哈维财政学英文题库 CHA1(5)

B) a system that will always lead to worthy projects getting funded. C) a system that involves the trading of votes.

D) a system that generally involves double-peaked preferences. E) all of the above. Ans: c

4. Rent seeking involves

A) finding reasonable rent rates.B) price floors.C) price ceilings.

D) citizen groups lobbying elected officials to manipulate government policy. E) none of the above.Ans: d

5. Special interest groups are established on the basis of A) sources of labor.B) size of income.

C) sources of income.D) region.E) all of the above. Ans: e

6. When each individual has consistent preferences, but those of the community are not consistent, it is known as

A) agenda manipulation.B) majority rule.C) voting paradox. D) logrolling.E) independence of irrelevant alternatives. Ans: c

7. In a representative democracy, there are

A) elected politicians.B) public employees.C) special interests.D) all of the above. Ans: d

8. A person prefers large and small levels of national defense to medium-sized levels of national defense. This person

A) is violating the law of transitivity.B) has single-peaked preferences.

C) has multiple-peaked preferences.D) can not achieve his or her most-preferred outcome. Ans: c

9. It is stated that, in democracy, every vote counts. To be a contentious voter in a democracy, one should

A) spend some time learning about the issues.B) find out about the positions of the candidates.C) be sure to vote.D) do all of the above.Ans: d 10. Political parties

A) have a large influence on setting the political agenda of candidates.B) are only concerned with market efficiency.

C) have primaries that influence the party platform.D) a and b.E) a and c. Ans: e

11. Voter fraud

A) can have a detrimental effect on the political process.B) is easily detected. C) is defined as trading votes to pass certain political agenda items. D) is more likely to occur in dictatorial political frameworks. E) is more prevalent among younger voters. Ans: a

12. Government bureaucrats want larger budgets

A) because salaries are sometimes tied to budget size.B) to fulfill an “empire building” tendency.

C) because it may be necessary to ensure marginal benefits of output equal marginal costs. D) because of all of the above. Ans: d 13. Lindahl prices

A) result in efficient levels of public goods provision. B) require honest revelation of preferences.

C) result in different prices for the same amount of output. D) cause all of the above.E) cause none of the above. Ans: d

14. Government growth has been caused by A) citizens who want larger government.

B) lots of public lands available in the West.C) increases in privatization.D) inflation. E) none of the above. Ans: a

15. Which of the following is an example of a special-interest group? A) Democratic party

B) Bureau of Alcohol, Tobacco, and FirearmsC) National Rifle Association D) Association of State LegislatorsE) all of the above Ans: c

16. The Budget Enforcement Act (BEA) of 1990

A) focuses on spending and revenue targetsB) was implanted by the Bureau of Economic Analysis

C) created the Department of Homeland Security D) all of the above Ans: a

17. In 1930 which country had the highest ratio of government expenditures to GDP? A) CanadaB) SwitzerlandC) United KingdomD) none of the above.Ans: c Essay

18. Consider the following net benefits (measured in billions of dollars) that will result from the passage of two legislative bills, X and Y:

(A) Identify the logrolling opportunity present in this situation.

(B) Identify the potential gains to voters.(C) Explain why logrolling is efficiency enhancing. Ans:

(A) On their own, neither issue X nor Y will pass. Both will be voted down by votes of 2-1. If person A trades a vote with B, then both issues will pass by 2-1 votes.

(B) With both issues passed, overall utility for person A is 3. For person B, overall utility is 4. For person C, overall utility is –5.

(C) With issue X passed, society is benefited because it had a total benefit to society of 3.

Logrolling also allowed issue Y to pass, though it shouldn’t have since its total benefit to society is –1.

19. Suppose there were three candidates running for office: Dewey, Cheatum, and Howe. Suppose a majority of voters preferred Cheatum to Dewey. Does this mean that a majority of voters preferred Howe to Dewey?

Ans: Suppose there are three voters. The following example illustrates the counter-example. Each voter ranks the candidates in order of preference. Cheatum beats Dewey, but Dewey beats Howe.

20. Suppose that you have two people in an economy, Ms. Hundley and Mr. McKenna, who want to produce a public good S. Suppose we calculate the Lindahl equilibrium using the method in your textbook. In this case, the demand curve for Ms. Hundley is S=P1/2. The

demand curve for Mr. McKenna is S=8/P. If the marginal social cost of the project is 10, what is the Lindahl equilibrium quantity of S? What are the Lindahl prices?

Ans: Set P1/2 = 8/P. Multiply both sides by P, leaving P3/2 = 8. Therefore, P = 82/3 = 4. At P = 4, S* = 2. Mr. McKenna pays 4. Ms. Hundley pays 6.

21. Consider Figure 6.5 in your textbook. If the equation for the demand curve were X = 18 – P/2 and marginal revenue were X = 9 – P/4 with MC constant at 10, how much rent would there be?

Ans: The cartel quantity would be found by setting MR = MC, which would be 6½. The

corresponding cartel price would be 23. The rents would be found by subtracting the MC of 10 from the cartel price of 23, which gives 13. Multiply that by 6½ for 84½.