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A type of public policy that might be set in response to the rising prices of a basic necessity, such as food, might be:
A. to make it illegal to charge high prices for the good.
B. to subsidize the price of basic necessities.
C. to pay producers to make more of the good.
D. All of these are ways government can address the shortage of a basic necessity.
2.Government attempts to lower, raise, or simply stabilize prices can:
A. backfire.
B. create unintended side effects.
C. decrease total surplus.
D. All of these are true.
3.Government attempts to stabilize prices can:
A. keep a market at its equilibrium.
B. decrease total surplus.
C. prove the usefulness of a central planner.
D. increase prices in the long run.
4.Government attempts to lower prices can:
A. lead to more producer surplus.
B. create missing markets.
C. prevent a market from reaching its equilibrium.
D. always create a better outcome.
5.Governments may attempt to raise, lower, or stabilize prices because:
A. the market's equilibrium is not maximizing total surplus.
B. governments changing the price in the market could increase consumer surplus and not harm producers.
C. market failures occur.
D. doing so will always create a better outcome.
6.Governments may intervene in a market because:
A. the government wants to decrease total surplus in the market.
B. the government wants to increase both consumer and producer surplus at the same time.
C. the government wants to redistribute the surplus in a market.
D. None of these is reasons for a government to intervene.
7.Governments may choose to intervene in a market in an attempt to:
A. encourage the consumption of certain goods.
B. discourage the consumption of certain goods.
C. redistribute surplus.
D. All of these are true.
8.Situations in which the assumption of efficient, competitive markets fails to hold are called:
A. market failures.
B. inelastic-response markets.
C. missing markets.
D. market interventions.
9.Market failures are:
A. situations in which the assumption of efficient, competitive markets fail to hold.
B. situations in which the assumption of efficient, competitive markets holds.
C. situations in which the assumption of inefficient, competitive markets fail to hold.
D. situations in which the assumption of inefficient, noncompetitive markets hold.
10.If there is a sole producer of a good, and he faces no threat of competition, it is likely that:
A. government intervention could increase total surplus.
B. he is acting inefficiently.
C. he is charging an inefficiently high price.
D. All of these are true.
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