Free Practice Quiz Question List

Government Intervention and Public Policy Online Quiz Questions

Use this free practice quiz with 30 questions to review Government Intervention and Public Policy, test your knowledge, and prepare for your next test or exam.

30 questions

True or false

1 point

A binding price ceiling creates a shortage because quantity demanded exceeds quantity supplied at the controlled price.

A
True
B
False

Choose one

1 point

Demand for a medication is highly inelastic, while supply is relatively elastic. A per-unit tax is imposed on sellers. Which group will bear most of the economic burden?

A
Sellers, because the tax is legally collected from sellers
B
Buyers, because demand is relatively inelastic
C
Buyers and sellers equally, regardless of elasticity
D
Neither side, because the government collects the tax

Fill in the blank

1 point

At a binding legal price of $8, quantity demanded is 900 units and quantity supplied is 650 units. The shortage is units.

True or false

1 point

A binding price floor creates a surplus because quantity supplied exceeds quantity demanded at the controlled price.

A
True
B
False

Written response

1 point

A government provides a $7 subsidy per unit, and 4,000 units are sold after the subsidy. What is the government expenditure, in dollars?

Choose one

1 point

A government sets a minimum price above the market equilibrium price for an agricultural product. What immediate market result does the model predict?

A
A shortage because quantity demanded exceeds quantity supplied
B
No change because the floor is only a legal restriction
C
A surplus because quantity supplied exceeds quantity demanded
D
A tax wedge between buyer and seller prices

Fill in the blank

1 point

A regulation that sets a maximum emissions level but lets each firm choose how to comply is a . A regulation that requires a particular pollution-control device is a .

Choose all

1 point

Which of the following are examples of anticompetitive behavior or transactions that antitrust policy may address? Select all that apply.

A
Price fixing among competitors
B
Mandatory product labeling to disclose ingredients
C
Bid rigging
D
An anticompetitive merger that substantially reduces competition
E
A subsidy for vaccinations

Written response

1 point

The market price is $30, the demand curve's vertical intercept is $90, and 500 units are purchased. What is consumer surplus, in dollars?

Choose one

1 point

In a cap-and-trade system, when will a firm generally choose to reduce one more unit of emissions rather than purchase an additional permit?

A
It reduces emissions only when its marginal reduction cost exceeds the permit price
B
It always buys permits, regardless of its reduction cost
C
It reduces emissions when its marginal reduction cost is less than the permit price
D
It stops producing whenever the permit price is positive

Choose all

1 point

Which questions are appropriate when evaluating a government intervention? Select all that apply.

A
Who gains and who loses
B
Administrative and enforcement costs
C
Whether the policy always maximizes market output
D
Possible unintended consequences such as shortages or evasion
E
Whether the policy changes the spelling of economic terms

Choose one

1 point

Why might a government provide a subsidy for vaccinations?

A
Vaccinations create only private benefits, so a subsidy would necessarily cause overproduction
B
Vaccinations create external benefits, so a subsidy may move consumption toward the socially efficient quantity
C
Vaccinations create negative externalities, so a tax is always the appropriate policy
D
Vaccinations have no effect on market quantity because they are a public good

Open ended

1 point

A government wants to reduce industrial carbon emissions. Compare a pollution tax, a cap-and-trade system, and a command-and-control emissions standard. Explain what each policy fixes or requires, identify the main tradeoff between certainty about emissions quantity and certainty about compliance price, and discuss at least one limitation or administrative challenge.

Choose one

1 point

Two of the largest firms in a concentrated market propose to merge. If regulators determine that the merger is likely to substantially lessen competition and that claimed efficiencies are not verifiable, which remedy is most directly appropriate?

A
Require every competitor to charge the same price
B
Block the merger if it is likely to substantially lessen competition
C
Provide a subsidy to the merging firms without reviewing effects
D
Set a binding price ceiling on all products in the market

Choose one

1 point

Which situation is the clearest example of a market failure that could justify government intervention?

A
The government wants every firm to earn the same profit
B
An unregulated market produces an inefficient allocation because of an externality
C
The equilibrium price is positive
D
Consumers and producers voluntarily trade

True or false

1 point

True or false: The side of a market that is legally required to send a per-unit tax to the government necessarily bears most of the economic burden.

A
True
B
False

Choose one

1 point

A city sets a binding rent ceiling. At the controlled rent, 900 apartments are demanded and 650 apartments are supplied. What is the immediate market result?

A
A surplus of 250 apartments
B
A shortage of 250 apartments
C
A shortage of 1,550 apartments
D
No shortage because the price is legally controlled

True or false

1 point

True or false: A binding price floor creates a surplus because quantity supplied exceeds quantity demanded at the legal price.

A
True
B
False

Written response

1 point

A $6 per-unit tax leaves 160 units sold. What is the government’s tax revenue in dollars?

Written response

1 point

What economic term describes a cost or benefit imposed on a third party outside a market transaction?

Choose all

1 point

Which two statements correctly describe performance standards in environmental regulation? Select all correct choices.

A
They specify an outcome, such as a maximum emissions level.
B
They require every firm to install the same approved equipment.
C
They generally give firms more flexibility in choosing how to comply.
D
They eliminate the need for monitoring and enforcement.

True or false

1 point

True or false: Under a cap-and-trade system, a firm should buy a permit when reducing an additional unit of emissions costs more than purchasing the permit.

A
True
B
False

Written response

1 point

The market price is $30, the demand curve’s vertical intercept is $90, and 500 units are purchased. What is consumer surplus in dollars?

Fill in the blank

1 point

A per-unit tax creates a between the price paid by buyers and the price received by sellers.

Choose one

1 point

Which comparison correctly distinguishes a pollution tax from a cap-and-trade system?

A
Both policies fix the emissions quantity and allow the compliance price to adjust.
B
A pollution tax fixes emissions quantity, while cap-and-trade fixes the price of emissions.
C
A pollution tax fixes the price of emitting, while cap-and-trade fixes the total permitted emissions.
D
Neither policy uses incentives for firms to reduce emissions.

Written response

1 point

A $6 per-unit tax reduces quantity from 200 units to 160 units. Using the linear-model formula, what is the deadweight loss in dollars?

Choose one

1 point

Two large firms in a concentrated market propose to merge. Which set of information would be most relevant for regulators evaluating whether the merger may harm competition?

A
Only the firms’ combined revenue and the number of employees after the merger
B
Market definition, existing concentration, entry barriers, likely competitive effects, and verifiable efficiency gains
C
Only whether the firms promise not to raise prices during the first year
D
Only whether the merger eliminates one of the firms’ administrative departments

Choose one

1 point

A city sets a legal maximum rent below the market equilibrium price. What is the most likely immediate effect in the rental market?

A
The quantity supplied exceeds the quantity demanded.
B
The quantity demanded exceeds the quantity supplied.
C
The market reaches a new equilibrium with no unmet demand.
D
Landlords receive a higher price than the market equilibrium price.

Choose one

1 point

Demand for a medically necessary treatment is highly inelastic, while its supply is relatively elastic. After a per-unit tax is imposed, which group will generally bear more of the economic burden?

A
Sellers, because taxes are usually collected from firms.
B
Buyers and sellers always share the burden equally.
C
Buyers, because demand is less responsive to price changes.
D
Neither side, because the government receives the tax revenue.

Choose one

1 point

The government introduces a per-unit subsidy for producing a good with positive external benefits. In a standard supply-and-demand diagram, what change best represents the subsidy paid to producers?

A
The supply curve shifts downward, increasing the quantity traded.
B
The demand curve shifts downward, reducing the quantity traded.
C
The supply curve shifts upward, reducing the quantity traded.
D
The demand curve shifts upward, leaving the quantity traded unchanged.