Question 1

When the federal government becomes heavily involved in programs that favor well-organized business interest at the expense of others, the expected result is

Accepted Answer

When the government favors well-organized business interests, it often supports established firms that have the resources to lobby effectively, which can stifle innovation by disadvantaging newer, innovative start-ups.

Question 2

If a federal agency requested funds to build a dam on an Idaho river to irrigate nearby farmland used for growing potatoes, the most active support for the project probably would come from

Accepted Answer

Potato farmers who own the land to be irrigated would likely support the project as it directly benefits them by providing water for their crops, potentially increasing their yield and profits.

Question 3

Which of the following provides the most reasonable explanation for why agricultural interests lobby for higher farm subsidies and price supports?

Accepted Answer

Agricultural interests lobby for higher farm subsidies and price supports primarily to benefit themselves financially, seeking a redistribution of income that favors their economic interests.

Question 4

An issue that generates substantial benefits to a small group of individuals while imposing a small cost on many others is called a

Accepted Answer

A special-interest issue benefits a small group significantly while spreading the costs across a larger population, making it less noticeable to those who bear the cost.

Question 5

Crony capitalism is present when

Accepted Answer

Crony capitalism occurs when businesses provide political support to decision-makers in exchange for favorable government treatment, which enhances their profitability.

Question 6

Which of the following is the most likely explanation for the imposition of a price floor in the market for corn?

Accepted Answer

Sellers of corn benefit from a price floor because it sets a minimum price above the equilibrium, potentially increasing their revenue.

Question 7

Restrictions that limit sugar imports, subsidies for the construction of sports stadiums, and federal spending on programs like the construction of an indoor rain forest in Iowa all provide examples of government programs

Accepted Answer

These examples illustrate government programs that cater to special-interest groups, often due to political motivations rather than broad public benefit or cost-benefit analysis.

Question 8

A special-interest issue is one that

Accepted Answer

A special-interest issue typically benefits a small, well-organized interest group at the expense of the broader public, such as taxpayers or consumers, who bear the cost.

Question 9

When subsidies, tax credits, and government favoritism are increasingly used to allocate goods and services,

Accepted Answer

When government intervention in the form of subsidies, tax credits, and favoritism is used to allocate resources, it creates incentives for businesses and individuals to engage in lobbying and political contributions to gain favorable treatment, which can lead to increased political corruption.

Question 10

When decisions are made by majority rule, elected officials have a strong incentive to

Accepted Answer

Elected officials often have an incentive to cater to specific voting blocs and interest groups to secure political support, which can lead to the allocation of resources in a way that benefits these groups rather than focusing solely on efficiency or the broader public interest.

Question 11

Special-interest legislation is characterized by

Accepted Answer

Special-interest legislation typically benefits a small group while spreading the costs across a larger population, making the costs less noticeable to the general public.

Question 12

Which of the following factors weakens the case for private-sector provision of goods and services as opposed to public-sector provision?

Accepted Answer

Externalities weaken the case for private-sector provision because they represent costs or benefits not reflected in market prices, leading to market failures that the public sector can address more effectively.

Question 13

As government becomes more involved in providing favors to some businesses and sectors of the economy at the expense of others

Accepted Answer

When the government provides favors to certain businesses, it often leads to increased lobbying and rent-seeking as companies try to gain these advantages, rather than focusing on improving efficiency or innovation.

Question 14

When politicians support policies that benefit small interest groups, such as farmers, at the expense of unorganized, widely dispersed groups, for example, taxpayers or consumers, this is a reflection of the

Accepted Answer

The special-interest effect occurs when a small, organized group receives benefits at the expense of a larger, unorganized group, often due to the group's ability to exert more political influence.

Question 15

If new regulations make it illegal to sell older model electrical appliances, then

Accepted Answer

When older models are banned, consumers will have to purchase new models, increasing demand for producers of compliant appliances.

Question 16

Which of the following is most likely to result in an increase in crony capitalism?

Accepted Answer

An increase in government spending and regulation can lead to crony capitalism as businesses may seek to influence government decisions to gain favorable treatment or contracts.

Question 17

Which of the following is most likely to result in government failure?

Accepted Answer

Government failure often occurs when government actions create inefficiencies or inequities, such as when they favor certain businesses or sectors, leading to misallocation of resources.

Question 18

Which of the following is a category of activity that results in government failure?

Accepted Answer

The special interest effect is a category of activity that can lead to government failure, as it involves policies that benefit a small group at the expense of the general public.

Question 19

Economics indicates that government funding of special interest projects and favoritism of some business firms relative to others will lead to

Accepted Answer

Government funding of special interest projects often leads to economic inefficiency because decisions are made based on political motivations rather than economic efficiency, leading to misallocation of resources.

Question 20

When the government is heavily involved in projects that provide benefits to some businesses at the expense of others, this will increase the incentive of businesses to

Accepted Answer

When the government is involved in projects that benefit certain businesses, it creates an incentive for businesses to lobby for these favors to gain an advantage over competitors, rather than focusing on improving products or resource value.

Quiz 6: The Economics of Political Action