatize gains?

(Consider This) Subsidies for mohair production illustrate:

(Consider This) Government passes a law requiring all domestic clothing factories to pay workers at least $20 per hour.As a result,domestic clothing companies move their operations overseas,leaving domestic workers unemployed.This situation illustrates the problem of:

(Last Word) In 2004,Congress passed a corporate tax relief bill with 276 provisions for tax breaks to groups such as restaurant owners,Hollywood producers,and NASCAR track owners.This is an example of the:

Government's ability to enforce laws and contracts increases private-sector economic risks.

The size and scope of government inhibit the flow of information to decision makers,leading to inefficient outcomes.

The invisible hand guides government's economic activity just as it does with private economic activity.

The government's ability to force people to do things can increase economic efficiency.

(Consider This) The collective action problem refers to:

(Consider This) Smaller groups are sometimes able to achieve political victories against larger groups.This is referred to as the:

(Consider This) From an economist's perspective,when is government too big?

(Last Word) In 2011,Congress funded a sanctuary for white squirrels,a giant roadside coffee pot,and an antique bicycle museum.This is an example of:

The unlawful misdirection of governmental resources for personal gain is known as:

(Last Word) In their effort to provide disaster relief after Hurricane Katrina,the Federal Emergency Management Agency (FEMA) made payouts on as many as 900,000 claims with invalid Social Security numbers or false names and addresses.This example illustrates:

Because of the force of law and bureaucratic structure,government accountability is less of a problem than in the private sector.

Political corruption occurs whenever:

(Consider This) From an economist's perspective:

(Consider This) Unintended consequences leading to inefficient outcomes are more likely with government programs than in the private sector because:

The Road Runner Club contributes money to Senator Sly's reelection campaign fund,and Senator Sly helps pass legislation to add more jogging paths across the state.From this we can definitively conclude: