econ chap 6

the theory of public choice

- analyzes the likelihood that various public sector alternatives will be instituted - assumes that economic incentives influence the choices of voters - applies the tools of economics to the collective decision-making process assumes that economic incentives influence the choices of voters. applies the tools of economics to the collective decision-making process.

when subsidies, tax credits, and government favoritism are increasingly used to allocate goods and services,

- lobbying activities will increase - contributions for political campaigns will increase - political corruption will become more widespread

according to the bureau of economic analysis, government income transfer payments amounted to approximately what percent of national income?

16 percent

"The ideal policy, from the viewpoint of the state, is one with identifiable beneficiaries, each of whom helped appreciably, at the cost of many unidentifiable persons, none of whom is hurt very much" This statement is probably

Correct because voters who have a strong personal interest in an issue will tend to support candidates who cater to their views, whereas most other voters ignore the issue

True or False: Political activities consistent with economic efficiency tend to emerge naturally from the unconstrained democratic political process

FALSE

when voters pay in proportion to the benefits received from an economic action of the government, if the government activity is productive,

all voters will gain

what is a predictable side effect of increased government activity, designed to redistribute income among citizens?

an increase in rent seeking activity

public choice analysis

assumes individuals in the public sector act in their own self interests

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

both the benefits and costs are widespread among voters

what is true about the market and public sectors?

competitive behavior is present in both sectors

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

consumers are in a weak position to either discipline the suppliers or alter the quantity or quality of the service provided

according to the economic way of thinking, personal benefits and costs influence the actions of

consumers, producers, voters, and politicians in both the private and the public sectors

government decisions tend to be biased toward actions that have

current benefits that are easily observable and future costs that are difficult to identify

the method of public choice analysis

develops a logically consistent theory based on how individual actors (such as voters, politicians, and bureaucrats) respond to incentives

public choice theory suggest thats politicians will be most likely to favor redistribution of income from

disorganized individuals to well-organized special interest groups

Senator Spendall is able to use his position on an important committee to set aside government funding specifically for a new bridge in his hometown. This is an example of

earmarking

economics indicates that government funding of special interest projects and favoritism of some business firms relative to others will lead to

economic inefficiency because the funding will be driven by political rather than economic considerations

public choice analysis suggest that bureaucrats and public sector managers have a strong incentive to

expand their budgets to sizes beyond what would be considered economically efficient

what factor weakens the case for private sector provision of goods and services as opposed to public sector provision?

externalities

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

first class mail delivery from the U.S. post office

public choice analysis suggests that the primary motivating factor for politicians will be finding the policies that are most likely to

get them reelected

which of the following is legally permitted to use coercive force to modify the actions of adults against their will?

governments

Giving local governments more power is less dangerous than giving the same power to the national government because

higher exit options exist at the local level. It is easier for people to move away from a bad local government

economic theory leads us to expect that the typical voter will be uninformed on many issues because

information is costly, and the individual voter casting a well-informed vote can expect negligible personal benefit

pork barrel legislation typically bundles the pet projects of several special interest groups. such legislation

is frequently enacted, even though the overall benefits to society are less than the overall costs to society

despite many differences, the market and public sectors are similar in what respects

it will be costly to use scarce goods, whether through the private or public sector

when resources are allocated politically, rent seeking will

lead to wasteful, rather than productive, use of resources

which of the following refers to when legislators trade votes on legislation?

logrolling

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

most of the benefits of pork-barrel projects within your district will accrue to your constituents, whereas most of the costs will be imposed on voters from other districts

the short sightedness effect suggests that

politicians have a strong incentive to support projects that yield immediate and easily recognized benefits, especially when the costs of the project are difficult to identify and are observable only in the distant future

economists use the term shortsightedness effect to describe what phenomena?

politicians tend to support actions that have immediate and easily recognized current benefits

Legislators often gain by bundling a number of projects benefiting local districts at the expense of general taxpayers together on a single bill. Such legislation is called

pork-barrel legislation

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

projects that are productive will tend to be favored by an overwhelming majority of voters

When analyzing public sector decision making, economic theory assumes that voters, politicians, and government officials will

respond to changes in personal benefits and costs when making public sector choices

legislation that offers immediate and easily recognizable benefits, at the expense of uncertain costs that are in the distant future, is often enacted even when economic inefficiency results. This can be expected because of

shortsightedness effect

as methods of economic organization, the market and public sector are similar in which of the following ways?

someone must cover the cost associated with the provision of scarce goods in both sectors

What does the quotation from above suggest would have the most influence on the public sector action?

special interest groups

in the case of a private good, which of the following forms of economic organization will result in the strongest incentive for consumers and producers to economize?

the good is produced privately and consumers purchase it with their own money

market allocation and the political process differ in that

there is a one-to-one link between payment for and receipt of a good in the market sector but this is often not true in the political sector

public choice theory assumes each voter will tend to support the political candidate who offers

to provide the voter with the most personal benefits at the least personal cost

public choice analysis indicates that

unconstrained democratic governments often enact special-interest programs that waste resources and impair the standard of living

At the most basic level, the distinguishing characteristic of government that makes it different from private firms is its ability to

use coercive force against people to modify their behavior or force them to pay for a good or service whether they benefit from it or not

in which case is the political process most likely to result in the acceptance of productive programs and rejection of unproductive political activities?

when both benefits and costs are widespread among voters

in what situation is the political process likely to result in the inefficient and wasteful use of resources?

when the benefits are concentrated and the costs widespread

When is representative democracy most likely to lead to the adoption of an inefficient government program?

when the program provides substantial benefits to a small proportion of voters and the costs are widespread among voters

regarding the political process, what is true?

when voters pay in proportion to benefits received, all voters will gain if the government activity is productive

what is true of government activities under a system of representative democracy?

when voters pay in proportion to benefits received, all voters will gain if the government activity is productive

public choice theory indicates that competitive forces between candidates in elections provide a politician with a strong incentive to offer voters a bundle of political goods that she believes

will increase her chances of winning elections