Economics and Government Intervention Quiz

What economic issue was the U.S. facing in 1971 that led to President Nixon's intervention?

• Stagflation

• Recession

• Inflation

• Deflation

What is the result of a price ceiling set below the equilibrium price?

• No effect

• Shortage

• Surplus

• Equilibrium

How does a price floor above the equilibrium price affect the market?

• It creates a shortage

• It creates a surplus

• It has no effect

• It maintains equilibrium

What is the impact of a non-binding price ceiling on the market?

• It causes a shortage

• It causes a surplus

• It leads to equilibrium

• It has no effect

What happens to the supply curve when a subsidy is introduced?

• It shifts to the left

• It becomes vertical

• It remains unchanged

• It shifts to the right

What is a potential negative outcome of subsidies in the market?

• No change

• Overproduction

• Equilibrium

• Underproduction

How does a tax on producers affect the supply curve?

• It shifts to the left

• It becomes horizontal

• It remains unchanged

• It shifts to the right

What is the effect of a tax on the equilibrium quantity in the market?

• It decreases

• It doubles

• It remains the same

• It increases

What is deadweight loss?

• The loss of government revenue

• The loss of total welfare in the market

• The loss of producer surplus

• The loss of consumer surplus

What is the main difference between a subsidy and a tax in terms of government finances?

• Subsidies generate revenue, taxes do not

• Taxes generate revenue, subsidies do not

• Both generate revenue

• Neither affects government finances