Economics (AS & A Level) · Oct / Nov 2022 · Paper 12 · Question 15
9708Methods and effects of government intervention in markets
A government fixes a maximum price for a product in order to increase its consumption. What would be the likely outcome of such a policy?
- AConsumption will fall if the maximum price is above the current equilibrium price.
- BConsumption will rise if the maximum price is below the current equilibrium price.
- CProduction will fall if the maximum price is above the current equilibrium price.
- DProduction will fall if the maximum price is below the current equilibrium price.
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Correct answer: D. Production will fall if the maximum price is below the current equilibrium price.
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