ECON 103 FINAL BOUDREAUX QUESTIONS &
ANSWERS
What is the real cash balance effect?
And what example did Boudreaux use in class? - Answers -The real cash balance
effect is what tells us the real value of money depends on the amount of real things it
can buy.
Boudreaux's example is Mr. Lee making trillions in America and then deciding to burn all
of his money and showing it wouldn't actually hurt America. (there is also dime in pool
ex.)
Found on Econ Notes 11/27/18 Top of note page
What are the 2 characteristics that make a public good distinct from a private good and
describe what they are with Boudreaux's example. - Answers -A public good is non-
rivalrous and non-excludable
Non-Rivalrous ex. = Anyone could walk into Boudreax's econ lecture and listen and they
would not be his rival. They wouldn't get in the way of anyone else listening to the
lecture at all. However, if someone wanted to wear Boudreaux's shoes, then they would
be his rival, because they cannot wear the same shoes at the same time.
Non-Excludable = National Defense, Pollution Reduction or an example with coercion is
taxes.
A good is non-excludable if once it's supplied to one person, it is impossible to exclude
other people from consuming it. (The lecture is non-excludable as he can keep people
from coming in)
Public goods are non-excludable as they cannot be personalizee (i.e. the temperature in
a room cannot be perfect for everybody)
Found on: Econ Notes 11/27/18 bottom of first page and top of second.
What is pair-wise voting and who developed it? - Answers -Boudreax's example was
with the 3 kinds of fruits that 3 people have to vote on at a restaurant.
Developed by "Kenneth Arrow" Pair-Wise voting is the solution to the problem of voting
between 3 people and 3 goods, however, this can be done with much larger numbers
as well and this is just the example.
The rule of pair-wise voting is that when you have more than 2 options, you take any 2
of them and you take a vote on those 2. Now you'll get a majority and a minority. You
, take the winner and put the winner against another option until only one option is left
standing.
This has a problem as different people have different preferences and for different
reasons and the winner can be decided by which pair goes first.
Found on: Econ notes 11/27/18 bottom of page 2
What is the power of an "Agenda Setter"? - Answers -The person who determines the
order in which the vote is taken. Their other important power is that they decide how
many options are on the table to be voted on.
Found on: Econ Notes 11/27/18 Midway through Page 3
What is a Condorcet Winner and Condorcet Loser? - Answers -A condorcet winner is
when in a certain situation it is possible for the people to have preferences where one
thing always wins.
A condorcet loser is something that will never win, regardless of how the vote order is
done.
Found on: Econ Notes 11/27/18 Midway through page 3
Does voting change or register preference? - Answers -Preferences have 2
dimensions: Order and Intensity. Voting does not change them or even register it.
Found on: Econ Notes 11/27/18 Bottom of page 3
What is the special interest group effect? - Answers -Special-interest groups can create
government support for programs with costs outweighing their benefits.
This creates an imbalance in the political process and gives undue weight onto the
people in which the benefits are concentrated and everyone pays the cost. The people
who benefit from it have a strong incentive to lobby fore the program, keep it and
sustain it.
Found on: Econ Notes 11/27/18 Bottom of page 3, top of page 4
What is rational ignorance?
What example did Boudreaux give? - Answers -People don't bother getting or
consuming knowledge that doesn't matter to them.
Boudreaux gave the example of how you wouldn't know the amount of lightbulbs in his
classroom, but it's easy knowledge to obtain if you cared.
Found on: Econ Notes 11/27/18 Midway through page 4
ANSWERS
What is the real cash balance effect?
And what example did Boudreaux use in class? - Answers -The real cash balance
effect is what tells us the real value of money depends on the amount of real things it
can buy.
Boudreaux's example is Mr. Lee making trillions in America and then deciding to burn all
of his money and showing it wouldn't actually hurt America. (there is also dime in pool
ex.)
Found on Econ Notes 11/27/18 Top of note page
What are the 2 characteristics that make a public good distinct from a private good and
describe what they are with Boudreaux's example. - Answers -A public good is non-
rivalrous and non-excludable
Non-Rivalrous ex. = Anyone could walk into Boudreax's econ lecture and listen and they
would not be his rival. They wouldn't get in the way of anyone else listening to the
lecture at all. However, if someone wanted to wear Boudreaux's shoes, then they would
be his rival, because they cannot wear the same shoes at the same time.
Non-Excludable = National Defense, Pollution Reduction or an example with coercion is
taxes.
A good is non-excludable if once it's supplied to one person, it is impossible to exclude
other people from consuming it. (The lecture is non-excludable as he can keep people
from coming in)
Public goods are non-excludable as they cannot be personalizee (i.e. the temperature in
a room cannot be perfect for everybody)
Found on: Econ Notes 11/27/18 bottom of first page and top of second.
What is pair-wise voting and who developed it? - Answers -Boudreax's example was
with the 3 kinds of fruits that 3 people have to vote on at a restaurant.
Developed by "Kenneth Arrow" Pair-Wise voting is the solution to the problem of voting
between 3 people and 3 goods, however, this can be done with much larger numbers
as well and this is just the example.
The rule of pair-wise voting is that when you have more than 2 options, you take any 2
of them and you take a vote on those 2. Now you'll get a majority and a minority. You
, take the winner and put the winner against another option until only one option is left
standing.
This has a problem as different people have different preferences and for different
reasons and the winner can be decided by which pair goes first.
Found on: Econ notes 11/27/18 bottom of page 2
What is the power of an "Agenda Setter"? - Answers -The person who determines the
order in which the vote is taken. Their other important power is that they decide how
many options are on the table to be voted on.
Found on: Econ Notes 11/27/18 Midway through Page 3
What is a Condorcet Winner and Condorcet Loser? - Answers -A condorcet winner is
when in a certain situation it is possible for the people to have preferences where one
thing always wins.
A condorcet loser is something that will never win, regardless of how the vote order is
done.
Found on: Econ Notes 11/27/18 Midway through page 3
Does voting change or register preference? - Answers -Preferences have 2
dimensions: Order and Intensity. Voting does not change them or even register it.
Found on: Econ Notes 11/27/18 Bottom of page 3
What is the special interest group effect? - Answers -Special-interest groups can create
government support for programs with costs outweighing their benefits.
This creates an imbalance in the political process and gives undue weight onto the
people in which the benefits are concentrated and everyone pays the cost. The people
who benefit from it have a strong incentive to lobby fore the program, keep it and
sustain it.
Found on: Econ Notes 11/27/18 Bottom of page 3, top of page 4
What is rational ignorance?
What example did Boudreaux give? - Answers -People don't bother getting or
consuming knowledge that doesn't matter to them.
Boudreaux gave the example of how you wouldn't know the amount of lightbulbs in his
classroom, but it's easy knowledge to obtain if you cared.
Found on: Econ Notes 11/27/18 Midway through page 4
