micro chapter 5

Adverse Selection

the problem of incomplete information - of choosing alternatives without fully knowing the details of available options

In 2018, U.S. federal government legislation authorized

232 earmarks, totaling $14.7 billion.

regulatory capture

A situation in which bureaucrats favor the interests of the groups or corporations they are supposed to regulate at the expense of the general public.

What statement concerning a public good is false?

All benefits associated with the production and use of a public good are received by the government.

The term government failure refers to the

Economically inefficient outcomes caused by voting problems or incentive structures in government

How to find net benefit from marginal cost and marginal benefit?

Marginal profit is calculated by taking the marginal revenue (the amount of revenue earned from the sale of one additional unit) and subtracting marginal cost (the cost of producing that additional unit).

paradox of voting

The question of why citizens vote even though their individual votes stand little chance of changing the election outcome.

The sometimes inconsistent results coming from a series of paired-choice voting is due to

a normal consequence of majority voting.

what is an example of a public good?

a weather warning system

Proponents of deregulation point to all of the following industries as examples of successful deregulation except for

airlines

Because majority voting fails to incorporate the strength of the preferences of individual voters, it

can, under some circumstances, produce economically inefficient outcomes.

Cost-benefit analysis attempts to

compare the benefits and costs associated with any economic project or activity

In presidential elections, voters often find that they do not agree with any single candidate on all the issues that matter to them (the voters). This is known as the

limited and bundled choice problem.

The median-voter model implies that

many people will be dissatisfied with the size of government in the economy.

Answer the question on the basis of this table showing the marginal benefit a particular public project will provide to each of the three members of a community. No vote trading is allowed. If the tax cost of this proposed project is $600 per person, a majority vote will

pass this project and resources will be overallocated to it.

One primary reason why regulatory capture may occur in an industry is that

people who are qualified to supervise and regulate the industry often come from the industry itself.

Which of the following would be an avenue for resolving the inefficiencies associated with majority voting?

political logrolling

According to a study of hospitals, power plants, and water utilities, health and safety violations are more prevalent in public companies because

public companies are less likely to be fined for violating health and safety laws than private companies.

Economists call the pursuit of extra profit or income by influencing government policies,

rent seeking behavior

Suppose lawyers seek legislation to limit the use of computer software that enables people to use their personal computers to self-prepare their own wills, trusts, and other legal documents. This is an example of

rent-seeking behavior.

benefits received principle

the idea that those who receive the benefits of goods and services provided by government should pay the taxes required to finance them

Because of the free-rider problem,

the market demand for a public good is nonexistent or understated.