Supply, Demand Essay

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Chapter 6 Supply, Demand, and Government Policies MULTIPLE CHOICE 1. Price controls are a. used to make markets more efficient. b. usually enacted when policymakers believe that the market price of a good or service is unfair to buyers or sellers. c. nearly always effective in eliminating inequities. d. established by firms with monopoly power. ANSWER: b. usually enacted when policymakers believe that the market price of a good or service is unfair to buyers or sellers. TYPE: M DIFFICULTY: 2 2. Policymakers choose to enact price controls in a market because a. they believe the market’s outcome to be unfair. b. enacting price controls will directly increase tax revenues. c. they are required by law to improve market conditions. d. they believe that the market system is inefficient and their actions will improve efficiency. ANSWER: a. they believe the market’s outcome to be unfair. TYPE: M SECTION: 1 DIFFICULTY: 2 3. Policymakers are led to control prices because a. they view the market’s outcome as inefficient. b. they view the market’s outcome as unfair. c. all politicians enjoy exercising their power. d. they are required to do so under the Employment Act of 1946. ANSWER: b. they view the market’s outcome as unfair. TYPE: M SECTION: 1 DIFFICULTY: 2 4. Price controls a. always produce an equitable outcome. b. always produce an efficient outcome. c. can generate inequities of their own. d. produce revenue for the government. ANSWER: c. can generate inequities of their own. TYPE: M SECTION: 1 DIFFICULTY: 2 5. Which of the following is a reason policymakers impose taxes? a. to attempt to make markets more efficient b. to influence market outcomes c. to raise revenue for public use d.

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