Question :
111) Which of the following statements concerning cost-benefit analysis true?
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111) Which of the following statements concerning cost-benefit analysis is true?
A) Large potential benefits, regardless of their time horizon, always justify government intervention.
B) Large potential costs, regardless of their time horizon, always preclude government intervention.
C) Though benefits from a government policy can be accurately measured, costs are usually impossible to quantify.
D) Cost-benefit analysis can be used effectively by private firms but should not be used in the public sector.
E) Though it is often difficult to estimate costs and benefits with precision, cost-benefit analysis can be useful in determining whether to implement a given government policy.
112) The direct resource costs of government intervention include the
A) increased costs of production arising from compliance with regulations.
B) resulting loss of productivity in the private sector.
C) opportunity costs of forgone investment.
D) salaries of government regulators.
E) rent seeking.
113) The total costs of government intervention in the market economy include
A) compliance costs.
B) direct resource costs, such as the salaries of civil servants.
C) the costs of rent seeking.
D) extra costs arising from regulation.
E) all of the above.
114) Examples of direct costs of government intervention include
A) the production cost of meeting new emission standards on new cars.
B) the regulatory affairs departments of many Canadian corporations.
C) the time spent by Canadians completing their income-tax forms.
D) the government’s administrative costs of conducting the Census.
E) costs of complying with provincial sales taxes.
115) “Rent-seeking” is a problem of
A) pure free-market economies.
B) centrally planned economies.
C) all economies, given the existence of government.
D) private organizations in which ownership is not identical to management.
E) landlords and tenants.
116) Attempts by professional lobbyists in Ottawa to influence the government’s subsidy to the shipbuilding industry, even when such a subsidy is not in the national interest, represents
A) an inefficient public choice.
B) the government acting like a monopolist.
C) rent seeking.
D) an externality.
E) asymmetric information.
117) Most economists who study “public choice theory” now agree that an important possible source of “government failure” is
A) that it is not possible for civil servants to determine the allocatively efficient provision of government services.
B) that most civil servants are incompetent.
C) that politicians and civil servants have their own objectives that may conflict with the national interest.
D) governments govern undemocratically.
E) politicians are incompetent or corrupt.
118) Which of the following is the best example of the phenomenon of “rational ignorance”?
A) The ignorance of a profit-maximizing firm on the location and shape of its long-run average cost curve, which is extremely difficult to determine.
B) The ignorance of most voters with regard to the position of the economy’s production possibilities boundary.
C) The theory of perfect competition assumes that consumers have full knowledge of all prices, while in reality they know the prices of only the goods and services they purchase.
D) Consumers are unaware of the quantity supplied by producers, and producers are unaware of the quantity demanded by consumers.
E) You choose not to become informed about an important government policy because the benefits of doing so are outweighed by the costs of doing so.
119) Economists generally agree that government intervention in the economy is appropriate
A) whenever there is a market failure.
B) whenever the costs of market failure are greater than the benefits of the existence of markets.
C) whenever the benefits of the correction of the market failure through intervention are greater than the costs of the intervention itself.
D) only when the market fails to provide a socially useful good.
E) whenever the costs of the intervention are greater than the value of the correction of the market failure.
120) The main point about public choice theory is that
A) most politicians are corrupt.
B) most civil servants act solely in the public interest.
C) there is adverse selection in the selection of elected officials.
D) elected officials never compromise the public interest in order to gain votes.
E) the choices of public officials may be governed more by their own self-interest than the public interest.
