Functions of Price Mechanism Quiz
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Questions and Answers

Which one of the following is a function of price mechanism

  • 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
  • which one of the following is a govt failure

  • 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
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