12 Questions
What is the primary reason for government intervention in markets?
To address market failures and inefficient distribution
Which of the following is NOT a characteristic of price instability?
Missing markets
What is the purpose of a maximum price policy?
To prevent supply hoarding and ensure affordability
Which policy is used to address the issue of missing markets for public goods?
Direct provision policy
What is the primary reason for the free-rider problem in the provision of public goods?
Individuals waiting for others to pay for public goods
Which policy involves the government buying excess supply when supply is high and selling when supply is low?
Buffer stock scheme
What is the main purpose of contracting out policy according to the text?
To provide poor services with no competition
Which of the following is NOT considered a demerit good according to the text?
Museums
What is the main purpose of policies to lower the consumption of demerit goods according to the text?
To increase the price and lower the demand for demerit goods
What is the purpose of a minimum price according to the text?
To set the lowest legal price for a good or service
What is the main disadvantage of minimum price support according to the text?
It can lead to market distortion
What is the purpose of a guaranteed minimum price?
To guarantee a minimum income for producers
This quiz covers the concept of government interventions in response to market failures, such as inefficient distribution, price instability, missing markets, and imperfect information. Learn about policies like maximum price controls to prevent supply hoarding and ensure affordability.
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