Microeconomics Ist Canadian edition By Ottawa Karlan – Test Bank

Microeconomics Ist Canadian edition By Ottawa Karlan – Test Bank

Chapter 06
Government Intervention

Multiple Choice Questions

1. A type of public policy that might be set in response to the rising prices of a basic necessity, such as food, might be:
A. to make it illegal to charge lower prices for the good.
B. to subsidize the price of necessities.
C. to pay producers to make more of the good.
D. To subsidize the price of non-necessities.

Blooms: Understand
Learning Objective: 06-01 Calculate the effect of a price ceiling on the equilibrium price and quantity.
Topic: 06-03 Three Reasons to Intervene

2. Government attempts to lower, raise, or simply stabilize prices can:
A. always be positive.
B. create unintended side effects.
C. Always increase consumer surplus.
D. Always increase producer surplus.

Blooms: Understand
Learning Objective: 06-01 Calculate the effect of a price ceiling on the equilibrium price and quantity.
Topic: 06-03 Three Reasons to Intervene

3. Government attempts to stabilize prices can:
A. keep a market at its equilibrium.
B. decrease total surplus.
C. prove the usefulness of a central planner.
D. increase prices in the long run.

Blooms: Understand
Learning Objective: 06-01 Calculate the effect of a price ceiling on the equilibrium price and quantity.
Topic: 06-03 Three Reasons to Intervene

4. Government attempts to lower prices can:
A. lead to more producer surplus.
B. create missing markets.
C. prevent a market from reaching its equilibrium.
D. always create a better outcome.

Blooms: Understand
Learning Objective: 06-01 Calculate the effect of a price ceiling on the equilibrium price and quantity.
Topic: 06-03 Three Reasons to Intervene

5. Governments may attempt to raise, lower, or stabilize prices because:
A. the market’s equilibrium is not maximizing consumer surplus.
B. governments changing the price in the market could increase consumer surplus without putting producers out of business.
C. market failures occur.
D. doing so will always create a better outcome.

Blooms: Understand
Learning Objective: 06-01 Calculate the effect of a price ceiling on the equilibrium price and quantity.
Topic: 06-03 Three Reasons to Intervene

6. Governments may intervene in a market because:
A. the government wants to decrease total surplus in the market.
B. the government wants to increase both consumer and producer surplus at the same time.
C. the government wants to redistribute the surplus in a market.
D. None of these are reasons for a government to intervene.

Blooms: Remember
Learning Objective: 06-01 Calculate the effect of a price ceiling on the equilibrium price and quantity.
Topic: 06-03 Three Reasons to Intervene

7. Governments may choose to intervene in a market in an attempt to:
A. encourage the production.
B. discourage the consumption of certain goods.
C. give consumers more money
D. give suppliers more money

Blooms: Remember
Learning Objective: 06-01 Calculate the effect of a price ceiling on the equilibrium price and quantity.
Topic: 06-03 Three Reasons to Intervene

8. Situations in which the assumption of efficient, competitive markets fails to hold are called:
A. market failures.
B. inelastic-response markets.
C. missing markets.
D. market interventions.