Question : 11) As pointed out by the “big tradeoff,” government action : 1226499

11) As pointed out by the “big tradeoff,” government action that redistributes incomes so that everyone has the same income leads to

A) fairness according to the “fair rules” approach.

B) efficient markets.

C) resources being allocated according to a command system.

D) a smaller total output

E) lower taxes on the rich than on the poor so that the rich do not lose their incentive to work.

12) Redistributing income from the rich to the poor creates inefficiency because

A) of wasteful expenditures by people receiving welfare grants.

B) of the administrative costs to operate the government redistribution agencies.

C) the redistribution creates an incentive to produce less output.

D) Both answers B and C are correct.

E) Both answers A and C are correct.

13) Why does redistribution, so that the distribution of income is equal, bring about less total output?

A) Incentives to work are reduced.

B) No one can determine marginal benefit or marginal cost as a result.

C) Those in political power will likely receive a larger income.

D) Because the marginal benefit and marginal cost of work have been equally increased.

E) The premise of the question is incorrect because an equal distribution of income would increase rather than decrease the total amount produced.

14) In December 2010, Kansas had a severe ice storm that caused electrical blackouts. The Fictitious Portable Generator firm of Lawrence had several portable generators that could be used by homeowners to provide electricity. Which of the following would be the fair-rules way to provide them?

A) The government confiscates the generators owned by Fictitious and distributes them.

B) Fictitious is forced by the state to rent the generators at half the normal rate.

C) The state sets up a lottery to determine who rents the available generators at the normal rate.

D) Fictitious rents generators at the equilibrium market price.

E) Fictitious follows government commands about who gets to use the generators.

15) If the government takes over the distribution of some scarce good in a time of a natural disaster and provides the good at no charge to users, what must also be done?

A) The government must produce the good itself.

B) Some rationing mechanism must be set up to determine who gets the good.

C) Everyone hurt in the natural disaster must get one of the goods.

D) nothing

E) Because we live in a democracy, the government must use majority rule as the rationing mechanism.

16) The “fair rules” view of fairness is based on

A) income transfers from the rich to the poor.

B) property rights and voluntary exchange.

C) utilitarianism.

D) the big tradeoff.

E) allocating resources using majority rule.

17) The idea that unequal incomes is unfair generally uses the ________ principle of fairness.

A) big tradeoff

B) involuntary exchange

C) voluntary exchange

D) it’s not fair if the result isn’t fair

E) it’s not fair if the rules aren’t fair

18) Which of the following is an example in which “the big tradeoff” can occur?

A) The government redistributes income from the rich to the poor.

B) Ford increases the price of a pickup truck.

C) A basketball player signs a $5 million contract.

D) A college lowers tuition.

E) The price of personal computers falls year after year.