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As it relates to corporations, the principal-agent problem is that:

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the goals of the corporate managers (the agents) may not match the goals of the corporate owners (the principals).

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In representative democracy, voters are ____________ and politicians are ______________.

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principals; agents

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As it relates to owners and managers, the principal-agent problem results from the

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separation of corporate ownership and control

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Factors that impede the attainment of economic efficiency in the public sector are called

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government failures.

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The idea of government failure includes all of the following

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-special-interest effect. -bureaucratic inefficiency. -pressure by special interest groups.

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Public choice theorists contend that:

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public bureaucracies are inherently less efficient than private enterprises

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The pursuit through government of a "transfer of wealth" at someone else's expense refers to

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rent-seeking behavior

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Public choice economists contend public bureaucracies are inefficient primarily because

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of the absence of competitive market pressures

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The political tendency to favor spending priorities with immediate benefits but deferred costs results in

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-chronic budget deficits. -misdirection of stabilization policy. -unfunded liabilities.

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Chronic budget deficits can be attributed to

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voters wanting government programs but not wanting to pay taxes

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Government changes in interest rates to regulate the economy are part of:

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monetary policy

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Government fiscal policy involves changing which of the following?

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Taxes and government spending.

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to reduce politicization of policy making, many countries have given control of ________ to politically independent central banks.

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monetary policy

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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?

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Monetary policy

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Public choice theorists point out that the political process

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differs from the marketplace in that voters and congressional representatives often face limited and bundled choices.

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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

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concept of limited and bundled choices.

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Regulatory capture often occurs because of which of the following?

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Nearly everyone with expertise works in the regulated industry.

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Deregulation

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eliminates regulatory capture and can improve outcomes by increasing competition

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Which of the following is a key difference between the economic activities of government and those of private firms?

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Government has the legal right to force people to do things; private firms do not.

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The government's ability to coerce can enhance economic efficiency by:

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correcting market failures.

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In a market economy, the government's power to coerce can:

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reduce private-sector risk and increase economic efficiency.

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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?

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Taxing polluters and subsidizing firms that are creating significant positive externalities.

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Which of the following is a source of government failure?

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The enormous size and scope of government

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ndividual accountability within the government bureaucracy

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tends to be lacking because of civil service protections and the complexity of government.

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The field of economics that analyzes government decision making, politics, and elections is called

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public choice theory.

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Public choice economists

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use the tools of economics to analyze decision making, politics, and elections in the public sector.

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Which one of the following topics would be of the most interest to a public choice economist?

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Rent-seeking behavior

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"Government failure" is a prominent topic in:

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public choice theory.

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The median-voter model implies that a political office seeker wil

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adopt more extreme views when seeking his or her party's nomination than when running against the other party's opponent.

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"Pork-barrel" legislation that contains funding for hundreds of earmarks throughout numerous states often reflects:

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