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Market Intervention and Equilibrium Quiz

#1

In economics, what does 'market equilibrium' refer to?

A state where supply and demand are equal
Explanation

Balance between supply and demand

#2

What is a common method of market intervention used by governments to control prices?

Subsidies
Explanation

Government financial support

#3

How does a price ceiling impact the market equilibrium?

It creates a shortage of goods
Explanation

Limits maximum price

#4

What is the concept of 'deadweight loss' in the context of market intervention?

The overall loss in market efficiency
Explanation

Loss of economic efficiency

#5

Which of the following is an example of a non-price form of market intervention?

Subsidy
Explanation

Government aid without price change

#6

How does a government's implementation of a price floor impact the market?

It creates a surplus of goods
Explanation

Sets minimum price

#7

What is the primary goal of market intervention policies?

To stabilize prices
Explanation

Maintain price consistency

#8

How can a government use open market operations to influence the economy?

By buying or selling government securities
Explanation

Control money supply

#9

What is the main drawback of using tariffs as a market intervention strategy?

It can trigger trade wars
Explanation

Risk of international conflicts

#10

How does a government subsidy affect the supply and demand equilibrium in the market?

It increases both supply and demand
Explanation

Boosts both sides of market

#11

What is the 'Laffer curve' often associated with in the context of market intervention?

Taxation
Explanation

Tax revenue optimization

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