Economics Chapter 22 Quiz

Special interest group A receives a 1/10,000th slice of the economic pie (Real GDP). It is seeking a transfer of $1,000. For group A to be indifferent between a transfer policy and an economic growth policy, economic growth must be ________________ times larger than the _________________. 1,000; transfer 10,000; transfer 100; transfer 10,000; transfer minus $1,000

10,000; transfer

A divisive society is one in which members of society work together for the common good. True False

False

Special interest groups are very unlikely to push for policies that increase the size of their slice of the economic pie if it means that the overall size of the economic pie will shrink. True False

False

Which of the following is true? Government cannot remove individuals from a prisoner's dilemma setting and make them better off. As long as government charges each individual a tax that is more than the gain received by being removed from a prisoner's dilemma setting, then government makes that individual better off. Government can remove individuals from a prisoner's dilemma setting by changing the payoff matrix. all of the above

Government can remove individuals from a prisoner's dilemma setting by changing the payoff matrix.

Involuntary transfers are the type of transfers used in the case against government. True False

True

Some people see the government as being more heavily involved in taking sides than in serving the common interest. True False

True

Which of the following is usually discussed in the case against government? special interest groups and transfers the unintended effects of governments actions removal from the prisoner's dilemma a and b

a and b

An unintended effect of a new tax placed on the producers of good A may include a higher price paid by the consumers of good A. less consumers' surplus for the buyers of good A. fewer workers employed in the production of good A. all of the above

all of the above

Which of the following situations is used as a justification for government? negative externalities removal from the prisoner's dilemma nonexcludable goods positive externalities all of the above

all of the above

In the prisoner's dilemma setting for producing and stealing, a tax imposed on participants could end up changing the payoff matrix so that one participant is better off, and one participant is worse off. both participants are worse off. both participants are better off. all of the above are possible

all of the above are possible

When a good is nonexcludable, then individuals will purchase the good for more than what it cost to produce the good. can obtain the benefits of the good without paying for it. have an incentive to become free riders. b and c

b and c

Government provides a nonexcludable public good that the public demands and can't seem to acquire through the market. This is government acting as a transfer mechanism. being non-productive. engaging in rent-seeking activities. being productive.

being productive.

A special interest group has a good chance of redistributing (transferring) income from others to itself if the costs of the transfer are spread over a very large number of people. costs of the transfer are spread over a very small number of people. costs of the transfer are spread over the same number of people that comprise the special interest group. the number of members in the special interest group is greater than 100.

costs of the transfer are spread over a very large number of people.

Government provides a nonexcludable public good that no one wants. This situation is most closely related with: government solving a market failure. government failure. market failure. the market solving a government failure.

government failure.

Why might special interest groups be more likely to push for transfers instead of economic growth? The answer is because it usually takes a much __________________ percentage _______________ in growth to equal what they can get from the transfer. smaller; decrease larger; increase larger; decrease smaller; increase

larger; increase

A nonexcludable public good is rivalrous in consumption and nonexcludable nonrivalrous in consumption and excludable nonrivalrous in consumption and nonexcludable

nonrivalrous in consumption and nonexcludable

In a divisive society the members of groups within the society see themselves as working in harmony with other groups in the society. equal to other groups within the society. pitted against other groups in the society. a and b

pitted against other groups in the society.

A community of 100 persons wants to redistribute (transfer) some income from themselves to members of group A. So far, they don't seem to be able to do what they say they want to do. This is most likely because each member of the community of 100 persons sees his contribution as __________________ relative to the total (of contributions) and therefore chooses to be a __________________. large; rent-seeker small; rent-seeker small; free rider large; free rider

small; free rider

Individuals want nonexcludable public good X, but the market does not provide it because of the free rider problem. Government overcomes the free rider problem by ______________ individuals and then either producing good X itself or paying someone to produce it. forcing individuals to work longer hours taxing surveying subsidizing

taxing

The essence of a prisoner's dilemma setting is that if both person A and person B do what is best for each of them, they end up in a position that is "the best" for each of them. they end up in a position that is "the worst" for each of them. one ends up in a position that is "the best" for him and the other ends in a position that is "the worst" for him. they end up in a position from which each would prefer to move away

they end up in a position from which each would prefer to move away.