As a result of the Great Depression (1929-1941) economic policy changed substantially by

a.showing how a fundamental role of the government is to stabilize the economy through various approaches.

b.showing how easily it would be to slip into communism if we do not monitor policy effects.

c.showing how government could not stop economic fluctuations and the free market must be left to correct itself.

d.showing how government involvement can make matters worse in an economic downturn.

Which of the following is not a major reason for government failures:

a.limitations imposed by the political process

b.limited information

c.limited competition

d.limited control over bureaucracy

Question 21

The voting paradox refers to

a.the lack of incentives for people to vote.

b. inconsistent choice making through majority voting.

c.the power of the median voter, who may be poor.

d.the power of ill-informed voters to achieve efficient outcomes.

The phenomenon of diminishing marginal utility refers to the fact that

a.people do not like additional units of a good

b.it is unfair to give more of a good to a person with high marginal utility.

c.efficiency is decreased if people consume more of a good.

d.the extra gain from having 1 more unit of a good becomes smaller as a person consumes more of any good.

Question 24

Examples of government intervention to correct the imperfect information market failure do not include

a.requiring disclosure of information about food labeling.

b.providing information about weather.

c. financing research and development.

d.revealing demand curves in competitive markets.

The median voter model could explain excessive public expenditure in an economy where