test 3 market efficiency

Question 1

define price ceiling

Answer 1

• A price ceiling is a legislated maximum price that sellers are allowed to change in the market.
• it is designed to benefit consumers by keeping the price below the market clearing price

Question 2

define price floor

Answer 2

A price floor is a legislated minimum price that sellers are allowed to change in the market.
- they are designed to help producers

Question 3

why do governments levy taxes on goods and services

Answer 3

• in order to raise revenue for government spending programs

Question 4

define subsidy

Answer 4

a subsidy is a grant paid to a producer with the purpose of reducing costs and increasing output. A subsidy can be thought of as a negative tax

Question 5

define efficiency

Answer 5

• producing the goods that society wants at the lowest possible cost