Deck 9: Supply and Demand in Political Markets

Question 1

Equilibrium in the market for special interest benefits is determined where _____.

A)the marginal cost of lobbying politicians is equal to the marginal benefits received from government
B)the marginal political opposition is equal to the marginal political support
C)the marginal price of a vote for a program is equal to the marginal benefit of that additional vote
D)the marginal price of regulation is equal to the marginal benefit from that regulation

Answer 1

B

Question 2

If rent seeking was,on average,a losing proposition,_____.

A)rent seekers would exit rent seeking until losses from rent seeking equaled zero
B)rent seeking would stop because it was no longer profitable
C)rent seekers would increase competition for scarce benefits
D)rent seeker would exit rent seeking until there is a normal rate of return to rent seeking

Answer 2

D

Question 3

In the context of rent seeking,rents refer to _____.

A)payments made to factors of production for private benefit that do not add anything to social output.
B)payments made to politicians for private benefit that do not add anything to gross domestic product
C)payments made to factors of production for private benefit that add to social output
D)payments made to third parties to find opportunities for lobbying

Answer 3

A

Question 4

The managers of government bureaucracies have an incentive to _____

A)maximize the size of their budgets
B)minimize the size of their staff
C)maximize the profits from their bureaus
D)minimize rent-seeking

Question 5

Which of the following statements is an example of agenda control?

A)A governor vetoes a concealed carry law.
B)A state legislature puts on the ballot a $500 million high-tech infrastructure initiative.
C)A state education department implants a federal education law.
D)A private citizen sues to prevent her home being taken through eminent domain.

Question 6

The geographic organization of the U.S.Congress into districts _____.

A)sometimes encourages and sometimes discourages the representation of special interests depending upon the shape of the size of the government program
B)has no relationship to the representation of special interests
C)discourages the representation of special interests
D)encourages the representation of special interests

Question 7

In most elections,_____ impedes political exchange

A)low transactions costs
B)uncertainty
C)the secret ballot
D)special interests

Question 8

Which of the following is not an incentive bureaucrats have to increase the size of their budgets?

A)They can increase their income by having a higher budget.
B)Increased budgets mean more power and prestige.
C)Higher budgets are necessary to maximize scale efficiencies.
D)A nice working environment is positively correlated with a higher budget.

Question 9

_____ is the exchange of political support on one issue for political support on another issue.

A)Logrolling
B)Market exchange
C)Agenda control
D)Rent seeking

Question 10

The fact that interest groups exist on both sides of an issue mean that _____.

A)no special interest group gets everything it wants
B)rational ignorance is nonexistent
C)a prisoner's dilemma exists
D)politicians are exposed to all viewpoints on an issue

Question 11

The welfare costs of rent seeking will approximate _____.

A)the value of the resources expended in lobbying
B)the deadweight loss of taxation
C)the value of the rent-seeking benefits
D)zero if political markets are perfectly competitive

Question 12

Which of the following statements best describes why we cannot be assured that bureaucrats who believe in the mission of their bureaus will always act in the public interest?

A)Logrolling among members of Congress ties the hands of the bureaucracy,preventing them from acting in the public interest.
B)Bureaucrats do not personally benefit from larger budgets,but if they care about the mission of the bureau they will personally gain from acting in the public interest.
C)Free riding on the work of other within the bureau will make acting in the public interest impossible.
D)Self-interest is a powerful motivator,regardless of whether an individual operates in the public or private sector.

Question 13

A special interest will be able to influence a legislature's actions _____.

A)only if there are not special interests on the other side of the issue
B)if enough members of the legislature are corrupt
C)up to the point where the marginal political support they provide equals the marginal political opposition of other special interests
D)as long as the marginal political support they provide to the legislature is positive

Question 14

Which of the following is not an example of agenda control?

A)The assignment of members of Congress to committees.
B)Determination of the ballot language of a tax-and-expenditure limitation initiative.
C)Special interests deciding which members of Congress deserve their attention.
D)The majority caucus decides who can run for Speaker of the House of Representatives.

Question 15

Which of the following statements best summarizes why bureaucrats tend to be budget maximizers?

A)The larger the budget,the more assured bureaucrats can be of having sufficient resources to complete a task.
B)The larger the budget,the more power and prestige the bureaucrat wields.
C)The larger the budget,the larger the workload of the bureaucrat.
D)The larger the budget,the more work in the public interest the bureaucrat can undertake.

Question 16

Logrolling _____.

A)impedes the work of special interest groups
B)makes it easier for politicians to pass special interest legislation
C)decreases the total quantity of special interest benefits
D)does not depend on the rational ignorance of voters

Question 17

Which of the following is not a source of rents?

A)Tariffs
B)Logrolling
C)Price supports
D)Entry barriers

Question 18

The legislature is equivalent to a political market because _____.

A)legislators are akin to price takers
B)policies can be bought and sold
C)legislators can be bought and sold
D)logrolling allows legislators to trade amongst themselves

Question 19

If everyone could participate in the logrolling process at low cost,_____.

A)then logrolling would allocate resources efficiently
B)the political benefits to politicians would fall
C)political exchange would no longer be important
D)decision-making costs would be astronomical

Question 20

Using potentially productive resources to try and obtain transfers from the government is called _____.

A)vote trading
B)logrolling
C)agenda control
D)rent seeking

Question 21

There is no relationship between the size of a bureau's budget and the income earned by the bureaucrat in charge of the bureau.

Question 22

During the bureaucratic bargaining process,if the legislature tries to counteroffer by saying it wants less output at a given price,the bureau's can employ the strategy of _____.

A)saying no
B)telling the legislature that reducing the output would endanger lives
C)telling the legislature that at the lower output,the price per unit will be much higher
D)making a counter-offer of more output at a lower price

Question 23

Which of the following is not a bargaining advantage enjoyed by bureau's?

A)They only have one legislature to deal with so bureaus are quite experienced in extracting a favorable budget agreement.
B)The legislature typically gets all information on the bureau from the bureau itself.
C)The bureaus have the ability to go out and hire the best negotiators while members of the legislature are the fixed negotiators on the other side.
D)Considerable bargaining occurs in committees comprised of high demanders of the output of the bureaucracy.

Question 24

In order to maximize their political benefits,legislators need only pay attention to the special interests in favor of a particular program.

Question 25

A federal system of governments can limit the problems posed by special interests because _____.

A)it provides voters with other governments to compare to their own
B)it increases the number of legislatures to oversee the bureaucracies
C)it decreases rational ignorance
D)b and c

Question 26

As a result of the bargaining advantages enjoyed by bureaus,they will generally have budgets that are ____.

A)are larger than optimal
B)are smaller than optimal
C)optimal
D)unable to be characterized in a general manner

Question 27

Other things equal,the more individuals in a special interest group,the more effect that special interest will be in securing political benefits.

Question 28

A more complex view of the incentives facing a bureaucrat _____.

A)shows that bureaucrats might prefer to maximize their discretionary budget over their total budget
B)shows that bureaucrats might prefer to always act in the public interest,if they believe in their bureau's mission.
C)shows that the incentives facing a bureaucrat are simple and never conflict with one another.
D)shows that the bureaucrats may about increasing their own income but their power and prestige

Question 29

Special interest legislation is inefficient because of logrolling.

Question 30

Which of the following is not an advantage of fiscal federalism?

A)It allows people to "vote with their feet."
B)It facilitates intergovernmental comparisons.
C)It increases the ability of government to bargain with bureaucracies.
D)It can limit the costs of government programs to those who benefiting from them.

Question 31

In contrast to a monopoly which misallocates resources by restricting output and producing too little,government bureaus misallocate resources by _____.

A)producing too little
B)producing too much
C)producing the right amount but charging nothing for the output
D)producing zero

Question 32

Rent seeking is inefficient logrolling leads to a misallocation of resources.

Question 33

The legislature is at a bargaining disadvantage with a bureau because _____.

A)they have many bureaus to oversee
B)its members reveal their demand for the good through speeches and public statements
C)they typically obtain all their information from the bureau
D)all of the above
E)a and c

Question 34

Once a government program is put into place,the employees of the bureau put in charge of administering the program _____.

A)become profit maximizers
B)begin working in the public interest
C)start rent seeking
D)become an interest group

Question 35

The American Economic Association limiting its presidential vote to only one candidate is an example of agenda control.

Question 36

There is no rational explanation how government can fund anti-smoking campaigns and tobacco subsidies simultaneously.

Question 37

If government is to allocate resources efficiently,_____.

A)competition among local governments should be limited in scope
B)local governments should transfer powers to state governments whenever possible
C)public goods should always be provided by the federal government
D)public goods should be devolved to local governments whenever feasible

Question 38

One advantage of fiscal federalism is that its decentralized nature _____.

A)allows for more rigid rules
B)gives voters more choice
C)creates thousands of bureaucracies
D)forces local governments to collude with one another

Question 39

In bargaining between a bureau and the legislature over a budget,the legislature decides to purchase a certain amount of output at certain price and negotiates both simultaneously.This gives the bureau the opportunity to _____.

A)minimize their effort
B)extract all the legislature's consumer surplus from the bureau's output
C)maximize the bureau's profits
D)maximize the budget's producer surplus by extracting from the legislature large rents

Question 40

Logrolling creates a political market and campaign donations are the medium of exchange.

Question 41

A bureau's total output is decided at the same time as its budget just as in the private sector.

Question 42

Do government bureaucracies misallocate resources? If so,how and why? Can you list one possible way to limit the negative effects of special interests such as bureaucracies?

Question 43

Define rent seeking.Is rent-seeking activity likely to be highly profitable in the long run? Why or why not?

Question 44

A government program,once started,perpetuates itself because those in charge of administering the program often become its strongest supporters.

Question 45

Ellis,a staunch environmentalist,is hired right of graduate school by the Environmental Protection Agency.He is ecstatic about having the opportunity to promote what he believes to be the public interest.Within a few years he gets promoted to manager of his bureau.Shortly after his promotion he successfully argues for a 30 percent increase in his department's budget.How might Ellis benefit personally from an increased budget? Now suppose that it was known to be true that the best thing for the environment was for a large portion of Ellis' budget to be shifted to another department.Why might Ellis fight this change? Why might he not?

Question 46

Bureaucrats who believe in the mission of their bureaus will want to maximize their bureau's budgets to further their perception of the public interest.

Question 47

Logrolling would allocate resources efficiently if everyone could participate.List and explain two reasons why we do not see logrolling in general elections.

Question 48

Special interests have an incentive to become informed about a policy from which they could receive concentrated benefits.Since other voters remain rationally ignorant of the policy,the special interests will have considerable influence in the legislature.Will special interests receive everything they want from the legislature? Why or why not? How will the legislature determine what the special interests will receive?

Question 49

The legislature is at a bargaining disadvantage because it receives most,if not all,of its information about the bureaucracy from the bureaucracy.

Question 50

The problems posed by special interests are unaffected by fiscal federalism.