Market failure and Government Intervention

Which of the following is a key characteristic of a public good?

• It is excludable and rival in consumption

• It is provided exclusively by private firms

• It is non-excludable and non-rival in consumption

• It always generates negative externalities

What is a common consequence of setting a price cap below equilibrium?

• A surplus of goods

• A shortage of goods

• No impact on the market

• A decrease in demand

What type of tax is imposed on goods with negative externalities?

• Progressive tax

• Regressive tax

• Pigouvian tax

• Corporation tax

If a government introduces a subsidy on solar panels, what will happen to the supply curve?

• It shifts to the left

• It shifts to the right

• It becomes perfectly inelastic

• There is no impact on supply

Which of the following is an example of a public good?

• National defence

• Healthcare

• Fast food restaurants

• Mobile phones

Which of the following is an example of a positive externality?

• Air pollution from a factory

• Traffic congestion

• Vaccination programs

• Overfishing in the ocean

What is the main reason private firms underprovide public goods?

• High production costs

• The free rider problem

• Lack of government regulation

• Monopoly power

Which of the following is an example of asymmetric information?

• A consumer knowing more about a product than the seller

• A doctor having more knowledge than a patient about a treatment

• A perfectly competitive market

• A price ceiling on bread

Which of the following is a likely unintended consequence of a tax on petrol?

• An increase in government revenue

• A shift of the supply curve to the right

• A rise in black-market petrol sales

• A decrease in price

Why do governments impose subsidies on education?

• To increase tax revenue

• To internalize positive externalities

• To reduce government spending

• To decrease competition between schools