Government intervention

Question 1

Maximum pricing

• What
• Pros
• Cons

Answer 1

• Creates an increase in demand
• Protects consumers and makes firms supply more efficiently
• Deters new firms, could make lessen quality of product

Question 2

Minimum pricing

• What
• Pros
• Cons

Answer 2

• Increases supply
• Suppliers get an increased price
• Resources allocated inefficiently, consumers play more

Question 3

Causes of government failure

Answer 3

• Aysmmetric information
• Administrative costs
• Misallocation of resources
• Policy myopia

Question 4

Consequences of government failure

Answer 4

• Conflicting objectives

- Market distortions, max/min/subsidies