How do rationally ignorant voters and budget maximizing bureaucrats prevent the political marketplace from delivering the efficient quantity of a public good?
What will be an ideal response?
If the marginal benefit to the voter of becoming well informed about a particular policy issue is much smaller than the marginal cost of becoming well informed, the voter is likely to remain rationally ignorant about the policy and the level of any related public goods provision. The marginal benefit of providing public goods is very high to both bureaucrats and the contractors who are employed to produce and distribute the public goods. So they have a concentrated interest in lobbying politicians to direct the bureaucrats to provide more than the efficient quantity of the public good, even to where the net benefit to the economy is zero.
You might also like to view...
When there is an expansionary gap, inflation will ________, in response to which the Federal Reserve will ________ real interest rates, and output will ________.
A. decline; lower; expand B. increase; raise; decline C. decline; lower; decline D. decline; raise; decline
Suppose the government of a country starts a system designed to ensure that depositors in a bank do not lose their money, even if the bank goes bankrupt. Banks will have to pay a premium to a Central Deposit Assurance Corp, ensuring that depositors do not lose their deposits. Which of the following is likely to be true in such a situation? a. Safer banks, with a higher net worth, would pay a
lower premium, while riskier banks, with a lower net worth, would pay a higher premium. b. Banks with a high net worth would pay a high premium, while banks with a low net worth would pay a low premium. c. The incidence of bank runs would increase. d. The willingness of banks to make loans would decrease.
When the price of a good falls, consumers buy more of the good because it is cheaper relative to competing goods. This statement describes the
a. consumer equilibrium effect. b. price effect. c. income effect. d. substitution effect.
When the government implements programs such as progressive income tax rates, which of the following is likely to occur?
a. equality is increased and efficiency is increased. b. equality is increased and efficiency is decreased. c. equality is decreased and efficiency is increased. d. equality is decreased and efficiency is decreased.