Which of these can the price mechanism NOT do?
Correct answer C. Shift the demand curve
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Which role does the price mechanism NOT perform?
Correct answer A. Indicator of income
In which case will a shift in demand affect price more than quantity?
Correct answer D. The price elasticity of supply is +0.2
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What should a fall in demand for a product do to the market equilibrium?
Correct answer B. Decrease equilibrium price and quantity
The statement ‘Income inequality can be high in a free market and should be reduced’ is an example of what?
Correct answer D. Normative economic statement
When does a positive externality occur?
Correct answer B. When social marginal benefits are higher than private marginal benefits
What happens if the government fixes a market price above the equilibrium?
Correct answer A. There is excess supply
Why do agricultural prices tend to be unstable?
Correct answer C. Demand and supply are price inelastic
Which statement correctly describes a public good?
Correct answer B. It has the properties of being non-excludable and non-diminishable
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What results when a maximum price is set below the equilibrium price?
Correct answer D. Excess demand
Economists say some form of rationing is needed whenever which condition exists?
Correct answer B. There is excess demand
If a government set a minimum wage for adult workers, what would economists predict?
Correct answer A. The costs and prices of firms employing cheap labour would increase
The government plans to tax cigarettes to raise money for health-care benefits, and demand for cigarettes is price inelastic. Which statement is true?
Correct answer D. The tax may not raise as much revenue as anticipated in the years to come because the demand for cigarettes is likely to become more elastic over time
Which of the following is the government most likely to subsidise?
Correct answer D. Positive externalities
Which of these is NOT a type of imperfect competition?
Correct answer C. Unfair competition
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In a contestable market, what must incumbent firms do to prevent new competitors from entering?
Correct answer C. Behave like competitive firms
In a Nash equilibrium, how does each player choose their best strategy?
Correct answer C. Given the strategies of other players
In insurance, high-risk customers are the most likely to buy cover. What is this an example of?
Correct answer C. Adverse selection
Why is a competitive equilibrium Pareto-efficient?
Correct answer E. All of the above
My neighbour burns garden waste and my house fills with smoke. What is this an example of?
Correct answer B. A consumption externality