#1
Which of the following is an example of a market intervention?
Price ceiling
ExplanationGovernment-imposed limit on how high a price can be charged for a product.
#2
What is the primary objective of market interventions?
To stabilize prices
ExplanationInterventions aim to prevent rapid price fluctuations.
#3
What is the primary goal of a price floor?
To prevent prices from falling below a certain level
ExplanationSets a minimum price that can be charged for a product.
#4
Which of the following is an example of a government-imposed quota?
Production limit
ExplanationRestricts the quantity of a good that can be produced or sold.
#5
What is the primary goal of a subsidy in a market?
To incentivize producers
ExplanationEncourages increased production or consumption of a good.
#6
What does price elasticity of demand measure?
The responsiveness of quantity demanded to changes in price
ExplanationPercentage change in quantity demanded divided by percentage change in price.
#7
Which of the following statements is true regarding elastic demand?
Price changes have a proportionately larger effect on quantity demanded
ExplanationSmall changes in price lead to large changes in quantity demanded.
#8
If the price elasticity of demand for a good is greater than 1, it is considered to be:
Elastic
ExplanationDemand is sensitive to price changes.
#9
What is the formula for calculating price elasticity of demand?
Percentage change in price / Percentage change in quantity demanded
ExplanationFormula measures the responsiveness of quantity demanded to price changes.
#10
Which of the following is an example of a price ceiling?
Rent control
ExplanationGovernment imposes a maximum rent that landlords can charge.
#11
If the cross-price elasticity of demand between two goods is negative, what can be concluded about their relationship?
They are complementary goods
ExplanationConsumers buy more of one good when the price of another decreases.
#12
What is the relationship between the price elasticity of supply and the slope of the supply curve?
They are inversely related
ExplanationElastic supply curves are flatter; inelastic curves are steeper.
#13
What happens to total revenue if demand is inelastic and the price decreases?
Total revenue increases
ExplanationInelastic demand causes total revenue to increase when prices decrease.
#14
Which of the following is NOT a determinant of price elasticity of demand?
Income level of consumers
ExplanationIncome level does not directly determine price elasticity of demand.
#15
If a good has perfectly inelastic demand, its price elasticity of demand is equal to:
0
ExplanationQuantity demanded remains constant regardless of price changes.
#16
Which of the following describes a situation where the demand for a good is highly price elastic?
The good has few substitutes available
ExplanationConsumers readily switch to alternatives when prices change.
#17
What effect does a tax imposed on producers have on the equilibrium price and quantity in the market?
Price increases, quantity decreases
ExplanationTax shifts supply curve, leading to higher prices and lower quantity.
#18
What happens to consumer surplus if the price of a good decreases?
It increases
ExplanationDifference between what consumers are willing to pay and what they actually pay expands.
#19
What effect does a subsidy on a good have on consumer surplus?
It increases
ExplanationSubsidies lower prices, expanding consumer surplus.