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Government Intervention in Resource Markets

Description: This quiz assesses your knowledge of government intervention in resource markets.
Number of Questions: 15
Created by:
Tags: economics resource economics government intervention
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What is the primary objective of government intervention in resource markets?

  1. To promote economic efficiency

  2. To maximize consumer surplus

  3. To ensure environmental sustainability

  4. To generate government revenue


Correct Option: A
Explanation:

Government intervention in resource markets aims to correct market failures and promote economic efficiency by ensuring that resources are allocated optimally.

Which of the following is an example of a government intervention in a resource market?

  1. Price ceiling

  2. Import quota

  3. Subsidy

  4. All of the above


Correct Option: D
Explanation:

Government intervention in resource markets can take various forms, including price controls, import quotas, subsidies, and taxes.

What is the potential impact of a price ceiling on a resource market?

  1. Increased consumer surplus

  2. Increased producer surplus

  3. Shortages

  4. All of the above


Correct Option: C
Explanation:

A price ceiling below the equilibrium price can lead to shortages, as producers are discouraged from supplying the resource at the artificially low price.

How does an import quota affect the domestic price of a resource?

  1. It increases the domestic price

  2. It decreases the domestic price

  3. It has no effect on the domestic price

  4. It depends on the elasticity of demand and supply


Correct Option: A
Explanation:

An import quota reduces the quantity of the resource available in the domestic market, leading to an increase in the domestic price.

What is the primary objective of a government subsidy in a resource market?

  1. To increase consumer surplus

  2. To increase producer surplus

  3. To promote economic efficiency

  4. To generate government revenue


Correct Option: B
Explanation:

Government subsidies in resource markets are typically provided to producers to lower their costs or increase their revenue, thereby increasing producer surplus.

How does a subsidy affect the quantity of a resource supplied?

  1. It increases the quantity supplied

  2. It decreases the quantity supplied

  3. It has no effect on the quantity supplied

  4. It depends on the elasticity of supply


Correct Option: A
Explanation:

A subsidy reduces the cost of production for producers, encouraging them to supply more of the resource.

What is the potential impact of government intervention on the environment?

  1. It can lead to environmental degradation

  2. It can promote environmental sustainability

  3. It has no effect on the environment

  4. It depends on the specific intervention


Correct Option: D
Explanation:

Government intervention can have both positive and negative impacts on the environment, depending on the specific policy and its implementation.

Which of the following is a potential benefit of government intervention in resource markets?

  1. Increased economic efficiency

  2. Improved environmental sustainability

  3. Reduced income inequality

  4. All of the above


Correct Option: D
Explanation:

Government intervention in resource markets can potentially lead to increased economic efficiency, improved environmental sustainability, and reduced income inequality, depending on the specific policy and its implementation.

What is the potential drawback of government intervention in resource markets?

  1. It can lead to market distortions

  2. It can reduce economic efficiency

  3. It can increase government spending

  4. All of the above


Correct Option: D
Explanation:

Government intervention in resource markets can potentially lead to market distortions, reduced economic efficiency, and increased government spending, depending on the specific policy and its implementation.

How can government intervention in resource markets affect economic growth?

  1. It can promote economic growth

  2. It can hinder economic growth

  3. It has no effect on economic growth

  4. It depends on the specific intervention


Correct Option: D
Explanation:

The impact of government intervention on economic growth depends on the specific policy and its implementation. It can potentially promote economic growth by correcting market failures and promoting efficiency, or it can hinder economic growth by creating distortions and reducing incentives for investment and innovation.

What is the role of property rights in resource markets?

  1. They define ownership and control over resources

  2. They facilitate resource allocation and exchange

  3. They promote economic efficiency

  4. All of the above


Correct Option: D
Explanation:

Property rights play a crucial role in resource markets by defining ownership and control over resources, facilitating resource allocation and exchange, and promoting economic efficiency.

How can government intervention affect the distribution of income in resource markets?

  1. It can reduce income inequality

  2. It can increase income inequality

  3. It has no effect on income inequality

  4. It depends on the specific intervention


Correct Option: D
Explanation:

The impact of government intervention on income distribution in resource markets depends on the specific policy and its implementation. It can potentially reduce income inequality by redistributing resource rents or providing subsidies to disadvantaged groups, or it can increase income inequality by creating rents for certain groups or by imposing regressive taxes.

What are the challenges associated with managing common-pool resources?

  1. Overexploitation

  2. Free-riding

  3. Lack of incentives for conservation

  4. All of the above


Correct Option: D
Explanation:

Managing common-pool resources presents challenges such as overexploitation, free-riding, and lack of incentives for conservation, due to the absence of clear property rights and the difficulty in excluding non-payers from benefiting from the resource.

How can government intervention address the challenges of managing common-pool resources?

  1. Imposing regulations and quotas

  2. Creating property rights and markets

  3. Providing subsidies for conservation

  4. All of the above


Correct Option: D
Explanation:

Government intervention can address the challenges of managing common-pool resources by imposing regulations and quotas, creating property rights and markets, and providing subsidies for conservation.

What is the role of international cooperation in managing global resource markets?

  1. It can promote sustainable resource use

  2. It can reduce resource price volatility

  3. It can facilitate technology transfer

  4. All of the above


Correct Option: D
Explanation:

International cooperation plays a crucial role in managing global resource markets by promoting sustainable resource use, reducing resource price volatility, and facilitating technology transfer.

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