Question

Question 15 (1 point)

Which of the following statements is true?

a	Regarding the reduction of private-sector economic risks, the government can outlaw various forms of theft, deception and discrimination.
b	Governments don’t face any problems when trying to organize millions of employees to carry out thousands of tasks.
c	Government failure refers to economically inefficient outcomes caused by shortcomings in the public sector.
d	All of the above.
e	Only a) and c)

Question 16 (1 point)

Which of the following statements is true?

a	The Principal-agent problem refers to conflicts that arise when tasks are delegated by one group of people (agents) to another group (principal).
b	Special-interest effect refers to any outcome of the political process whereby a small number of people obtain a government program or policy that gives them large gains at the expense of a much greater number of persons who individually suffer small losses.
c	The appeal to government for special benefits at taxpayers’ expense is called rent-seeking.
d	All of the above.
e	Only b) and c)

Question 17 (1 point)

Which of the following statements is true?

a	A government creates an unfunded liability when it commits to making a series of future expenditures without simultaneously committing to collect enough tax revenues to pay for those expenditures.
b	The government collects Social Security taxes to help defray the expected future costs of the program (Social Security and Medicare), but the current tax rates will not generate nearly enough revenue to pay for all of the expected outlays.
c	A government runs an annual budget deficit when its spending is less than its tax revenues during a particular year.
d	All of the above.
e	Only a) and b)

Answer 1

15 Option E

Correcting market failures: Government can improve economic efficiency from positive externalities by using involuntarily collected tax money to subsidize production. Can help negative externalities by using involuntary policies like direct controls, pollution taxes and cap and trade schemes.
Reducing private sector economic risks: Government makes sure that only mutually agreeable transactions take place. Government outlaws various forms of theft, deception, discrimination, restraints on trade, price-fixing and refusal to honor a contract

16 Option E

The special interest issue is an issue that generates substantial individual benefits to a small organized minority while imposing a small individual cost on many other voters

An example of rent-seeking in a modern economy is spending money on lobbying for government subsidies in order to be given wealth that has already been created, or to impose regulations on competitors, in order to increase market share. Taxi licensing is a textbook example of rent-seeking.Rent-seeking behavior occurs when a
transfer of wealth at someone else's or society's expense occurs through government action.

17 Option E

In case of Social Security Exhaustion of trust fund assets is projected to occur under the intermediate assumptions because program cost will begin to exceed the tax revenues dedicated to the trust funds in the future, requiring increasing amounts of net redemptions from the trust funds

Unfunded liabilities are debt obligations, usually of the U.S. government or pension plans, that do not have sufficient funds to pay the future debt.