Incumbents are unaffected by fixed costs of entry while potential entrants are affected by them because A) for potential entrants the cost is avoidable, while for the incumbent, it is not. B) fixed costs will be greater for the potential entrant than for the incumbent. C) fixed costs are zero for the incumbent. D) incumbents […]
One desirable aspect of having multiple levels of government is that numerous small governments _____. a. leads to a prisoners’ dilemma b. allows for the possibility of intergovernmental competition c. affect the optimal size of the sharing group d. demonstrate how effective the federal government is at what it does ANSWER b
Connecting public roads in one city to public roads in another is an example of a _____ problem where larger governments can help smaller governments. a. negative externalities b. economies of scale c. prisoners’ dilemma d. coordination problem ANSWER d
One reason larger governments might be preferable to smaller ones is _____. a. diminishing marginal utility b. intergovernmental competition c. economies of scale d. the flypaper effect ANSWER c
Which of the following helps to reduce risk? A) Abstain from risk taking. B) Obtain more information. C) Diversify. D) All of the above. ANSWER D
Logrolling would allocate resources efficiently if everyone could participate. List and explain two reasons why we do not see logrolling in general elections. What will be an ideal response? ANSWER The first reason we do not see logrolling in general elections is because of high transactions costs. With large numbers of voters in a […]
During the twentieth century, a primary driver of the expansion of the U.S. income tax system has been _____. a. westward expansion b. natural disasters c. military conflict d. withholding ANSWER c
If a government wants to maximize revenues from a tax it should A) impose it on sellers. B) impose it on consumers. C) choose a good with a relatively elastic demand. D) choose a good with a relatively inelastic demand. ANSWER D
Multiple levels of government are desirable because _____. a. different governmental activities are best undertaken by governments of different sizes b. many governmental activities can only be financed if taxed at multiple levels of government c. multiple levels of government provide sufficient bureaucracy to deal with the complex problems faced by today’s governments d. government […]
If an incumbent faces an identical potential entrant with no costs of entry, the incumbent will A) produce the Cournot duopolist level of output. B) produce the Stackelberg leader level of output. C) set price equal to marginal cost. D) shut down. ANSWER B
