Briefly explain what public choice theorists believe about the role of self interest in economics and politics.
What will be an ideal response?
Public choice theory is the application of economic principles to politics. Public choice economists believe that government actions are an outgrowth of individual behavior. Specifically, they assume that the behavior of individuals in politics, as in the marketplace, will be influenced by self-interest. Bureaucrats, politicians, and voters make choices that they believe will yield them expected marginal benefits that will be greater than their expected marginal costs. Of course, the private sector and the public sector differ when it comes to the “rules of the game” that they must follow. The self-interest assumption is, however, central to the analysis of behavior in both arenas.
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Refer to Figure 24-1. Ceteris paribus, a decrease in the price level would be represented by a movement from
A) AD1 to AD2. B) AD2 to AD1. C) point A to point B. D) point B to point A.
A type of investment fund that makes long-term investments in companies that are not publicly traded is called a
A) private equity fund. B) hedge fund. C) sovereign wealth fund. D) brokerage fund.
A defined benefit pension plan is designed to retain a worker at the same firm for his or her career
Indicate whether the statement is true or false
The SRAS would be vertical: a. if there was no profit effect
b. if there was no misperception effect. c. if there was no profit effect or misperception effect. d. under no conceivable set of circumstances.