Practice Questions
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Which of the following government policies is most likely to enhance market efficiency according to welfare economics?
Providing subsidies helps lower costs for essential services. Other options are incorrect because High taxes can make goods too expensive; Price contr...
How do government regulations aimed at improving market efficiency affect overall welfare in the economy?
Regulations can help or hurt welfare based on how they are set up and the market situation. Other options are incorrect because This idea suggests tha...
How do government interventions aimed at improving market efficiency relate to allocative efficiency in an economy?
When the government steps in, it can help make sure resources are used where they are needed most. Other options are incorrect because Some people thi...
Which of the following best describes the role of competition policy in addressing market failure to achieve productive efficiency?
Competition policy helps create a fair market. Other options are incorrect because Some people think competition policy means no government rules at a...
Which of the following scenarios best illustrates how government policies can correct market failure while promoting productive efficiency through economic incentives?
A subsidy helps lower costs for making electric vehicles. Other options are incorrect because This option suggests that raising prices alone is enough...
Which of the following best describes the impact of government intervention on market efficiency?
Government actions can sometimes make markets less efficient. Other options are incorrect because Many people think that government help always makes ...
Which of the following government policies is most likely to improve market efficiency?
Giving money for research helps new ideas grow. Other options are incorrect because Some think price limits help everyone, but they can cause shortage...
Which of the following best describes a situation where government intervention may improve market efficiency due to market failure?
In a monopolistic market, one company controls the whole market. Other options are incorrect because Some might think that a perfect market needs no h...
How does a subsidy affect market efficiency and consumer surplus?
A subsidy helps lower prices for consumers. Other options are incorrect because This answer suggests that subsidies always hurt both consumers and pro...
A government decides to implement a subsidy for electric vehicles to encourage their adoption. As a result, the price consumers pay decreases, while the price producers receive increases. Considering the concepts of allocative efficiency and deadweight loss, what is the most likely outcome of this intervention on market efficiency?
When the government gives a subsidy, it can create deadweight loss. Other options are incorrect because This answer suggests that both consumer and pr...
Which of the following statements accurately describe the effects of government interventions on market efficiency? (Select all that apply)
Other options are incorrect because Some think price controls help everyone, but they can cause shortages; Many believe subsidies always help, but the...
When the government imposes a price ceiling below the equilibrium price, it can lead to a situation where the quantity demanded exceeds the quantity supplied, resulting in a _____ of goods in the market.
A price ceiling makes goods cheaper. Other options are incorrect because A surplus happens when there are too many goods; Equilibrium is when supply a...
How does a government-imposed price ceiling typically affect market efficiency?
A price ceiling sets a maximum price for goods. Other options are incorrect because Some might think lower prices help everyone; It's a common belief ...
What is the primary reason government price controls can lead to a deadweight loss in a market?
Price controls change how prices work in a market. Other options are incorrect because Some might think that a price ceiling only stops high prices; I...
Subsidies to farmers can be likened to a price floor in the market: A. Allocative efficiency: B. Consumer surplus :: C. Producer surplus: ?
When the government gives money to farmers, it can cause prices to be higher than they should be. Other options are incorrect because Market equilibri...
A government decides to implement a price ceiling on essential goods to make them more affordable for consumers. Which of the following outcomes best describes the effect of this intervention on market efficiency?
When the government sets a price ceiling, it can make prices lower. Other options are incorrect because Some might think that lower prices always help...
Arrange the following steps in the process of how government interventions, like subsidies, impact market efficiency, starting from the introduction of the policy to the final outcome: A) Producers increase supply due to higher prices received, B) Government implements a subsidy, C) Consumer prices decrease, D) Market experiences deadweight loss.
First, the government gives money to help producers. Other options are incorrect because This option suggests that prices drop before producers respon...
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