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2 Nov 2020

11. Politicians have an incentive to ensure that government money is spent in their home state. Thus, when legislators are negotiating over whether to support a piece of legislation, they commonly ask each other to include _______________________.

a. logrolling

b. pork-barrel spending

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Microeconomics
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Understanding Special Interest Politics
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Raushan Raj
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2 Nov 2020

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Related questions

1. True or false? Actions that allow oligopoly firms to coordinate their pricing behavior are called facilitating practices.
 
2. In the long run, if a perfectly competitive firm is incurring an economic loss, the firm
 
A. Will leave the industry
B. Is earning greater than normal profit but not an economic profit
C. Will minimize opportunity costs by staying in business
D. Will produce as long as total revenue exceeds the total fixed cost
E. Will have some long-run fixed costs
 
3. Which of the following is NOT one of the problems associated with common ownership of resources and a job that needed to be done?
 
A. Zimbody paid big body to do the antibody's job
B. Anybody could have done it, but nobody did it
C. Everybody was sure somebody would do it
D. Everybody blamed somebody
E. Nobody realized that everybody wouldn't do it
 
4. A negative externality related to a product
 
A. Results in an overallocation of resources to that product
B. Can be corrected by government subsidies
C. Is an example of government failure
D. Results in under allocation of resources to that product
E. Can be corrected by lowering the cost of production
 
5. A primary cause of inefficiency in government is that
 
A. Antitrust is applied to government policies as well as market situations
B. Government employees tend to be lazier than private-sector employees
C. The gains from government projects are often concentrated, while the costs are dispersed among all taxpayers
D. Markets interfere with governments
E. All of these are true
 
6. According to the survey reported in the text, most people believe that health-related goods and services should be allocated by the ___ allocation mechanism.
 
A. First come, first served
B. Random
C. Government
D. Price
E. Private
 
7. It is ___ that transfer(s) consumer surplus to producers and creates (s) deadweight losses.
 
A. The commodity market
B. Restrictions to entry
C. The allocation mechanism
D. Government
E. Perfect competition
 
8. The practice of legislators supporting one another's projects in order to ensure support for their own is called
 
A. Social regulation
B. Partisanship
C. Democracy
D. Logrolling
E. Wasteful
 
9. When shopping in some countries, bargaining is standard. The sellers ask for a high price to start and then decrease the price until the sale is made. This is due to
 
A. Producers trying to gain as much consumer surplus as they can
B. Prices changing so quickly that it doesn't make sense to make price tags
C. No government control
D. The market unable to reach equilibrium
E. Consumers trying to gain as much consumer surplus as they can
 
10. All of the following are examples of a first-come, first-served system of allocation EXCEPT
 
A. Classes at school
B. Tickets to concerts
C. Medical care
D. Access to highways
E. All of these are examples allocated by a first-come, first-served system

1) If the economy was experiencing a severe recession, which of the following combinations of monetary and fiscal policy actions would be most appropriate?

a. a decrease in the reserve requirement coupled with an increase in taxes

b. the sale of government securities by the Fed coupled with an increase in the level of government spending.

c. the purchase of government securities by the Fed coupled with a decrease in the level of government spending.

d. the purchase of government securities by the Fed coupled with a tax reduction

e. an increase in the reserve requirement coupled with a tax reduction

f. the purchase of government securities by the Fed coupled with a tax increase

2) Many years ago, the traditional mortgage loan structure specified
A. a down payment of 20%.
B. an initial loan-to-value ratio of 100%.
C. a variable interest rate.
D. all of the above.

3) Unlike the traditional mortgage amortization schedule, "negative-amortization" mortgages permit the
A. mortgage payments to exceed the accrued interest during the early years of the mortgage.
B. principal payments to grow at a constant rate during the early years of the mortgage.
C. value of the house to depreciate during the early years of the mortgage.
D. outstanding balance to increase over a part of the life of the mortgage.

4) The traditional mortgage amortization schedule specifies a monthly payment that is
A. increasing over the life of the mortgage.
B. decreasing over the life of the mortgage.
C. constant over the life of the mortgage.
D. first increasing, then decreasing, over the life of the mortgage.

5) The "interest-only" mortgage typically converts later to a
A. traditional mortgage with a higher payment.
B. traditional mortgage with a lower payment.
C. "negative-amortization" mortgage with a lower payment.
D. "exotic" mortgage with a lower payment.

6) "Exotic" mortgages became popular in part because they allow someone of
A. means to get into a home they would easily have been able to afford.
B. modest means to get into a home they might otherwise not have been able to afford.
C. modest means to build more equity in their home than a traditional mortgage would allow.
D. modest means to build their credit score by proving they could make challenging payments.

7) Other things equal, increasing home prices tend to
A. force homeowners to spend less than they earn.
B. allow homeowners to spend more than they earn.
C. leave homeowners' ability to spend unaffected.
D. increase the likelihood that homeowners will default on their mortgages.

8) If homeowners purchased a $250,000 home with a zero-down, interest-only mortgage, and the value of the home subsequently fell to $200,000, in order to sell the house and move to another city, the homeowners would be required at closing to pay (in addition to the proceeds from the home sale)
A. nothing.
B. $50,000.
C. any transaction costs and real estate fees.
D. $50,000 plus any transaction costs and real estate fees.

9) Home price escalation in the U.S. during 2005 fueled booms in
A. Iraq and Afghanistan
B. stocks of dot com startups in Silicon Valley and U.S. government bonds
C. home building and home equity lines of credit
D. mortgage foreclosures and home demolition

10) The stimulus package proposed by the Bush Administration in early 2008 relied upon

A. a permanent increase in personal income tax rates
B. a temporary surtax added to existing personal income tax rates
C. making permanent the 2003 income tax rate cuts, as well as tax rebates to taxpayers
D. a requirement that any children claimed as dependents have social security numbers

11) The stimulus plan adopted in 2009 by newly-elected President Obama consisted of
A. only tax cuts
B. only spending increases on newly-created federal programs
C. only attempts to shore up Medicaid, welfare and unemployment programs
D. roughly equal tax cuts and spending increases, with additional spending to shore up existing federal programs

12) The main effect on the economy of the financial sector crisis in late 2008 was
A. reduced aggregate demand
B. increased aggregate demand
C. reduced aggregate supply
D. increased aggregate supply

13) If not corrected, the financial sector crisis of late 2008 would have tended to
A. increase both Real GDP and the general price level
B. increase Real GDP and lower the general price level
C. lower Real GDP and increase the general price level
D. lower both Real GDP and the general price level

14) Monetary policy designed to counteract a reduction in aggregate demand might include
A. a reduction in the money stock
B. a reduction in short-term interest rates
C. increased government infrastructure spending
D. an increase in individual income tax rates

The vast majority of consumers have a relatively inflexible leisure budget. If a sports team moves to town, the money one spends taking a family to a game typically is money that is not spent at a local bowling alley, golf course, restaurant or theatre. The net effect on spending in the metropolitan area then is zero or very closes to zero. While sports teams may rearrange the spending and economic activity in an urban area, they are not likely to add much to it. An important exception to this reasoning occurs when sports teams attract new money into an area. If it were true, as the Boston Red Sox claim, that 35 percent of the fans at a typical game in Fenway Park came from out of state, then each game would bring tens of thousands of dollars of new demand to the Boston metropolitan area. Several qualifiers should be noted, however. First, the experience of major league teams in the various sports suggests that the general range of fans from "out of the area" is from 5 to 20 percent (Noll and Zimbalist, 1997a, chs. 2, 15; Crompton, 1995). Of course, this range depends on how one defines "the area." A strict definition of urban limits and, hence, a smaller radius around the stadium or arena, implies a larger percentage from outside the area. A combined metropolitan statistical area that includes several counties implies a smaller proportion of fans from outside the area. Thus, the smaller the radius, the greater the amount of "new spending." Conceptually, the benefit principle of taxation would imply that the delineated area should coincide with the tax jurisdiction that supports the construction and operation of the facility.6 Second, there is considerable evidence that out-of-state fans at most sporting events do not come to town because of the game. Rather, they are in town for business reasons, to see family or for other leisure activities. If they were not at the game, they would spend their money on other entertainment in the same city. Hence, their disbursements in and around the ballpark substitute for another local spending. Further, they may be guests of a local business or family who pays for the tickets and concessions, in which case there also is no new money attracted from outside of the area (Noll and Zimbalist, 1997b). Some stadium proponents have also argued that the local sports team attracts visiting media personnel from other cities. This, of course, is as true for journalists as it is for television or radio reporters and team members themselves. But there is no net contribution here because the inflow is offset by a similar outflow of team members and media personnel when the local team plays away games. Finally, in addition to attracting some new spending from out-of-state fans coming to ball games, professional sports teams also receive distributions of national television contracts and other funds from their central league office. To the extent that these funds remain in the local economy, additional new local demand may be attributed to a sports team. As we shall see in the next section, however, certain substantial leakages retard this effect.

1. Read the above sentences and explain how a substitution effect is relevant for evaluating the economic impact of professional sports franchises.

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