Government Intervention in Price Mechanism
Economics ⇒ Government and the Economy
Government Intervention in Price Mechanism starts at 10 and continues till grade 12.
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Describe one negative effect of imposing a price floor above equilibrium price.
Describe one way in which government intervention can lead to market inefficiency.
Describe one way in which subsidies can distort the price mechanism.
Describe the effect of a price floor on the market for wheat if set above the equilibrium price.
Explain how government intervention in the price mechanism can help correct market failure.
If the government sets a price ceiling on onions at Rs. 20 per kg, but the equilibrium price is Rs. 30 per kg, what is likely to happen?
The government imposes a maximum price on essential medicines. What is this intervention called?
The government sets a maximum price for sugar at Rs. 40 per kg, but the equilibrium price is Rs. 50 per kg. What is the likely outcome? (1) Surplus (2) Shortage (3) No effect (4) Price increase
If the government provides a subsidy of Rs. 10 per unit to producers, what will happen to the supply curve? (1) Shift left (2) Shift right (3) No change (4) Become vertical
The government sets a maximum price for sugar at Rs. 40 per kg, but the equilibrium price is Rs. 50 per kg. What is the likely outcome? (1) Surplus (2) Shortage (3) No effect (4) Price increase
Which of the following is a direct effect of a price floor? (1) Shortage (2) Surplus (3) Black market (4) Price decrease
Which of the following is a likely consequence of a price ceiling? (1) Surplus (2) Shortage (3) Equilibrium (4) No effect
A price ceiling is set ______ the equilibrium price.
Fill in the blank: A ______ is a minimum legal price set by the government, usually above the equilibrium price.
Fill in the blank: The main objective of a price floor is to protect ______.
Fill in the blank: The Minimum Support Price (MSP) for crops in India is an example of a ______.
True or False: A price floor leads to excess supply if set above the equilibrium price.
True or False: Black markets may emerge as a result of price ceilings.
True or False: Government intervention in the price mechanism can help achieve social welfare objectives.
True or False: Price controls always lead to efficient allocation of resources.
