Do government bureaucracies misallocate resources? If so, how and why? Can you list one possible way to limit the negative effects of special interests such as bureaucracies?
What will be an ideal response?
Yes, government bureaucracies misallocate resources by producing too much output. This occurs because bureaucrats have strong incentives to maximize the size of their budgets. Combined with the fact that bureaucracies have several bargaining advantages over legislatures, this will result in an output level higher than optimal. One possible way to limit the negative effects of special interests is fiscal federalism, where government functions are devolved to the lowest level of government feasible.
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a. the chief of police b. the city attorney c. the police captain d. the first line supervisor
Refer to Figure 5-3. If consumers paid the full price of medical services, the price they would pay is
A) $40. B) $55. C) $65. D) > $65.
In a closed economy with fixed output, an increase in government spending without any change in taxes will lead to a(n):
A. increase in the real interest rate and a decrease in private saving. B. decrease in the real interest rate and an increase in private saving. C. decrease in the real interest rate and no change in private saving. D. increase in the real interest rate and no change in private saving.
Figure 7.4
The above figure represents the marginal utility per dollar for candy bars and oranges for Sophia. The price of each product is $0.50, and Sophia has a budget of $4.Refer to Figure 7.4. If Sophia bases her choice on cognition, she will purchase ________ candy bars and ________ oranges to maximize utility.
A. 3; 5 B. 6; 2 C. 9; 0 D. 1; 5