One problem with a cost plus incentive fee procurement contract is _____. a. it requires clearly defined output that is not really malleable b. it almost always leads to higher costs c. firms have a strong incentive to invest in the most expensive technology to complete the project d. firms have an incentive to misrepresent […]
Opportunism may occur when A) both parties have limited information. B) both parties have full information. C) one party has information the other does not. D) All of the above. ANSWER C
Consumers have been buying fewer CDs as downloadable music has become easier to purchase and use. We would represent this as A) a leftward shift of the demand curve for CDs. B) a rightward shift of the demand curve for CDs. C) a change in the price of CDs. D) a leftward shift of the […]
The excess burden of an income tax is a function of the _____. a. average tax rate b. flat tax rate c. marginal tax rate d. Laffer curve ANSWER c
Which of the following statements best describes why we cannot be assured that bureaucrats who believe in the mission of their bureaus will always act in the public interest? a. Logrolling among members of Congress ties the hands of the bureaucracy, preventing them from acting in the public interest. b. Bureaucrats do not personally benefit […]
When costs are uncertain, the type of procurement contract that will cover the uncertain costs plus an agreed-upon rate of return is _____. a. fixed fee b. cost plus fixed fee c. cost plus percentage fee d. cost plus incentive fee ANSWER c
A person who practices poisonous snake charming and does not reveal this to her health insurance company before purchasing insurance is an example of A) moral hazard. B) adverse selection. C) signaling. D) screening. ANSWER B
The idea behind a flat tax is to _____. a. cut taxes on high-income taxpayers b. to raise taxes on high-income taxpayers c. increase progressivity d. minimize the excess burden of the income tax ANSWER d
A person who starts practicing poisonous snake charming after signing a contract with a health insurance company is an example of A) moral hazard. B) adverse selection. C) signaling. D) screening. ANSWER A
A more complex view of the incentives facing a bureaucrat _____. a. shows that bureaucrats might prefer to maximize their discretionary budget over their total budget b. shows that bureaucrats might prefer to always act in the public interest, if they believe in their bureau’s mission. c. shows that the incentives facing a bureaucrat are […]
