Topic Questions (MCQ – HARD): Government policies to correct market failure – 3auk

The diagram illustrates the cost and revenue curves of a monopoly supplier in its initial state.

If the government sets the price at OP, what output level will the firm choose to maximize its profits?

OA

OB

OC

OD

In order to incentivize a privatised firm to enhance its productive efficiency, what aspect should an industry regulator control?

dividends

level of output

prices

profitability

When a congestion charge is implemented for private motorists entering a city centre, what will be the overall impact on the welfare of the following categories of car users?

A

B

C

D

Which of the following policies is not aimed at addressing market failure?

Policy to promote fair competition in markets.

Policy to provide free immunization against contagious diseases.

Policy to establish a minimum wage requirement.

Policy to regulate and limit pollution in rivers.

Transport economists have determined that the demand for private car use is highly inelastic.

What would be the most effective measure to alleviate road traffic congestion?

prohibiting the entry of private cars and lorries into town centres

implementing a subsidy to decrease the cost of bicycle usage

implementing road pricing on all major roads

providing subsidies for public transportation such as trains and buses

What is a benefit of utilizing tradable pollution permits for pollution control?

Tradable permits are limited to the firms that receive them.

Tradable permits eliminate the need for enforcement expenses.

Tradable permits promote the utilization of market mechanisms.

Tradable permits ensure an absence of pollution.