Question 1

If a minimum price is set above equilibrium (assuming a downward sloping demand curve and upward sloping supply curve) there will be:&#10;A) A price fall&#10;B) Excess supply&#10;C) Excess demand&#10;D) A price increase

Accepted Answer

Setting a minimum price above the equilibrium price leads to excess supply because producers are willing to supply more at the higher price, but consumers are not willing to buy as much at that price, resulting in a surplus of the product.

Question 2

A negative production externality can occur when:&#10;A) The Social Marginal Benefit is greater than the Social Marginal Cost&#10;B) The Social Marginal Cost is greater than the Private Marginal Cost&#10;C) The Private Marginal Benefit is less than the Social Marginal Benefit&#10;D) The Social Marginal Cost is greater than the Private Marginal Benefit

Accepted Answer

A negative production externality occurs when the production of a good or service imposes costs on third parties not involved in the market transaction. This is represented by the Social Marginal Cost (SMC) being greater than the Private Marginal Cost (PMC), as the SMC includes both the private costs and the external costs to society.

Question 3

In a buffer stock scheme:&#10;A) The government buys up products when there is excess demand.&#10;B) The government sells products when there is excess supply.&#10;C) The government buys products when there is a shortage.&#10;D) The government sells products when there is a shortage.

Accepted Answer

D

Question 4

In a buffer stock scheme:&#10;A) The government uses the price to regulate demand.&#10;B) The government stores products to sell when demand is low.&#10;C) The government stores products to sell when supply is low.&#10;D) The government buys products when there is a shortage to sell abroad.

Accepted Answer

In a buffer stock scheme, the government stores products to sell when supply is low to stabilize prices and ensure availability.

Question 5

The government may regulate monopolies because this form of market structure:&#10;A) Increases consumer surplus.&#10;B) Increases community surplus.&#10;C) Increases producer surplus.&#10;D) Increases allocative efficiency.

Accepted Answer

Monopolies often lead to an increase in producer surplus because they can set prices above competitive levels due to the lack of competition, allowing them to earn higher profits. This comes at the expense of consumer surplus and allocative efficiency.

Question 6

Privatization:&#10;A) Increases the size of the public sector.&#10;B) Decreases the size of the private sector.&#10;C) Increases the provision of goods and services by the government.&#10;D) Occurs when ownership of organizations is transferred from the public to the private sector.

Accepted Answer

Privatization involves transferring ownership and management of enterprises or services from the public (government) sector to private individuals or organizations, thereby reducing the size of the public sector and expanding the private sector's role in the economy.

Question 7

Privatization does NOT involve:&#10;A) Increasing share ownership in the private sector.&#10;B) Reducing the size of the private sector.&#10;C) Raising revenue for the government.&#10;D) Replacing social objectives with profit maximization as an objective for the organization.

Accepted Answer

Privatization involves transferring ownership and operations from the public sector to the private sector, which inherently increases the size of the private sector rather than reducing it. The other options (A, C, D) are typical outcomes or objectives of privatization.

Question 8

The public sector is more likely to undertake a project for social reasons even if it is not more profitable than the private sector:

Accepted Answer

The public sector often prioritizes social welfare and public interest over profitability, unlike the private sector, which typically focuses on profit maximization.

Question 9

A government is likely to want to control a natural monopoly.

Accepted Answer

A government is likely to want to control a natural monopoly to prevent abuse of monopoly power, such as excessively high prices or poor service, and to ensure that essential services remain accessible and affordable to the public.

Question 10

The overall welfare of society is measured by _________ surplus.

Accepted Answer

The answer of The overall welfare of society is measured...

Question 11

Direct provision of goods and services is undertaken by the government for:&#10;A) All goods and services&#10;B) Particular goods and services such as education&#10;C) Expensive goods and services&#10;D) Imported goods and services

Accepted Answer

The answer of Direct provision of goods and services is...

Question 12

Which of the following is not a form of anti-competitive behaviour?&#10;A) Forming a cartel&#10;B) Predatory pricing&#10;C) Firms controlling supply chains&#10;D) None of the above

Accepted Answer

The answer of Which of the following is not a...

Question 13

The CMA stands for:&#10;A) Competition and Markets Authority&#10;B) Competition and Monopolies Agency&#10;C) Coordination of Monopolies Authority&#10;D) Complaints of Market Aggression

Accepted Answer

The answer of The CMA stands for:&#10;A) Competition and Markets...

Question 14

The Competition Commission investigates mergers or takeovers where the combined market share is:&#10;A) Exactly 25 percent&#10;B) In excess of 25 percent&#10;C) In excess of 50 percent&#10;D) Exactly 50 percent

Accepted Answer

The answer of The Competition Commission investigates mergers or takeovers...

Question 15

Which of the following is not a possible problem associated with anti-competitive behaviour?&#10;A) Higher prices&#10;B) Fall in producer surplus&#10;C) Less investment in R & D&#10;D) Poor customer service

Accepted Answer

The answer of Which of the following is not a...

Deck 9: Intervening in the Market System