#1
Which of the following is an example of a price ceiling?
Rent control
ExplanationGovernment-imposed limit on rent prices.
#2
Which of the following is an example of a government subsidy?
Cash payment to farmers for crop production
ExplanationFinancial aid to encourage specific economic activities.
#3
What effect does a price ceiling typically have on quantity supplied?
Decreases it
ExplanationLimits on prices often reduce goods available.
#4
What is the primary goal of implementing a price floor?
To set a minimum price for a good or service
ExplanationEstablishing a bottom price to support producers.
#5
Which of the following is an example of a market intervention to correct externalities?
Imposing a tax on cigarettes to reduce smoking
ExplanationTaxation to address negative side effects on society.
#6
What is the term for the situation where the price mechanism fails to allocate resources efficiently?
Market failure
ExplanationInefficient resource distribution in the market.
#7
What is the primary goal of market interventions?
To ensure equity in distribution
ExplanationInterventions aim to promote fairness in resource allocation.
#8
In economics, what does 'deadweight loss' refer to?
Efficiency loss due to market intervention
ExplanationLoss of economic efficiency caused by interventions.
#9
Which of the following is a potential consequence of imposing a price floor?
Surplus supply
ExplanationMinimum price may lead to excess production.
#10
Which of the following is NOT a reason for government intervention in markets?
To maximize corporate profits
ExplanationInterventions focus on societal goals, not corporate gains.
#11
What happens to consumer surplus when a price floor is imposed?
It decreases
ExplanationMinimum prices can reduce benefits for consumers.
#12
What is a negative consequence of government price controls?
Reduction in consumer choices
ExplanationLimits on pricing options may restrict consumer variety.
#13
What concept is illustrated by the intersection of supply and demand curves in a market?
Market equilibrium
ExplanationBalance point of quantity demanded and supplied.
#14
Which of the following is a characteristic of a perfectly competitive market?
Numerous buyers and sellers
ExplanationA market with a multitude of competing participants.
#15
What is the main effect of government subsidies on producers?
Increases producer surplus
ExplanationFinancial support boosts benefits for producers.
#16
What is the primary reason for government intervention to address income inequality?
To ensure social stability
ExplanationInterventions aim for societal balance and harmony.
#17
What is the term used to describe the additional cost incurred by society as a whole when an additional unit of a good or service is produced?
External cost
ExplanationCost affecting society beyond the buyer and seller relationship.