Question 1

Which of the following best describes a public choice?

Accepted Answer

A decision that has consequences for many people and perhaps the entire society.

Question 2

Which of the following is an example of a government failure?

Accepted Answer

Government action leads to underprovision or overprovision of resources to a given activity.

Question 3

In the economic model of public choice, which group is primarily motivated by the goal of gaining election and reelection?

Accepted Answer

Politicians

Question 4

Which of the following best describes the free-rider problem?

Accepted Answer

The absence of an incentive for people to pay for what they consume, allowing them to benefit without paying.

Question 5

A good is considered non-excludable if:

Accepted Answer

It is impossible or extremely costly to prevent someone from enjoying its benefits.

Question 6

Which of the following is a pure public good?

Accepted Answer

National defense

Question 7

Suppose Jack and Jill both value a public good. To find the marginal social benefit (MSB) curve for this public good, you should:

Accepted Answer

Sum their marginal benefit curves vertically.

Question 8

Which of the following statements about the political marketplace is TRUE?

Accepted Answer

It does not possess the same power as the competitive market to convert self-interest into an efficient outcome.

Question 9

What is the principle of minimum differentiation?

Accepted Answer

The tendency for competitors, including political parties, to make themselves similar to appeal to the maximum number of clients (voters).

Question 10

Which of the following is most likely to result from the free-rider problem in the private provision of a public good?

Accepted Answer

Underproduction or zero production of the public good.

Question 11

If a good is rival and excludable, it is classified as:

Accepted Answer

A private good

Question 12

Which equation represents allocative efficiency in a competitive market?

Accepted Answer

$MSB = MSC$

Question 13

Why might bureaucrats advocate for overprovision of a public good?

Accepted Answer

To maximize their department’s budget, increasing their status and power.

Question 14

Rational ignorance occurs when:

Accepted Answer

Voters decide not to acquire information about a policy because the cost of doing so exceeds the expected benefit.

Question 15

Which of the following is NOT a reason why government provision of public goods may lead to inefficiency?

Accepted Answer

Price and profit signals always ensure efficient allocation.

Question 16

Consider the provision of public education. Why might some parents choose private schooling or homeschooling despite paying taxes for public schools?

Accepted Answer

The opportunity cost of private education is perceived as lower than the opportunity cost of sending children to public schools.

Question 17

Which of the following best explains why the private market fails to provide the allocatively efficient quantity of a public good?

Accepted Answer

The free-rider problem prevents individuals from paying for the good, leading to underproduction.

Question 18

Which of the following is TRUE regarding the marginal social benefit (MSB) of a public good?

Accepted Answer

It is the maximum amount all people are willing to pay for one more unit, summed vertically.

Question 19

Which of the following is a common resource?

Accepted Answer

Fish in the ocean

Question 20

When is government regulation necessarily better than an inefficient market?

Accepted Answer

Not necessarily; inefficiencies created by government action may be greater than those from market failure.

Chapter 10: Public Choices and Public Goods – Study Notes

Study Guide - Practice Questions