ECON 202 MOD 8

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Which of the following statements about rent seeking is false?

Because rent seeking redistributes society's resources, anyone engaging in such behavior is violating the law.

George Stigler's paper, "The Theory of Economic Regulation," argues that special interest pressure from producers for leads to regulations that are designed for the benefit of consumers.

False

It is well-known that the use of landfills effectively destroys the value of land for subsequent use.

False

Recycling is not an economic problem because it involves running out of basic resources that our children might need.

False

Recycling is not an economic problem because there is only so much land that can be used for landfill, and that land is substantially damaged by the creation of garbage dumps.

False

Smoking in restaurants is generally a bad idea because of the diseases caused by passive smoking.

False

The best solution to water pollution is to make the responsible people clean the water and return it to its natural state

False

The government can be relied on to efficiently solve problems associated with pollution through (Pigovian) taxes

False

The point of the video is that the government can seldom enhance economic efficiency.

False

The social problem of smoking in restaurants is caused because smokers want to pollute the air, causing harm to people around them.

False

The possibility of "government failures" should be evaluated before getting the government involved in addressing "market failures."

True

The social problem of smoking in restaurants because smokers and nonsmokers want to use the air in different ways.

True

The video indicated that there is a significant difference between recycling fluorescent lights and plastic bottles.

True

According to public choice theory, policymakers

are likely to pursue their own self-interest, even if their self-interest conflicts with the public interest.

The public choice model assumes that government policymakers

are likely to pursue their own self-interests, even if their self-interests conflict with the public interest.

Which of the following statements refers to rent seeking?

"Laws passed by the federal government often provide benefits for a small number of individuals. These individuals, in turn, have an incentive to contribute to the campaigns of politicians who pass these laws."

The key problem(s) with externalities is that

A and B above.

Sewage treatment is an example of

An externality

The key to solving problems associated with smoking in restaurants is to

Assign property rights to restaurant owners.

To establish Arrow's theorem you need to

Consider who would win when you vote in various ways & Show that the outcome depends on the order in which things are compared

The central question In trying to determine whether to involve the government in an economic issue is

Determining whether or not the government can be relied on to make things better

Economics shows that it is inefficient to recycle plastic bottles because they have little value.

False

Banning smoking in restaurants is clearly economically efficient because passive smoke is harmful.

False

Use the table to answer the following question. The issue is to have citizens vote on the three alternative projects. There are three people in the society, and they are listed on the left. To interpret the table, note that lower numbers mean that someone likes something better—a one means the person likes that alternative best, a two means second best and three means the person likes that alternative the least. If the Park beats the Police Station in a heads up vote, and the Police Station beats the Sewage Treatment Plant, then that means the Park is preferred to the Sewage Treatment Plant.

False

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?

Firms that were regulated by the Interstate Commerce Commission (ICC) attempted for many years to influence the ICC's actions.

Restaurant owners have an incentive to

Fully account for the value impact of restaurant smoking on nonsmokers. & Fully account for the value of restaurant smoking to smokers. & Take into account how smoking shifts the overall demand curve for restaurant meals.

Key limitations on the government correcting "market failures" include

Information Misaligned incentives between the government and citizens The incentive of the government to tax and spend to help politicians get elected or re-elected.

What is regulatory capture?

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.

Beginning in the 1950s economists began to investigate incentives within government. They found that:

One should be cautious in calling on the government to improve economic performance

The key to Viscusi's findings about the net impact of smoking on healthcare costs is that

People who smoke need more medical care, but they also (unfortunately) tend to die younger, and that creates an offsetting reduction in health care costs

Use the table above to answer the following question. The issue is to have citizens vote on the three alternative projects. There are three people in the society, and they are listed on the left. To interpret the table, note that lower numbers mean that someone likes something better—a one means the person likes that alternative best, a two means second best and three means the person likes that alternative the least. If the voting process begins with a comparison of the Park and the Sewage Treatment Plant, and then the winner takes on the Police Station, which project will win?

Police Station

The economically efficient amount of recycling will occur if

Recyclers pay the full cost of picking up recycled products,

Megan McArdle argues that regulatory capture happens for all of the following reasons except

Regulators want the regulated industry to spend a lot of time and effort on compliance.

Use the table to answer the following question. The issue is to have citizens vote on the three alternative projects. There are three people in the society, and they are listed on the left. To interpret the table, note that lower numbers mean that someone likes something better—a one means the person likes that alternative best, a two means second best and three means the person likes that alternative the least. If the voting process begins with a comparison of the Park and the Police Station, and then the winner takes on the Sewage Treatment Plant, which project will win?

Sewage Treatment Plant

A key advantage of assigning property rights to owners of restaurants is that

Smokers and nonsmokers are likely to be able to eat meals the way they like.

The U.S. government has imposed quotas on the importation of sugar that makes sugar prices higher because

Sugar farmers lobbied for regulation that would increase their profits by limiting competition.

To evaluate recycling, you must consider

The demand for recycled products, & The incremental costs to society for recycling products, & The value of the land used for landfills,

W. Kip Viscusi studied tobacco smoking and concluded that

The external costs and benefits of smoking were about equal, so there wasn't a significant negative externality to smoking.

Arrow's theorem investigates:

The impossibility of determining the "will of the people" by voting.

Sam Peltzman's paper, "Toward a More General Theory of Regulation," argued that regulators would reach an equilibrium when

The marginal benefit to the regulator of providing special treatment to producers equals the marginal cost of angering consumers into voting to remove the regulator.

The appropriate charge for trash disposal should be set by

The opportunity cost of using the landfill, & The cost of the trucks and labor needed to haul trash away,

The opportunity cost of using land for a landfill is determined by:

The value of the land before the landfill was developed, minus the cost of the land after the landfill is full

The net effect of smoking in a restaurant is to

There is no general answer.

Use the table to answer the following question. The issue is to have citizens vote on the three alternative projects. There are three people in the society, and they are listed on the left. To interpret the table, note that lower numbers mean that someone likes something better—a one means the person likes that alternative best, a two means second best and three means the person likes that alternative the least. Which of the following is the best choice for this society:

There is no method for determining the answer.

Arrow's impossibility theorem shows that political outcomes often critically depend on the order in which things are considered.

True

One problem with using taxes to solve economic externalities is that politicians may spend the money on things they like, rather than things their constituents want.

True

Recycling is an economic issue because the goods that are recycled, the land for landfills, and the trucks and labor needed for both recycling and trash disposal are all examples of scarce resources.

True

Use the table to answer the following question. The issue is to have citizens vote on the three alternative projects. There are three people in the society, and they are listed on the left. To interpret the table, note that lower numbers mean that someone likes something better—a one means the person likes that alternative best, a two means second best and three means the person likes that alternative the least. In a heads up vote between a Park and a Police station, the Park would win.

True

Economists investigate voting mechanisms because:

Voting systems are just another method for allocating resources.

The video showed that

When you have three or more people and three or more choices, the winner can depend strictly on the order in which things are considered. & Voting mechanisms can generate circular outcomes, so the "will of the people" cannot be determined by voting.

Which of the following is not an example of rent-seeking behavior?

engaging in aggressive advertising that slams a competitor's product

Financial contributions to the campaigns of members of Congress, state legislators, and other elected officials by firms that seek special interest legislation that make the firms better off are

examples of rent seeking

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.

false

Economists often analyze the interaction of individuals and firms in markets. Economists also examine the actions of individuals and firms as they attempt to use government to make themselves better off at the expense of others, a process that is referred to as

rent seeking

Economists often analyze the interaction of individuals and firms in markets. Economists also examine the actions of individuals and firms as they attempt to use government to make themselves better off at the expense of others, a process that is referred to as

rent seeking.

Rent-seeking behavior, unlike profit-maximizing behavior in competitive markets, wastes society's scarce resources.

true


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