Public Choice Theory Indicates That the Behavior of People in Government

question 178

Multiple Choice

Public choice theory indicates that the behavior of people in government

• A) differs from the behavior of people in the private sector because they are motivated by the public interest rather than their own personal self-interest.
• B) differs from the behavior of people in the private sector because public sector decision roles do not allow people to pursue their own self-interests.
• C) is the same as people in the private sector only if decisions are made by majority vote.
• D) is best understood by applying the same principles we use to predict the behavior of people in the private sector.

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Definitions:

Average Variable Cost

The average amount of variable cost per unit, calculated by dividing total variable costs by the quantity of output.

Profit-Maximizing

The approach taken by an enterprise to ascertain the optimal price and output quantity for the highest profit.

MR = MC

A principle in economics stating that profit maximization occurs when marginal revenue equals marginal cost.

Perfectly Competitive Market

An economic theory describing a market where no individual buyers or sellers have the power to influence the price of a product, and where the products offered are homogenous, with no barriers to entry or exit for businesses.