Question 1

Which of the following factors explains why managers of government agencies have little incentive to achieve operational efficiency?

Accepted Answer

Public-sector managers have no fear of bankruptcy, which reduces the pressure to be operationally efficient, unlike in the private sector where inefficiency can lead to financial failure.

Question 2

Which of the following is a distinguishing characteristic of a user charge?

Accepted Answer

User charges are fees paid by individuals based on the extent of their usage of a particular good or service, making option A the correct distinguishing characteristic.

Question 3

Which of the following is an example of a good that is produced by the public sector but consumers purchase it in proportion to the benefit received?

Accepted Answer

First-class mail delivery from the U.S. Post Office is a service provided by the public sector where consumers pay for the service in proportion to the benefit they receive, as they purchase stamps or postage based on their mailing needs.

Question 4

Payments that users (consumers) are required to make if they want to receive certain services provided by the government are called

Accepted Answer

User charges are payments required from consumers to receive specific services provided by the government, such as tolls for roads or fees for public parks.

Question 5

Government decisions tend to be biased toward actions that have

Accepted Answer

Government decisions often favor actions with immediate, visible benefits because they are more likely to gain public approval and political support, even if the future costs are less apparent or harder to quantify.

Question 6

When the government both provides a service and covers its costs through taxation,

Accepted Answer

When the government provides a service funded by taxation, consumers have limited influence over the service's quality or quantity, as they cannot easily choose alternative providers or directly impact the funding.

Question 7

Public choice analysis suggests that bureaucrats and public-sector managers have a strong incentive to

Accepted Answer

Public choice analysis indicates that bureaucrats and public-sector managers often seek to expand their budgets to increase their power, influence, and job security, even if it leads to inefficiencies.

Question 8

Assume that you are a member of the U.S. House of Representatives from your home state and district. Which of the following best explains why you have a strong incentive to get the federal government to finance pork-barrel projects in your district?

Accepted Answer

Pork-barrel projects provide direct benefits to a legislator's constituents, which can help secure votes and political support, while the costs are distributed across a wider population, making it politically advantageous.

Question 9

A local government operates a city recreation center with a pool and tennis courts. The center is financed through $50 annual membership fees (required for members to use it). This type of financing is an example of a

Accepted Answer

A user charge is a fee paid by individuals who use a particular service or facility, such as a recreation center, to help cover the costs of its operation.

Question 10

Legislation that offers immediate and easily recognized benefits, at the expense of costs that are observable only in the distant future, is often enacted, even when economic inefficiency results. In economics this is referred to as the

Accepted Answer

The shortsightedness effect refers to the tendency of policymakers to favor policies that provide immediate benefits while deferring costs to the future, often leading to economically inefficient outcomes.

Question 11

In which case is the political process most likely to result in the acceptance of efficient projects and rejection of inefficient projects?

Accepted Answer

When both the benefits and costs are widespread among voters, it is more likely that the political process will reflect the true preferences of the majority, leading to the acceptance of efficient projects and rejection of inefficient ones.

Question 12

Which of the following is true?

Accepted Answer

When voters pay in proportion to benefits received, it ensures that those who benefit from a government activity are the ones who fund it, making it more likely that the activity is productive and beneficial to all involved.

Question 13

Which of the following is a predictable side effect of increased government activity (for example, taxes and subsidies) designed to redistribute income among citizens?

Accepted Answer

Increased government activity in redistributing income often leads to more rent-seeking behavior, where individuals or groups try to gain economic benefits through political influence rather than productive economic activity.

Question 14

Other things constant, if both the benefits and costs of a public-sector activity are widespread among voters, the political process will generally result in the

Accepted Answer

When both benefits and costs are widespread, voters are more likely to support activities that are productive, as they perceive a net benefit, while rejecting unproductive activities that do not provide sufficient benefits relative to their costs.

Question 15

Which of the following is true of government activities under a system of representative democracy?

Accepted Answer

When voters pay in proportion to the benefits they receive, they are more likely to support government activities that are productive, as these activities provide them with direct benefits, leading to widespread voter approval.

Question 16

Public choice analysis

Accepted Answer

Public choice analysis assumes that individuals in the public sector, like those in the private sector, act in their own self-interests rather than solely in the public interest.

Question 17

When the tax to fund a government project is allocated among voters in proportion to the benefits they receive from the project,

Accepted Answer

When taxes are allocated in proportion to the benefits received, voters who benefit more from the project will be more willing to support it, leading to efficient projects being favored by a majority.

Question 18

In which one of the following situations is the political process most likely to result in both the acceptance of efficient (productive) programs and the rejection of inefficient (counterproductive) political activities?

Accepted Answer

When the people who benefit from a government program pay the costs in proportion to the benefits they receive, there is a direct incentive to support efficient programs and reject inefficient ones, as individuals will weigh the costs against the benefits they personally receive.

Question 19

Which of the following statements is false?

Accepted Answer

Unconstrained democratic political processes do not naturally lead to economic efficiency, as they can be influenced by special interests and result in inefficient outcomes.

Question 20

Public choice theory indicates that representative government yields outcomes more consistent with economic efficiency when a close relationship exists between the benefits received and the costs borne by each voter. Which of the following methods of financing a government program will most likely result in a close relationship between voter benefits and costs?

Accepted Answer

User charges directly link the cost of a government service to the individuals who benefit from it, ensuring that those who use the service bear the cost, aligning benefits with costs.

Quiz 6: The Economics of Political Action