1) Which of the below is a definition of a minimum price? a) A price set by the free market below which prices cannot fall b) A price set by the government above which prices cannot rise c) A price set by the government below which prices cannot fall d) A price set by the free market above which prices cannot rise 2) Which of the below is a reason for a minimum price? a) To encourage the consumption of a merit good b) To discourage the consumption of a demerit good c) To raise tax revenue to pay for NHS services d) To raise tax revenue to compensate 3rd parties 3) Which of the below is an advantage of a minimum price? a) It increases consumption as it creates and incentive to consume b) It creates inequality as low income households cannot afford these goods c) It generates tax revenue for the government d) It reduces consumption due to the rationing function of the price mechanism 4) Which of the below is NOT a disadvantage of a minimum price a) It could create a black market b) It creates a disequilibrium position c) It dis-incentivises consumption of a demerit good d) It creates excess supply 5) What is meant by a maximum price a) A price set by the government above which prices cannot rise b) A price set by producers, beyond which they are not prepared to charge c) The most that a consumer is willing to pay for a good d) The lowest price a consumer is prepared to pay 6) Which of the below is a reason for maximum price? a) To discourage consumption of demerit goods b) To allow low income families to afford essentials such as energy and rent c) To put firms out of business so government can provide public goods d) To generate tax revenue to subsidise green production technologies 7) Which of the below is an advantage of a maximum price? a) It makes essential products more affordable b) It reduces food waste c) It creates shortages d) It creates dis-incentives to supply 8) Which of the below is NOT a disadvantage of a maximum price? a) It creates a dis-equilibrium position b) It creates excess supply c) It makes products more expensive d) It creates shortages

Maximum and minimum prices

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