Question 1

Unlike the market process,in the political market it is possible for some individuals to receive very large benefits from the political process without any significant impact on their tax bills.

Accepted Answer

This is because political decisions can distribute benefits unevenly and may be influenced by factors such as lobbying, campaign contributions, and privileged access to decision-makers. As a result, some individuals or groups may receive significant benefits (such as subsidies or favorable regulations) without having to pay for them through higher taxes.

Question 2

Some economists who use the public choice model to explain the ways government intervenes in the economy believe that regulatory capture results when an agency or commission is given authority over a particular industry or product.Which of the following is the best example of regulatory capture?
A) The Food and Drug Administration (FDA) has increased the time and expense pharmaceutical firms incur to receive approval to market a new drug.
B) A federal government agency hires more employees than it requires to regulate an industry because it does not seek to minimize costs or maximize the agency's profits.
C) The head of an agency is required to testify before Congress because Congress controls the size of the agency's budget. Congress "captures" the agency because of its budget authority.
D) Firms that were regulated by the Interstate Commerce Commission (ICC) attempted for many years to influence the ICC's actions.

Accepted Answer

Firms attempting to influence the actions of a regulatory agency (the ICC in this case) is a classic example of regulatory capture. The firms are attempting to shape the decisions of the agency to benefit their own interests, rather than those of the public or the economy as a whole.

Question 3

The public choice model asserts that the self-interest of policymakers is likely to cause them to take actions that are inconsistent with the preferences of voters,even where those preferences are clear.

Accepted Answer

The public choice model is based on the assumption that policymakers act to maximize their own self-interest, rather than always acting in the best interests of the public or the voters who elected them. This can lead to situations where policymakers take actions that may be inconsistent with the preferences of voters or the broader public, including situations where policymakers may ignore or actively work against clear preferences of the electorate.

Question 4

What is regulatory capture?
A) It is a situation in which a policy maker seeks to improve his election prospects by aligning himself with a powerful special interest group which will finance his political campaign.
B) It is the exchange of political support between a regulatory agency and the regulated firm resulting in both parties capturing economic rents.
C) It is a situation in which a firm being regulated successfully influences the regulatory agency's actions to benefit the interests of the firm, rather than the public interest.
D) It is a situation in which a regulatory agency uses its authority to force actions that are not favored by the regulated firms but are in the public's interest.

Accepted Answer

Regulatory capture occurs when a firm being regulated successfully influences the regulatory agency's actions to benefit the interests of the firm, rather than the public interest. This can happen when the regulated firm uses its resources (e.g. lobbying) to influence the regulatory agency, or when regulatory officials develop close relationships with the firms they are supposed to be regulating. As a result, regulations may be weakened or loopholes may be introduced that allow the firm to operate with less scrutiny or fewer constraints. This can ultimately harm consumers or other stakeholders who rely on the industry being regulated, as well as undermine the effectiveness of the regulatory agency.

Question 5

The largest source of revenue for the federal government of the United States is from
A) tariffs collected on imported goods.
B) property taxes imposed on private property.
C) sales taxes on items purchased for consumption.
D) individual income taxes.

Accepted Answer

According to the National Taxpayer Union Foundation, individual income taxes contribute to approximately 50% of the federal government's revenue. This makes it the largest source of revenue. Tariffs, property taxes, and sales taxes are all sources of revenue for state and local governments, but not a significant contributor to federal revenue.

Question 6

What is logrolling?
A) a situation where a policymaker votes to approve a bill in exchange for favorable votes from his colleagues on other bills
B) a situation where policymakers transfer resources from those voters who are unlikely to have a huge impact on the political outcome to those who contribute to political campaigns
C) a situation where a policymaker accepts bribes to prevent proposed legislation from coming to a vote
D) a situation where a policymaker gets the government to fund a non-essential project benefiting her family members

Accepted Answer

Logrolling is a practice among policymakers where they trade votes on different bills to achieve the desired legislative outcome. This may involve a policymaker agreeing to vote in favor of a bill in exchange for favorable votes from his colleagues on other bills. For example, a policymaker may agree to vote in favor of a bill related to education in exchange for favorable votes from others on a bill related to transportation.

Question 7

When the majority of voters have preferences very different from those of the median voter,then the median voter theorem will lead to accurate predictions of the outcomes of elections.

Accepted Answer

The median voter theorem assumes that the preferences of the majority of voters are similar to the preferences of the median voter. If the majority of voters have preferences that are very different from the median voter, then the theorem may not accurately predict election outcomes.

Question 8

An example of a payroll tax in the United States is
A) Social Security taxes.
B) taxes on corporate profit.
C) excise taxes on gasoline.
D) property taxes on real estate.

Accepted Answer

Social Security taxes are a type of payroll tax in the United States. Employers and employees contribute a percentage of wages to fund Social Security benefits for retired, disabled, or deceased individuals and their families.

Question 9

What is meant by the term "rational ignorance"?
A) It refers to the absence of a negative incentive, for example, a fine for not voting, which results in a low voter turnout.
B) It refers to a situation where one policymaker deliberately approves a bill he does not support in exchange for a future favorable vote for his own cause.
C) It means the lack an economic incentive for voters to become informed about a pending legislation.
D) It refers to the fact that policymakers and their constituents have different ideas of what it means to behave rationally and each party deliberately ignores the other's view.

Accepted Answer

Rational ignorance refers to the idea that voters may choose not to become informed about a political issue or pending legislation because the cost (such as time and effort) of becoming informed outweighs the potential benefit of their vote. In other words, voters may rationally choose to remain ignorant because they don't have a strong economic incentive or motivation to become informed.

Question 10

Table 18-2
 
-Refer to Table 18-2.The table above outlines the rankings of three members of the U.S.Senate on three spending alternatives.Assume that Congress can spend additional revenue on only one of the three spending alternatives and that Bart,Lisa,and Maggie,all members of the Senate,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)Immigration Reform and Unemployment Benefits (2)Immigration Reform and Social Security Reform and (3)Unemployment Benefits and Social Security Reform.
Show the results of each vote and 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 11

At the state and local levels in the United States,the largest source of tax revenue is
A) individual income taxes.
B) property tax on real estate.
C) sales tax.
D) grants from the federal government.

Accepted Answer

The answer of At the state and local levels in...

Question 12

What is the difference between the voting paradox and the Arrow impossibility theorem?

Accepted Answer

The answer of What is the difference between the voting...

Question 13

If voters lack an economic incentive to become informed about pending legislation,then their preferences become a constraint on legislators voting for rent-seeking legislation.

Accepted Answer

If voters lack an economic incentive to become informed about pending legislation, they are more likely to be apathetic towards politics and less likely to vote, which can result in low voter turnout and less meaningful constraints on legislators. Additionally, voters' preferences may not necessarily constrain legislators from passing rent-seeking legislation if those legislators are not accountable or responsive to their constituency.

Question 14

Is a typical person likely to gather more information when buying a new computer or when voting for a member of the U.S.Senate? Why?

Accepted Answer

The answer of Is a typical person likely to gather...

Question 15

Define logrolling.Explain why logrolling often results in legislation that benefits the economic interests of a few,while harming the interests of a larger group of people.

Accepted Answer

The answer of Define logrolling.Explain why logrolling often results in...

Question 16

What is the relationship between market failure and government failure?

Accepted Answer

The answer of What is the relationship between market failure...

Question 17

Logrolling may result in
A) legislation that yields economy-wide benefits, the funding for which is borne primarily by a few of the smallest states.
B) a majority of Congress supporting legislation that benefits the economic interests of a few, while harming the economic interests of a much larger group.
C) members of Congress selling their votes on proposed legislation to the highest bidder.
D) creating limited incentives for policymakers to consider the immediate consequences of their proposed legislation.

Accepted Answer

Logrolling is a political practice where lawmakers agree to support each other's proposed legislation, even if they do not fully agree with the provisions in the bill, in order to gain support for their own proposed legislation. This can result in a majority of Congress supporting legislation that benefits the economic interests of a few, while harming the economic interests of a much larger group. This is because lawmakers tend to focus on their own interests and gaining support for their own proposed legislation, rather than considering the broader implications of the legislation for the economy as a whole.

Question 18

One important difference between the political process and the market process is that
A) the political process results in collective actions in which not everyone is required to participate, while in the market process individuals are obliged to participate.
B) the political process results in collective actions in which everyone is obliged to participate, while in the market process individuals are free to participate or not.
C) the political process results in collective actions that maximize economic surplus, while the market process may lead to efficiency losses.
D) the political process results in collective actions in which everyone is made better off, while the market process results in actions that favor some groups only.

Accepted Answer

The political process involves the use of government power to make decisions and enforce regulations that affect everyone within a given jurisdiction. These decisions may include taxes, subsidies, regulations, and public goods, among others. In contrast, the market process involves voluntary exchanges between individuals and firms, where prices and quantities are determined through the interactions of buyers and sellers. Individuals are free to participate or not in the market process, depending on their preferences and resource constraints. While both processes can lead to desirable outcomes, they differ in terms of the degree of coercion involved and the incentives that individuals face when making decisions.

Question 19

A situation where a member of Congress votes to approve a bill in exchange for favorable votes from other members on other bills is called
A) rent seeking.
B) logrolling.
C) regulatory capture.
D) special interest legislation.

Accepted Answer

This is an example of logrolling, which is the practice of exchanging votes among legislators for mutual gain or benefit. It is a common tactic used in Congress to gain support for bills and to build coalitions. Rent seeking, regulatory capture, and special interest legislation refer to other types of political behavior and do not accurately describe this situation.

Question 20

Rational ignorance
A) explains why consumers ignore sunk costs when they vote.
B) explains the Arrow impossibility theorem.
C) refers to attempts by special interests to use government action to make themselves better off at the expense of others.
D) helps to explain why rent seeking by special interest groups occurs.

Accepted Answer

Rational ignorance refers to the decision by individuals to not gather information or spend time on issues because the expected cost of doing so exceeds the expected benefit. This can lead to a situation where special interest groups, who have a much higher stake in the outcome of certain policies, will engage in rent-seeking behavior and use their resources to influence politicians or policy outcomes in their favor.

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

Unlike the market process,in the political market it is possible for some individuals to receive very large benefits from the political process without any significant impact on their tax bills.

Some economists who use the public choice model to explain the ways government intervenes in the economy believe that regulatory capture results when an agency or commission is given authority over a particular industry or product.Which of the following is the best example of regulatory capture?

The public choice model asserts that the self-interest of policymakers is likely to cause them to take actions that are inconsistent with the preferences of voters,even where those preferences are clear.

What is regulatory capture?

The largest source of revenue for the federal government of the United States is from

What is logrolling?

When the majority of voters have preferences very different from those of the median voter,then the median voter theorem will lead to accurate predictions of the outcomes of elections.

An example of a payroll tax in the United States is

What is meant by the term "rational ignorance"?

At the state and local levels in the United States,the largest source of tax revenue is

What is the difference between the voting paradox and the Arrow impossibility theorem?

If voters lack an economic incentive to become informed about pending legislation,then their preferences become a constraint on legislators voting for rent-seeking legislation.

Is a typical person likely to gather more information when buying a new computer or when voting for a member of the U.S.Senate? Why?

Define logrolling.Explain why logrolling often results in legislation that benefits the economic interests of a few,while harming the interests of a larger group of people.

What is the relationship between market failure and government failure?

Logrolling may result in

One important difference between the political process and the market process is that

A situation where a member of Congress votes to approve a bill in exchange for favorable votes from other members on other bills is called

Rational ignorance