The Public Choice Model Raises Questions About the Government's Ability

question 167

Multiple Choice

The public choice model raises questions about the government's ability to regulate economic activity efficiently.Which of the following statements represents the views of most economists with regard to the role of government?

• A)Congress should abolish the Food and Drug Administration, the Environmental Protection Agency, and other agencies and commissions because the costs of their actions exceed the benefits they provide to the public.
• B)Government should do more to regulate markets. The public choice model has shown that rent seeking and rational ignorance affect more markets than are currently subject to regulation.
• C)U.S. citizens can afford more government regulation if the cost of this regulation is borne mostly by taxpayers with the highest incomes.
• D)Agencies such as the Food and Drug Administration and the Environmental Protection Agency can serve a useful purpose, but we need to take the costs of regulation into account along with the benefits.

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Definitions:

Elasticity of Supply

A measure of how much the quantity supplied of a good changes in response to a change in the price of that good.

Price Elasticity

The degree to which the demand for a good is responsive to changes in its price.

Tax Passed

Occurs when the burden of a tax is shifted from the entity legally responsible for it to another party, such as consumers.

Import Quota

A regulatory measure that sets a physical limit on the quantity of goods that can be imported into a country over a specified period of time.