Multiple Choice
Identify the
letter of the choice that best completes the statement or answers the question.
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1.
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Sally, Kelly, and Debbie are roommates deciding on how many cats they want in the
apartment. Sally prefers three cats to two cats to one cat, Kelly prefers two to one to three, and
Debbie prefers one to two to three. If they decide by majority vote (one versus two, two versus
three, and so on), how many cats will they get? A) | none | B) | one | C) | two | D) | three | E) | the answer
cannot be determined from the information given | | |
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2.
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The
median voter is most likely to get what he or she wants A) | when many issues
are under consideration | B) | when logrolling is going on | C) | when there is a
cyclical majority | D) | in a representative democracy | E) | when a single
issue is under consideration | | |
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3.
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Under
representative democracy, A) | the median voter's preferences are always
satisfied | B) | citizens no longer have any influence since they do not vote on
each issue | C) | representatives may reflect the preferences of the median
voter | D) | less logrolling will occur than under direct
voting | E) | logrolling is impossible | | |
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4.
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When
tobacco farmers in states such as Virginia try to influence legislators to pass laws that are
favorable to the tobacco industry, this is an example of a special-interest group engaged
in A) | a zero-sum
game | B) | profit
maximization | C) | rent seeking | D) | market
exchange | E) | rational ignorance | | |
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5.
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Because information and the time required to acquire and digest it are
scarce, A) | consumers
concentrate on private choices rather than on public choices | B) | consumers
concentrate on public choices rather than on private choices | C) | it is irrational
for consumers to remain ignorant of the costs and benefits of government
proposals | D) | consumers have greater incentive to gather and act upon
information about public choices than to gather and act upon information about their private
choices | E) | an individual voter has more incentive to examine the
performance records of candidates for public office | | |
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6.
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One
result of voters' rational ignorance is that A) | cyclical majorities are more common | B) | logrolling is
more common | C) | majority rules | D) | special
interests often dominate | E) | members of Congress go along with whatever their constituents
want | | |
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7.
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Rational ignorance suggests that voters may not spend much time examining candidates
before an election because A) | politics is boring | B) | each voter has
virtually no chance of deciding the election | C) | public choices
are not important to society | D) | candidates are chosen by the electoral
college | E) | candidates are usually so different that it is easy to
determine which is better | | |
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8.
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Rationality implies that in order to get what they want, people will spend relatively
more time and effort A) | making private market decisions | B) | getting
politically involved | C) | investigating political candidates'
platforms | D) | debating social issues | E) | writing to
Congress | | |
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9.
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In
order to dispose of nuclear waste created by power plants around the country, the government buys
land in Glowing Gulch, Idaho. Citizens of that town organize to block construction of the nuclear
waste facility. Which of the following statements is false? A) | The benefits of
the nuclear waste facility are widespread. | B) | The costs of the nuclear waste facility are
concentrated. | C) | The citizens of Glowing Gulch are a special-interest
group. | D) | Consumers of the power generated at the nuclear plants are not
likely to organize to support construction of the nuclear waste facility. | E) | The citizens of
Glowing Gulch are equally concerned about all public issues. | | |
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10.
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Competing-interest legislation involves A) | concentrated
costs and widespread benefits | B) | both widespread costs and widespread
benefits | C) | both concentrated costs and concentrated
benefits | D) | widespread costs and concentrated
benefits | E) | concentrated costs and either widespread or concentrated
benefits | | |
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11.
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Legislation that provides a price support for dairy farmers is an example
of A) | public-interest
legislation | B) | competing-interest legislation | C) | a positive-sum
game | D) | special-interest
legislation | E) | concentrated-costs legislation | | |
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12.
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In
Exhibit 0216, triangle abc A) | represents consumer surplus before the price
support | B) | represents producer surplus at the support
price | C) | does not represent consumer surplus at the support price
because the equilibrium price is not $2.50 | D) | does not represent consumer surplus at the support price
because the consumer also pays for the storage of cheese, butter, and powdered milk as well as the
purchase of excess supply | E) | represents consumer surplus after the price
support | | |
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13.
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In
the long run, the beneficiaries of farm price supports are A) | tenant
farmers | B) | consumers | C) | taxpayers | D) | milk drinkers | E) | early owners of
specialized resources | | |
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14.
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Direct transfer programs A) | are generally less efficient and less politically acceptable
than subsidy programs | B) | are generally more efficient and more politically acceptable
than subsidy programs | C) | are generally less efficient but more politically acceptable
than subsidy programs | D) | are generally more efficient but less politically acceptable
than subsidy programs | E) | will generally result in increased production by the group
being subsidized | | |
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15.
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A
lobbyist for the coal industry asks Congress to limit environmental constraints on coal-burning
plants. This is an example of A) | the median-voter model | B) | rent
seeking | C) | perfect competition | D) | monopoly | E) | public-interest legislation | | |
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16.
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The
term populist legislation refers to legislation that involves A) | widespread
benefits and costs | B) | concentrated costs and benefits | C) | widespread
benefits but concentrated costs | D) | concentrated benefits but widespread
costs | E) | satisfying the majority of voters | | |
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17.
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According to rent-seeking theory, which group is most likely to benefit from
representative democracy? A) | consumers | B) | taxpayers | C) | the poor | D) | children | E) | lawyers | | |
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18.
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Rent
seeking reduces our overall economy's efficiency by A) | getting
government to adopt legislation that actually reduces production | B) | disseminating
market information | C) | lowering taxes | D) | getting voters
more interested in politics | E) | reducing equity | | |
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19.
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Rent
seeking activities by special interest groups result in A) | greater economic
activity by promoting efficiency in government | B) | lower economic
activity by diverting resources to less-productive or nonproductive uses | C) | a more equal
distribution of income and wealth in the nation | D) | lower
expenditures by government through an increase in taxes | E) | greater
efficiency in the private economy and increased wealth for society | | |
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20.
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Some
of the nation's best minds are occupied with devising schemes to avoid taxes and to transfer income
to favored groups at the expense of market efficiency. These activities are called A) | rational
ignorance | B) | choice of the cyclical majority | C) | rent
seeking | D) | competing interest legislation | E) | a zero-sum
game | | |
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21.
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Campaign finance reform is usually proposed A) | as a way of
reducing the power of special-interest groups | B) | as a form of
rent seeking | C) | by economists as a way of implementing the median voter
model | D) | by political action committees | E) | by the Justice
Department | | |
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22.
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Campaign finance reform A) | was implemented in 1996 | B) | is favored, in
one form or another, by most Americans | C) | is a way to publicly fund presidential
campaigns | D) | is primarily a Republican--rather than a
Democratic--issue | E) | is a form of rent seeking | | |
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23.
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Limits of special-interest contributions to national political
campaigns A) | would increase
the extent of rent seeking | B) | would involve concentrated costs and concentrated
benefits | C) | are a form of rational ignorance | D) | would heighten
the advantage of incumbency | E) | would heighten the advantage of
challengers | | |
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24.
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Tax
evasion differs from tax avoidance in the sense that evasion A) | is
easier | B) | can only be done through an
accountant | C) | is legal | D) | is
illegal | E) | is encouraged by the Internal Revenue
Service | | |
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25.
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Filing a fraudulent income tax return that understates income or overstates deductions
is known as A) | tax
evasion | B) | logrolling | C) | tax
avoidance | D) | rent seeking | E) | profiteering | | |
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26.
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Suppose you want to buy a boat, but you know that interest paid on a boat loan is not
tax deductible. Therefore, you take out a home equity loan, the interest on which is still tax
deductible. This procedure is an example of A) | illegal tax avoidance | B) | illegal tax
evasion | C) | legal tax avoidance | D) | legal tax
evasion | E) | the answer cannot be determined from the information
given | | |
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27.
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Activities that go unreported to the government in order to avoid paying taxes or
because the activity is illegal are known collectively as the A) | non-profit
sector | B) | federal sector | C) | illegal
economy | D) | special-interest category | E) | underground
economy | | |
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28.
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Which
of the following would be considered part of the underground economy? A) | tips reported to
the IRS by a waitress | B) | a barber giving a person a haircut in exchange for a
meal | C) | income earned
through selling shares of stock | D) | the portion of a professional athlete's salary that is economic
rent | E) | donations
received by a local church in their collection plate on Sunday morning | | |
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29.
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One
consequence of raising tax rates is that it A) | provides an added incentive to work | B) | provides less
incentive to participate in the underground economy | C) | always increases
total tax revenues | D) | leads to less underreporting of
income | E) | leads to more underreporting of
income | | |
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30.
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Private firms and public bureaus differ in the sense that A) | only private
firms employ capital | B) | public bureaus usually show a profit | C) | some public
bureaus are inefficient | D) | ownership of private firms is
transferable | E) | ownership of public bureaus is transferable in the
marketplace | | |
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31.
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If
managers of a private corporation perform poorly, each owner has the option of A) | closing down the
firm | B) | selling her
share of the firm | C) | managing the firm herself | D) | paying no taxes
on the little profit she does receive | E) | selling off the plant and equipment of the
firm | | |
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32.
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The
fire department receives its revenues from the government budget, not on a per-fire-extinguished
basis. As a result, it is difficult for department officials to know if A) | the fire
department is even needed | B) | too much or too little fire protection is being
supplied | C) | fires should be extinguished | D) | they should
raise or lower price | E) | keep the difference between revenues and
costs | | |
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33.
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In
deciding between using a public bureau or a private firm to collect garbage, elected officials may
prefer a public bureau because A) | public bureaus have been shown to be more efficient than
private firms in garbage collection | B) | they can convey political favors by giving people jobs in the
public bureau | C) | public bureaus will be more responsive to
consumers | D) | citizens would have to pay if private firms collected
garbage | E) | taxes will be lower if the public bureau is in charge of
garbage collection | | |
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34.
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Generally, people are more satisfied with private market outcomes than public voting
outcomes because A) | each consumer in
the private market can choose the quantity he or she desires | B) | most people are
near the median | C) | the prices are lower | D) | markets are
involuntary | E) | there are too many choices to make in the public
sector | | |
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35.
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A
public good, such as a community's emergency warning sirens, typically A) | imposes benefits
on only a few individuals but imposes costs on many people | B) | imposes both
benefits and costs on relatively few individuals | C) | imposes benefits
on many individuals but imposes the costs on relatively few people | D) | imposes both
benefits and costs on many individuals | E) | only imposes costs on individuals when logrolling is prevalent
in the government | | |
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