Voters Are Making a Choice to Spend Money on Three

question 166

Multiple Choice

Voters are making a choice to spend money on three projects: a dam, a school, or a road. In the choice between the dam and the school, the majority favors the school. In a choice between a dam and a road, the
Majority favors a dam. In a choice between a road and a school, the majority favors a road. These rankings
Indicate that majority voting may

• A) result in economically efficient outcomes because of rent-seeking behavior.
• B) reflect irrational preferences.
• C) produce inconsistent choices.
• D) lead to consistent choices in spite of irrational community preferences.

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Definitions:

Income Statement Approach

A method that estimates the amount of Bad Debts Expense that will result based on a percentage of net credit sales for the period. The amount of the expected bad debt is added to the existing balance of Allowance for Doubtful Accounts.

Gross Accounts Receivable

The total amount owed to a company by its customers for goods or services delivered, before deducting any allowance for doubtful accounts.

Contra-Asset Account

An asset account where its balance is a reduction of another asset account, typically used for accumulated depreciation.

Allowance for Doubtful Accounts

A contra-asset account reducing total accounts receivable to reflect the amount that is expected to be uncollectible.