Markets and Government Quiz

A price ceiling of $60 is set on a good that currently sells for $80. What would happen?

• a shortage.

• a surplus.

• no change to equilibrium.

I budgeted $60 for a live Christmas tree but found the perfect tree for $50. What is my consumer surplus?

• $60

• $50

• $10

• $0

If the price in a market is set above equilibrium, we will have

• a surplus.

• a surplus and deadweight loss.

• a shortage.

• a shortage and deadwight loss.

If the price in a market is set below equilibrium, we will have

• a surplus.

• a surplus and deadweight loss.

• a shortage.

• a shortage and deadweight loss.

Total surplus is generally maximized at

• market equilibrium.

• the supermarket.

• at the point where consumer and producer surplus are the farthest apart.

• market disequilibrium.

Markets are generally but not always efficient. Which of the following IS NOT a reason why markets fail?

• Lack of competition

• External benefits or costs

• Information not share by all parties

• Public Goods

• Supply and Demand flucuations

Bert and Ernie are debating about governments intervening in markets. Bert argues that governments should never intervene. Ernie argues that governments should intervene at times and can correct market failures. Who is correct?

• Bert

• Ernie

The minimum wage is an example of a

• price ceiling.

• price floor.

Which of the following is an indirect way that governments intervene in markets?

• price ceilings

• price floors

• excise taxes

Inhabitants of a nearby town discover that a factory has been polluting the surrounding streams and rivers. Which of the following would best help remedy the situation?

• The government subsidizes production at this factory

• The government taxes production at this factory

• The government does nothing and allows markets to function without intervention