Functions of Price Mechanism Quiz

To create an incentive to customers to decrease the quantity supplied when price increases

To encourage government intervention to allocate resources

To provide a signal to producers and consumers about changes in supply and demand when prices change (correct)

To ration scarce resources by allowing price to decrease when demand increase

Excessive administration costs involved in meeting environmental regulations (correct)

A market bubble causing the price to rise excessively

the existence of free riders leading to the under production of public goods

Under production of foods with external benefits