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Government Policies Affecting Market Outcome Quiz

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Government Policies Affecting Market Outcome Quiz

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Questions and Answers

In the context of government policies altering private market outcomes, what is the purpose of a price ceiling?

To eliminate prices entirely

To set a legal minimum on the price of a good or service

To increase taxes on buyers and sellers

To set a legal maximum on the price of a good or service (correct)

Why do shortages lead to sellers rationing goods among buyers?

To ensure fairness in distributing goods

To make more profits

To allow buyers to set their own prices

To bypass market signals (correct)

How do price controls affect the allocation of society's resources according to the Ten Principles from Chapter 1?

Price controls always lead to fair distribution

Price controls have no impact on resource allocation

Price controls alter the allocation of society's resources (correct)

Price controls lead to efficient resource allocation

What is one of the common rationing mechanisms used by sellers during shortages?

Long lines for buyers Signup and view all the answers

How does an efficient rationing mechanism differ from an inefficient one during shortages?

Efficient mechanisms prioritize buyers who value goods the most Signup and view all the answers

What is the purpose of a price floor in government policies altering private market outcomes?

To set a legal minimum on the price of a good or service Signup and view all the answers

What is the primary purpose of the government levying taxes on goods and services?

To raise revenue for public services Signup and view all the answers

In the context of price controls, what happens if a price ceiling is set below the equilibrium price?

It causes a surplus Signup and view all the answers

How does a tax on a good impact the equilibrium quantity in the market?

It causes the equilibrium quantity to fall Signup and view all the answers

What does the term 'incidence of a tax' refer to in economics?

The division of the tax burden between buyers and sellers Signup and view all the answers

Why is it important for policymakers to apply government policies very carefully?

To avoid unintended consequences on resource allocation Signup and view all the answers

Which economic concept determines the division of the burden of a tax between buyers and sellers?

Price elasticity of demand Signup and view all the answers