Question 1

Which of the following is true of ownership by taxpayers in a government bureau?​

Accepted Answer

Taxpayers do not have ownership in government bureaus as they are not privately owned. Rather, government bureaus are funded and managed by the government, which is responsible for their operations. Taxpayers have no ownership interest in government bureaus and therefore cannot transfer or surrender any ownership.

Question 2

Which of the following is a crude but efficient mechanism that promotes efficiency in the provision of public goods by bureaus? ​

Accepted Answer

"Vote with their feet" refers to the idea that individuals can express their preferences and promote efficiency by moving to jurisdictions that provide the public goods and services they desire, thereby creating competition among providers.

Question 3

Filing a fraudulent income tax return that understates income or overstates deductions is known as:​

Accepted Answer

Filing a fraudulent income tax return that deliberately understates income or overstates deductions is classified as tax evasion, which is a criminal offense punishable by substantial financial fines and possible time in prison. Tax evasion is different from tax avoidance, which is a legitimate tax-reducing strategy.

Question 4

Which of the following activities constitute tax avoidance?​

Accepted Answer

Increasing one's charitable contributions in December is a legal way of reducing the taxable income, so it falls under tax avoidance. The other options, such as selling illegal drugs, not reporting tips, or selling alcohol and cigarettes can be illegal activities and are not considered tax avoidance, but tax evasion. Selling a condominium can also be legal and is not necessarily tax avoidance.

Question 5

Raising tax rates:​

Accepted Answer

Raising tax rates can lead to more underreporting of income as individuals may feel incentivized to hide their income to avoid paying higher taxes. Furthermore, higher tax rates can also discourage economic activity and reduce participation in the formal economy, leading to increased reliance on underground or informal economic activity. Therefore, choices A, B, and C are incorrect, and D is unlikely to be true in practice.

Question 6

The basic difference between government bureaus and market firms is that bureaus:​

Accepted Answer

Government bureaus are not subject to the same market forces as market firms and therefore may be less concerned with satisfying consumer demand. Bureaus do not have a profit-maximizing incentive like market firms, and may instead be focused on serving the public interest. However, this does not mean that bureaus always act in the public interest or that market firms are never concerned with the public interest.

Question 7

Which of the following is true of bureaus?​

Accepted Answer

Bureaus are government agencies that are responsible for implementing and enforcing laws created by the government. They do not cover their costs through sales, control the money supply, or have transferable ownership. While consumer feedback may be considered, it is not their primary focus.

Question 8

Private firms and public bureaus differ in that:​

Accepted Answer

Private firms have a profit incentive to satisfy consumer wants and needs because they rely on customers to purchase their goods and services. Therefore, they have more incentive to listen to feedback in order to improve and retain those customers. Public bureaus, on the other hand, do not have the same profit incentive and may not prioritize consumer feedback as highly.

Question 9

Budget maximization by bureaus results in:​

Accepted Answer

Budget maximization by bureaus often leads to a larger budget than that desired by the median voter because bureaucrats aim to increase their budget to expand their influence and resources, which may not align with the preferences of the median voter.

Question 10

A widely held theory of bureaucratic behavior is that government bureaus:​

Accepted Answer

The theory of bureaucratic behavior suggests that government bureaus seek to maximize their budgets, as budgets are directly linked to increased power and influence within the government. Bureaucrats may also seek to justify their continued existence and expand their missions, which can only be accomplished with increased funding.

Question 11

The underground economy describes:​

Accepted Answer

The underground economy refers to economic activity that is not reported to the government for tax purposes, and this often includes illegal activity such as drug trafficking and prostitution, as well as legal activities such as cash payments for services.

Question 12

Suppose Woody wants to buy a boat. Since the interest paid on a boat loan is not tax deductible, he opts for a home equity loan, the interest on which is still tax deductible. This procedure is an example of _____.​

Accepted Answer

Woody is using a legal method to minimize his taxes by choosing a home equity loan instead of a boat loan. This is an example of tax avoidance, where the taxpayer arranges their affairs in a way that reduces taxes owed without violating the law.

Question 13

If the managers of a private firm perform poorly, each owner has the option of:​

Accepted Answer

If the managers of a private firm perform poorly, the best option for an owner is to sell his or her share of the firm. This allows the owner to exit the firm and potentially recoup some of their investment, while also avoiding further losses. Closing down the firm or managing it themselves may not be feasible options, as they require significant time and resources. Not paying taxes on profit is illegal, and selling off equipment may further damage the value and viability of the firm. Therefore, selling one's share of the firm is the most practical and rational choice.

Question 14

Connor uses means that are legal to arrange his finances so as to pay the least tax possible. He is engaging in:​

Accepted Answer

Tax avoidance refers to arranging one's finances in a legal manner to minimize tax liability. Tax evasion, on the other hand, involves illegal means to avoid paying taxes. Logrolling, rent seeking, and pork-barrel spending are all related to the political process and refer to activities that involve the exchange of favors or resources in order to gain political advantage or benefits.

Question 15

Identify the correct statement about government bureaus.​

Accepted Answer

Government bureaus operate without the same profit motive as private companies and may not face the same consequences for waste and inefficiency.

Question 16

Government bureaus:​

Accepted Answer

Government bureaus, being typically monopolies or oligopolies, have less competition and therefore less incentive to improve consumer satisfaction. Additionally, consumers have fewer alternatives to voice their dissatisfaction, which may result in less consumer feedback.

Question 17

Bureaus are:​

Accepted Answer

Bureaus are government agencies that are funded by legislative appropriations. They are responsible for implementing and enforcing laws and regulations, as opposed to the legislative branch which makes the laws and the executive branch which enforces them.

Question 18

A government bureau:​

Accepted Answer

Government bureaus are not profit-oriented, and their main goal is to provide public goods and services. Thus, they may not be as motivated as a private firm to reduce quality to minimize costs. They are also not involved in reporting or evading taxes (B), profit-sharing (C), or selling a wide range of public and private goods and services (D). They also do not aim to maximize budgets by financing the production of all goods and services in an economy (E), as the government has limited resources and needs to prioritize its spending.

Question 19

_____ are the true owners of government bureaus.​

Accepted Answer

Taxpayers are the true owners of government bureaus as they are the ones who fund the government through their taxes. Government officials, politicians, banks, and retirees may have some influence or interest in these bureaus, but ultimately it is the taxpayers who have the power to make changes through their votes and their ability to withhold funding.

Question 20

Which of the following is a part of the underground economy?​

Accepted Answer

The underground economy involves transactions that are not reported to the government and are often conducted in cash. In this case, the barber who receives a meal in exchange for a haircut is operating within the underground economy as this is an informal transaction that is likely not being reported to the government for tax purposes. The other choices either involve reported income or legal transactions.

Quiz 16: Public Goods and Public Choice

Which of the following is true of ownership by taxpayers in a government bureau?​

Which of the following is a crude but efficient mechanism that promotes efficiency in the provision of public goods by bureaus? ​

Filing a fraudulent income tax return that understates income or overstates deductions is known as:​

Which of the following activities constitute tax avoidance?​

Raising tax rates:​

The basic difference between government bureaus and market firms is that bureaus:​

Which of the following is true of bureaus?​

Private firms and public bureaus differ in that:​

Budget maximization by bureaus results in:​

A widely held theory of bureaucratic behavior is that government bureaus:​

The underground economy describes:​

Suppose Woody wants to buy a boat. Since the interest paid on a boat loan is not tax deductible, he opts for a home equity loan, the interest on which is still tax deductible. This procedure is an example of _____.​

If the managers of a private firm perform poorly, each owner has the option of:​

Connor uses means that are legal to arrange his finances so as to pay the least tax possible. He is engaging in:​

Identify the correct statement about government bureaus.​

Government bureaus:​

Bureaus are:​

A government bureau:​

_____ are the true owners of government bureaus.​

Which of the following is a part of the underground economy?​

Which of the following is true of ownership by taxpayers in a government bureau?

Which of the following is a crude but efficient mechanism that promotes efficiency in the provision of public goods by bureaus?

Filing a fraudulent income tax return that understates income or overstates deductions is known as:

Which of the following activities constitute tax avoidance?

Raising tax rates:

The basic difference between government bureaus and market firms is that bureaus:

Which of the following is true of bureaus?

Private firms and public bureaus differ in that:

Budget maximization by bureaus results in:

A widely held theory of bureaucratic behavior is that government bureaus:

The underground economy describes:

Suppose Woody wants to buy a boat. Since the interest paid on a boat loan is not tax deductible, he opts for a home equity loan, the interest on which is still tax deductible. This procedure is an example of _____.

If the managers of a private firm perform poorly, each owner has the option of:

Connor uses means that are legal to arrange his finances so as to pay the least tax possible. He is engaging in:

Identify the correct statement about government bureaus.

Government bureaus:

Bureaus are:

A government bureau:

_____ are the true owners of government bureaus.

Which of the following is a part of the underground economy?