Name:_______________________

Economics 410 Final

Prof. Bryan Caplan

Spring, 2009

Instructions:

� You have 90 minutes to complete this exam.�

� Write all answers directly on the exam.

� You may use any books, notes, or other materials that you wish, but avoid spending too much time on any one question.�

� Partial credit may be awarded on all questions.�

� The maximum possible number of points is 100.

� You should have 4 pages, counting this one.

Part 1: True, False, and Explain

(10 points each - 2 for the right answer, and 8 for the explanation)

State whether each of the following twelve propositions is true or false.� In 2-3 sentences (and clearly-labeled diagrams, when helpful), explain why.

1.� Suppose 20% of voters want to increase defense spending, 40% want to reduce it, and 40% was to keep it at its current level.

T, F, and Explain:� According to the Median Voter Theorem, the current level of defense spending must be efficient.

2. T, F, and Explain:� Neither the Miracle of Aggregation nor optimal punishment strategies work if all voters have literally zero political knowledge.

3. T, F, and Explain:� In the Tiebout model, states where anti-market bias is more intense will tend to lose population.

4.� Suppose the Council of Economic Advisors could veto U.S. tariff legislation with a majority vote.� The median CEA member�s most-preferred tariff is 0%, the median Congressman�s is 20%, the median Senator�s is 30%, and the President�s is 10%.

T, F, and Explain:� In Cooter�s model of division of powers, the equilibrium tariff rate will lie between 10% and 20%.

5.� ���Other authors... have argued that politicians can take continuing and full credit for pork going to their district but only partial and onetime credit for getting rid of pork altogether.� (Wittman, The Myth of Democratic Failure)

T, F, and Explain:� Wittman accepts this assumption, but argues that political competition can easily take care of the problem.

6.� T, F, and Explain:� Caplan argues that democracy would work better in the real world if the SIVH were true.

Part 2: Short Answer

(20 points each)

In 4-6 sentences, answer all four of the following questions.

1.� �But the large economic groups that are organized do have one common characteristic which distinguishes them from those large economic groups that are not...� (Olson, The Logic of Collective Action)� What �one common characteristic� is Olson talking about, and how exactly does it work?� Apply Olson�s analysis to a specific example.

2.� When dictatorships turn into democracies, government policies often do not change very much.� Using everything you have learned in this class, give TWO plausible explanations for why �regime change� would not lead to major policy change.