#1
What is the primary aim of implementing price controls in a market?
To ensure fair distribution of goods and services
ExplanationPrice controls aim to achieve equitable access to goods and services.
#2
Which of the following is an example of a price floor?
Minimum wage laws
ExplanationMinimum wage laws set a floor on wages, ensuring workers are paid a certain minimum amount.
#3
Which of the following is an example of a price ceiling?
Rent control
ExplanationRent control is a form of price ceiling, limiting the maximum rent that landlords can charge.
#4
What is the economic term for the level at which supply and demand are equal?
Market equilibrium
ExplanationMarket equilibrium is the point where supply and demand are balanced, determining the market-clearing price.
#5
What is the term for a situation in which the government intervenes to set a maximum price for a particular good or service?
Price ceiling
ExplanationA price ceiling occurs when the government sets a maximum price for a specific good or service.
#6
What is the primary objective of implementing price controls?
Ensure fairness in resource distribution
ExplanationThe primary goal of price controls is to achieve fairness in the distribution of resources within the market.
#7
What happens when a government imposes a price ceiling below the market equilibrium price?
There will be a shortage of the good
ExplanationA price ceiling below equilibrium leads to increased demand and a shortage of the good.
#8
Which of the following statements is true about price controls in a market economy?
Price controls can sometimes lead to black markets
ExplanationPrice controls may create incentives for illegal markets, known as black markets.
#9
What is the potential downside of implementing a price ceiling?
Creates inefficiency in resource allocation
ExplanationPrice ceilings can lead to resource allocation inefficiencies and distortions in the market.
#10
How does a price floor affect producer surplus?
Increases producer surplus
ExplanationPrice floors benefit producers by setting a minimum price, leading to increased producer surplus.
#11
What is the term used to describe a situation where a price ceiling leads to the development of illegal markets?
Black market
ExplanationA black market emerges when a price ceiling encourages illegal transactions outside the regulated market.
#12
What is the primary effect of a price ceiling below the equilibrium price?
Shortage of goods
ExplanationA price ceiling below equilibrium results in increased demand, leading to a shortage of goods.
#13
In what scenario might a government implement a price floor?
To prevent prices from falling below a certain level
ExplanationPrice floors are used to establish a minimum price to support producers and prevent price drops.
#14
What is the main goal of implementing price controls during times of crisis?
To stabilize prices and prevent exploitation
ExplanationPrice controls in crises aim to stabilize prices, preventing excessive exploitation and ensuring access to essential goods.
#15
What could be a consequence of a government imposing a price floor above the equilibrium price?
Shortage of goods
ExplanationA price floor above equilibrium may lead to a surplus of goods as producers may overproduce.
#16
Which of the following is a potential consequence of implementing a price floor in an agricultural market?
Excessive production leading to surplus
ExplanationPrice floors in agriculture can lead to overproduction, creating a surplus of goods.
#17
In a market with a price ceiling set above the equilibrium price, what is the likely outcome?
No impact on the market
ExplanationA price ceiling above equilibrium has no immediate impact, as it doesn't constrain market forces.
#18
Which of the following is a possible consequence of imposing a price floor above the equilibrium price?
Surplus of goods
ExplanationA price floor above equilibrium may lead to a surplus of goods as production exceeds demand.