A citizen decides not to research the candidates in an upcoming election because it would take hours and a single vote is very unlikely to change the result. What do economists call this kind of choice?
Rational ignorance
✓
Logrolling
Regulatory capture
A voting cycle
Correct Answer
Rational ignorance
Rational ignorance is a utility-maximizing decision to skip voting or stay uninformed, because the cost of becoming informed is real while the chance that one vote decides the outcome is tiny. Logrolling is legislators trading votes on unrelated bills. Regulatory capture is an industry gaining influence over its own regulators. A voting cycle is a pattern of majority votes with no consistent winner.
Category: Voters and Elections
Question 2
Which situation gives a group the strongest incentive to organize and lobby for a policy?
Small benefits spread across millions of people
Large benefits shared among a small number of members
✓
Benefits that go to people who cannot be identified
Costs shared equally by every citizen
Correct Answer
Large benefits shared among a small number of members
When a few people each stand to gain a lot, each one has a strong reason to spend time and money on lobbying, and a small group is easy to coordinate. Small benefits spread across millions of people give each person little reason to act. Benefits that go to people who cannot be identified make organizing very hard. Costs shared equally by every citizen are thin and dispersed, so they rarely spark organized action.
Category: Special Interests
Question 3
Why have older Americans been politically effective in winning programs such as Medicare coverage of prescription drugs?
They make up a majority of all eligible voters
They are guaranteed a set number of seats in Congress
They vote at high rates and have well-organized advocacy groups
✓
They are exempt from paying federal taxes
Correct Answer
They vote at high rates and have well-organized advocacy groups
Older citizens turn out to vote at much higher rates than young adults, and organizations such as the AARP represent them with money and organization. They make up a majority of all eligible voters is false; they are a minority whose influence comes from turnout and organization. They are guaranteed a set number of seats in Congress is false. They are exempt from paying federal taxes is also false.
Category: Special Interests
Question 4
Which Supreme Court decision held that the First Amendment protects independent political spending by corporations and struck down limits on that spending?
Buckley v. Valeo
Brown v. Board of Education
Marbury v. Madison
Citizens United v. FEC
✓
Correct Answer
Citizens United v. FEC
Citizens United v. FEC was a 5-4 decision that removed limits on independent political spending by corporations and led to a sharp rise in election spending. Buckley v. Valeo, decided in 1976, earlier linked campaign spending to free speech and allowed only voluntary spending limits tied to public financing. Brown v. Board of Education ended legal school segregation. Marbury v. Madison established judicial review.
Category: Voters and Elections
Question 5
A group that is small compared with the whole nation but well organized and focused on one specific issue is called what?
Special interest group
✓
Political party
Electorate
Median voter bloc
Correct Answer
Special interest group
A special interest group is small, organized and focused, which lets it push policies that benefit its members even when they do not benefit society as a whole. A political party is a broad organization that runs candidates on many issues. The electorate is the entire body of eligible voters, the opposite of a small group. A median voter bloc would be the large middle of the political spectrum, not a narrow group.
Category: Special Interests
Question 6
A proposed tax on pollution would cost each of two factories in a town $1 million in profits and would give each of the town's 10,000 residents $300 in benefits. What is the total benefit to the residents?
$300,000
$3 million
✓
$2 million
$30 million
Correct Answer
$3 million
Total benefit equals the number of residents times the benefit per resident: 10,000 x $300 = $3,000,000, or $3 million. $300,000 multiplies by only 1,000 residents. $2 million is the combined cost to the two factories. $30 million multiplies by 100,000 residents.
Category: Special Interests
Question 7
A new rule would cost each of 5 firms $4 million and would give each of 100 million people a benefit of $2. Total benefits exceed total costs, yet the rule may fail. According to the economics of special interests, what explains this?
The firms' total cost is larger than the public's total benefit
Firms are not allowed to contact legislators about rules
Each firm has a much stronger incentive to lobby than each person
✓
Each person's benefit is larger than each firm's cost
Correct Answer
Each firm has a much stronger incentive to lobby than each person
The firms lose $20 million in total while the public gains $200 million, but each firm stands to lose $4 million and can easily coordinate with four others, while each person gains only $2 and has little reason to act. The firms' total cost is larger than the public's total benefit is false, since $20 million is far less than $200 million. Firms are not allowed to contact legislators about rules is false; lobbying is legal. Each person's benefit is larger than each firm's cost is false, because $2 is far less than $4 million.
Category: Special Interests
Question 8
When a regulated industry gains considerable influence over the government agency that is supposed to oversee it, this is called what?
Rational ignorance
Pork-barrel spending
Logrolling
Regulatory capture
✓
Correct Answer
Regulatory capture
Regulatory capture occurs when the firms being regulated end up shaping the decisions of their own regulators. Rational ignorance is a voter's choice to stay uninformed. Pork-barrel spending is legislation that mainly benefits a single political district. Logrolling is legislators agreeing to support one another's unrelated bills.
Category: Special Interests
Question 9
Legislation that directs government money mainly to one legislator's district, while its costs are spread across taxpayers nationwide, is called what?
Pork-barrel spending
✓
Logrolling
Rational ignorance
Regulatory capture
Correct Answer
Pork-barrel spending
Pork-barrel spending concentrates benefits in one district, where voters notice and reward their legislator, while each taxpayer elsewhere pays only a tiny share. Logrolling is the vote-trading that often helps such projects pass. Rational ignorance is a voter's choice to stay uninformed. Regulatory capture is an industry's influence over its own regulators.
Category: Pork and Logrolling
Question 10
Several legislators agree to vote for a package of otherwise unrelated bills, each of which one of them favors, so that all of the bills pass together. What is this practice called?
Filibustering
Logrolling
✓
Gerrymandering
Regulatory capture
Correct Answer
Logrolling
Logrolling is vote-trading among legislators, and it tends to encourage pork-barrel projects because a coalition can fund a project in every member's district. Filibustering is prolonging debate to delay or block a vote. Gerrymandering is drawing district lines to favor one party. Regulatory capture is an industry gaining influence over its regulators.
Category: Pork and Logrolling
Question 11
Under rent control, which group bears a cost that is hard to see and therefore tends to be overlooked in politics?
Tenants already living in rent-controlled units
Officials who administer the rent rules
People who want to rent but cannot find an apartment
✓
Homeowners living in other cities
Correct Answer
People who want to rent but cannot find an apartment
Rent control leads landlords to offer fewer units, so would-be renters who never find housing pay a real but invisible cost, an example of identifiable winners and anonymous losers. Tenants already living in rent-controlled units are the visible winners. Officials who administer the rent rules are not the group that loses housing. Homeowners living in other cities are not affected by the local rule.
Category: Identifiable Winners
Question 12
When a country blocks imports to protect a domestic industry, which group's losses are hardest for voters to notice?
Workers in the protected domestic industry
Owners of the protected domestic firms
Legislators who voted for the import limits
Consumers who would have bought cheaper imported goods
✓
Correct Answer
Consumers who would have bought cheaper imported goods
Each consumer pays a little more, and those costs are spread thinly across millions of people who rarely trace them to the policy. Workers in the protected domestic industry are visible winners whose jobs are preserved. Owners of the protected domestic firms are also clear winners. Legislators who voted for the import limits may gain political support rather than suffer losses.
Category: Identifiable Winners
Question 13
Which theory predicts that politicians will adopt policies that match the preferences of the voter in the middle of the left-right political spectrum?
Median voter theory
✓
Random walk theory
Rational expectations theory
Comparative advantage theory
Correct Answer
Median voter theory
Median voter theory says candidates move toward the center to win, so policy should reflect a middle-of-the-road position. Random walk theory describes unpredictable movements in stock prices. Rational expectations theory concerns how people form forecasts about the economy. Comparative advantage theory explains gains from specialization and trade.
Category: Majority Rule
Question 14
A state's voters are 60% liberal and 40% conservative. Two liberal candidates and one conservative candidate run for governor, and whoever gets the most votes wins. What outcome is possible?
A liberal is guaranteed to win the election
The conservative wins because the liberal vote divides
✓
The election must end in a tie
Voters' party preferences have no effect on the result
Correct Answer
The conservative wins because the liberal vote divides
If liberal voters divide between their two candidates, for example 30% and 30%, the conservative's 40% is the largest single share, so majority preferences are not reflected. A liberal is guaranteed to win the election is false for exactly that reason. The election must end in a tie is false, since one candidate will usually have the most votes. Voters' party preferences have no effect on the result is false; they determine each candidate's share.
Category: Majority Rule
Question 15
When majority votes show that option A beats option B, option B beats option C, and option C beats option A, the situation is called what?
Logrolling
A split vote
A voting cycle
✓
A median voter outcome
Correct Answer
A voting cycle
A voting cycle means majority rule produces no consistent winner, because each option loses to some other option. Logrolling is legislators trading votes on unrelated bills. A split vote happens when similar candidates divide their supporters. A median voter outcome is a stable middle-of-the-road policy, which a cycle prevents.
Category: Voting Cycles
Question 16
Many local governments hire private companies to collect garbage instead of using city employees. What does this approach try to achieve?
A ban on private firms bidding for city work
Higher costs that are paid entirely by borrowing
A way to avoid any oversight by elected officials
The efficiency that competition brings to private firms
✓
Correct Answer
The efficiency that competition brings to private firms
Private firms that compete for a contract face pressure to keep costs low and quality high, which government agencies funded by taxes often lack. A ban on private firms bidding for city work is the opposite of hiring them. Higher costs that are paid entirely by borrowing is not the goal of contracting. A way to avoid any oversight by elected officials is wrong, since officials still choose and monitor the contractor.
Category: Markets and Government
Question 17
Three roommates rank dinner choices. Ana: pizza, then tacos, then sushi. Ben: tacos, then sushi, then pizza. Cal: sushi, then pizza, then tacos. In a majority vote between only sushi and pizza, which wins?
Sushi, 2 votes to 1
✓
Pizza, 2 votes to 1
Sushi, 3 votes to 0
Pizza, 3 votes to 0
Correct Answer
Sushi, 2 votes to 1
Ana ranks pizza above sushi, but Ben and Cal both rank sushi above pizza, so sushi wins 2 to 1. Pizza, 2 votes to 1 reverses Ben's ranking. Sushi, 3 votes to 0 ignores Ana's preference for pizza. Pizza, 3 votes to 0 ignores both Ben and Cal. With these rankings pizza also beats tacos and tacos beat sushi, so the preferences form a cycle.
Category: Voting Cycles
Question 18
Why do economists expect government agencies that provide goods directly to face weaker pressure to perform well than private firms?
They are prohibited from hiring skilled workers
They do not face competitors or the threat of going bankrupt
✓
They must earn a profit each year to survive
They sell their services in highly competitive markets
Correct Answer
They do not face competitors or the threat of going bankrupt
Agencies are funded by tax dollars, so unhappy citizens cannot take their business to a rival, and pressure from elected officials is much milder than the threat of bankruptcy. They are prohibited from hiring skilled workers is false. They must earn a profit each year to survive describes private firms, not agencies. They sell their services in highly competitive markets is the reverse of their situation.
Category: Markets and Government
Question 19
Which statement reflects a balanced economic view of markets and government?
Markets reliably produce every outcome society wants
Government reliably fixes every market shortcoming
Both have real strengths and real weaknesses
✓
Economic analysis serves only one political ideology
Correct Answer
Both have real strengths and real weaknesses
Markets allocate scarce resources flexibly but can fail, and government can help with market problems but is itself imperfect, so each should be judged by its actual strengths and weaknesses. Markets reliably produce every outcome society wants ignores problems such as pollution and monopoly. Government reliably fixes every market shortcoming ignores special interests and voting problems. Economic analysis serves only one political ideology is false, since economists across the political spectrum use the same tools.
Category: Markets and Government
Question 20
A tariff on imported tires protects jobs for a small, well-organized group of workers but raises tire prices slightly for millions of consumers. Why does the economics of special interests predict that consumers will not organize against it?
Consumers gain from paying higher tire prices
Consumers are legally barred from contacting legislators
Each consumer loses more than each worker gains
Each consumer loses only a little, and organizing is costly
✓
Correct Answer
Each consumer loses only a little, and organizing is costly
A small loss per person is not worth the time and effort of organizing millions of strangers, while the protected workers have a concentrated stake and can coordinate easily. Consumers gain from paying higher tire prices is false; higher prices are a loss. Consumers are legally barred from contacting legislators is false. Each consumer loses more than each worker gains is false, because each worker's job is worth far more to that worker than a few dollars per tire.
Category: Identifiable Winners