Question 1

What is rent seeking and how is it related to regulatory capture?

Accepted Answer

The answer of What is rent seeking and how is...

Question 2

Congressman Flack votes for a program that will benefit the constituents of Congressman Walpole.Which of the following explanations for Flack's vote is most consistent with the public choice model?

Accepted Answer

According to the public choice model, politicians are rational actors who make decisions based on self-interest, and are motivated by the desire to gain and maintain power. In this case, Congressman Flack votes for a program that will benefit the constituents of Congressman Walpole because he expects Walpole's support for programs that will benefit Flack's constituents. This is consistent with the public choice model's prediction that politicians will engage in strategic behavior to maximize their own power and influence.

Question 3

Congressman Flack votes for a program that will benefit the constituents of Congressman Walpole.The public choice model suggests that Flack's vote is best explained by which of the following?

Accepted Answer

Logrolling

Question 4

Financial contributions to the campaigns of members of Congress,state legislators and other elected officials by firms that seek special interest legislation that make the firms better off are

Accepted Answer

This is an example of rent seeking, where firms use their financial resources to gain an advantage in the political process and shape policies that benefit them. It is not illegal, although there may be limits on the amount and disclosure of such contributions. It is also not irrational, as elected officials may seek to maximize their own interests or respond to the incentives and pressure created by organized interest groups.

Question 5

Many economists believe that when the federal government establishes an agency to regulate a particular industry,the regulated firms try to influence the agency even if these actions do not benefit the public.Economists refer to this result of government regulation by which of the following terms?

Accepted Answer

Regulatory capture is the term used to describe the phenomenon where the regulatory agency that is supposed to regulate an industry ends up being influenced and controlled by the industry it is supposed to regulate. This happens because the regulated firms have a strong incentive to influence the regulatory agency, in order to protect their own interests and profits, even if their actions do not benefit the public. This can result in a regulatory agency that is ineffective in protecting the public interest, and instead serves the interests of the industry it is supposed to regulate.

Question 6

A tax imposed by a state or local government on retail sales of most products is

Accepted Answer

A tax imposed by a state or local government on retail sales of most products is commonly known as a sales tax. Option A is incorrect because an excise tax is a tax on specific goods or services, such as gasoline or tobacco. Option B is incorrect because there is no widely recognized tax known as a social service tax. Option C is incorrect because a consumption tax is a tax on the purchase of goods and services, but it can also include taxes on savings and investments.

Question 7

Which of the following is the source of revenue for Medicare and Social Security in the United States?

Accepted Answer

Social insurance taxes, also known as payroll taxes, are the source of revenue for both Medicare and Social Security in the United States. These taxes are paid by both employees and employers, with a portion of the tax going towards funding these programs. Individual income taxes and sales taxes do not directly fund these programs, and property taxes are typically used to fund local government services such as schools and infrastructure.

Question 8

Table 18-2
 
-Refer to Table 18-2.The table above outlines the rankings of three members of the U.S.House of Representatives on three spending alternatives.Assume that Congress can spend additional revenue on only one of the three spending alternatives and that Tom,Dick and Harriet,all members of the House of Representatives,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)Foreign Aid and Post-Secondary Education (2)Foreign Aid and Roads and Bridges and (3)Post-Secondary Education and Roads and Bridges.
Determine whether the voting paradox will occur as a result of these votes.

Accepted Answer

The answer of Table 18-2
 
-Refer to Table 18-2.The table...

Question 9

Former Alabama Governor George Wallace ran for president several times,once as a third-party candidate in 1968.Wallace claimed there was "not a dime's worth of difference" between the Democratic and Republican parties during one of his campaigns.How does Wallace's comment relate to the median voter theorem?

Accepted Answer

The answer of Former Alabama Governor George Wallace ran for...

Question 10

Rent seeking behavior,unlike profit maximizing behavior in competitive markets,wastes society's scarce resources.

Accepted Answer

Rent seeking behavior involves individuals or firms trying to gain a larger share of existing wealth without creating new wealth. This often involves seeking government intervention or regulation that favors their interests, rather than competing through innovation or efficiency. As a result, rent seeking behavior can lead to inefficient allocation of resources and economic losses for society as a whole. In contrast, profit maximizing behavior in competitive markets incentivizes firms to create new wealth through innovation and efficiency, which can benefit society by increasing productivity and reducing prices.

Question 11

Which of the following is the largest source of revenue for the U.S.federal government?

Accepted Answer

The individual income tax is the largest source of revenue for the U.S. federal government, generating approximately 50% of its total revenue. Social insurance taxes (such as Social Security and Medicare taxes) make up about one-third of the total revenue, while sales and property taxes are primarily collected by state and local governments.

Question 12

A key assumption of the public choice model is that government policymakers will pursue their own self-interests.Economists assume that consumers and firms pursue their own self-interests when they interact in competitive markets and this interaction results in efficient economic outcomes.Does the pursuit of self-interest by policymakers result in efficient economic outcomes?

Accepted Answer

The answer of A key assumption of the public choice...

Question 13

Logrolling refers to attempts by individuals to use government action to make themselves better off at the expense of others.

Accepted Answer

The answer of Logrolling refers to attempts by individuals to...

Question 14

In the United States,the largest source of funds for public schools is

Accepted Answer

The largest source of funds for public schools in the United States is the property tax. This tax is collected at the local level and goes directly into funding local public schools. Federal funding for education makes up a smaller portion of public school funding.

Question 15

A key insight of the public choice model is that public policymakers are likely to pursue the public's interest,even if their self-interests conflict with the public interest.

Accepted Answer

The key insight of the public choice model is that public policymakers are likely to pursue their own self-interests rather than the public's interest.

Question 16

The public choice model can be used to examine voting models that contrast the manner in which collective decisions are made by governments (state,local and federal)and the manner in which individual choices are made in markets.Which of the following descriptions is consistent with the difference between collective decision-making and decision-making in markets?

Accepted Answer

The answer of The public choice model can be used...

Question 17

One result of the public choice model is that most economists believe that

Accepted Answer

The public choice model suggests that policymakers may have incentives to intervene in the economy in ways that do not promote economic efficiency. This is because policymakers may be motivated by factors such as ideology, special interest groups, and the desire to gain re-election, rather than solely focusing on maximizing economic efficiency. This highlights the potential for government failure as well as market failure.

Question 18

The public choice model raises questions about the government's ability to regulate economic activity efficiently.Which of the following statements represents the views of most economists with regard to the role of government?

Accepted Answer

Most economists believe that while government regulations are necessary, the costs associated with them must also be taken into consideration. While agencies such as the Food and Drug Administration and the Environmental Protection Agency serve a useful purpose, the costs of regulation need to be weighed against the benefits they provide.

Question 19

The median voter theorem states that the outcome of a majority vote is likely to represent the preferences of the voter who is in the political middle.

Accepted Answer

The median voter theorem posits that in a two-party system, the candidate who appeals to the median voter (the voter in the political center) is most likely to win the majority of votes, thus representing the preferences of the median voter. Therefore, the statement is true.

Question 20

Economists often analyze the interaction of individuals and firms in markets.Economists also examine the actions of individuals and firms as they attempt to use government to make themselves better off at the expense of others,a process that is referred to as

Accepted Answer

Rent seeking refers to when individuals and firms attempt to use government intervention to gain an advantage over others and increase their own wealth or power. This can include seeking subsidies, tax breaks, or regulations that benefit their own interests but may harm others in the market. Economists study rent seeking behavior to better understand how government policies affect market outcomes and to develop policies that promote efficiency and fairness.

Quiz 18: Public Choice, taxes, and the Distribution of Income