12 Questions
In the context of government policies altering private market outcomes, what is the purpose of a price ceiling?
To set a legal maximum on the price of a good or service
Why do shortages lead to sellers rationing goods among buyers?
To bypass market signals
How do price controls affect the allocation of society's resources according to the Ten Principles from Chapter 1?
Price controls alter the allocation of society's resources
What is one of the common rationing mechanisms used by sellers during shortages?
Long lines for buyers
How does an efficient rationing mechanism differ from an inefficient one during shortages?
Efficient mechanisms prioritize buyers who value goods the most
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
What is the primary purpose of the government levying taxes on goods and services?
To raise revenue for public services
In the context of price controls, what happens if a price ceiling is set below the equilibrium price?
It causes a surplus
How does a tax on a good impact the equilibrium quantity in the market?
It causes the equilibrium quantity to fall
What does the term 'incidence of a tax' refer to in economics?
The division of the tax burden between buyers and sellers
Why is it important for policymakers to apply government policies very carefully?
To avoid unintended consequences on resource allocation
Which economic concept determines the division of the burden of a tax between buyers and sellers?
Price elasticity of demand
Test your knowledge on government policies that impact the private market, including price controls, taxes, and their effects on supply and demand. Explore topics like price ceilings, price floors, and tax implications using the supply/demand model.
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