As it relates to corporations, the principal-agent problem is that: |
the goals of the corporate managers (the agents) may not match the goals of the corporate owners (the principals). |
In representative democracy, voters are ____________ and politicians are ______________. |
principals; agents |
As it relates to owners and managers, the principal-agent problem results from the |
separation of corporate ownership and control |
Factors that impede the attainment of economic efficiency in the public sector are called |
government failures. |
The idea of government failure includes all of the following |
-special-interest effect. -bureaucratic inefficiency. -pressure by special interest groups. |
Public choice theorists contend that: |
public bureaucracies are inherently less efficient than private enterprises |
The pursuit through government of a "transfer of wealth" at someone else's expense refers to |
rent-seeking behavior |
Public choice economists contend public bureaucracies are inefficient primarily because |
of the absence of competitive market pressures |
The political tendency to favor spending priorities with immediate benefits but deferred costs results in |
-chronic budget deficits. -misdirection of stabilization policy. -unfunded liabilities. |
Chronic budget deficits can be attributed to |
voters wanting government programs but not wanting to pay taxes |
Government changes in interest rates to regulate the economy are part of: |
monetary policy |
Government fiscal policy involves changing which of the following? |
Taxes and government spending. |
to reduce politicization of policy making, many countries have given control of ________ to politically independent central banks. |
monetary policy |
he U.S. Federal Reserve, the Bank of Japan, the Bank of England, and the European Central Bank are all in charge of what for the countries they represent? |
Monetary policy |
Public choice theorists point out that the political process |
differs from the marketplace in that voters and congressional representatives often face limited and bundled choices. |
When congressional representatives vote on an appropriations bill, they must vote yea or nay, taking the bad with the good. This statement best reflects the |
concept of limited and bundled choices. |
Regulatory capture often occurs because of which of the following? |
Nearly everyone with expertise works in the regulated industry. |
Deregulation |
eliminates regulatory capture and can improve outcomes by increasing competition |
Which of the following is a key difference between the economic activities of government and those of private firms? |
Government has the legal right to force people to do things; private firms do not. |
The government's ability to coerce can enhance economic efficiency by: |
correcting market failures. |
In a market economy, the government's power to coerce can: |
reduce private-sector risk and increase economic efficiency. |
The government of Southland wants to improve resource allocation in the country. Which of the following actions by the Southland government is most likely to accomplish this? |
Taxing polluters and subsidizing firms that are creating significant positive externalities. |
Which of the following is a source of government failure? |
The enormous size and scope of government |
ndividual accountability within the government bureaucracy |
tends to be lacking because of civil service protections and the complexity of government. |
The field of economics that analyzes government decision making, politics, and elections is called |
public choice theory. |
Public choice economists |
use the tools of economics to analyze decision making, politics, and elections in the public sector. |
Which one of the following topics would be of the most interest to a public choice economist? |
Rent-seeking behavior |
"Government failure" is a prominent topic in: |
public choice theory. |
The median-voter model implies that a political office seeker wil |
adopt more extreme views when seeking his or her party's nomination than when running against the other party's opponent. |
"Pork-barrel" legislation that contains funding for hundreds of earmarks throughout numerous states often reflects: |
logrolling |