Senior Secondary (HKDSE) · Economics

Efficiency: Practice Questions

5 multiple-choice questions marked as you go, and 3 written questions with worked solutions. All on Efficiency.

8 questions16 marksFree, no account

Question 1

1 mark

In a typical supply and demand diagram, the deadweight loss resulting from a market intervention is represented by the area that indicates a loss of

Question 2

1 mark

A particular good generates a negative externality in its production. In a free market, without any government intervention, how does the equilibrium output compare to the socially optimal output, and what is the implication for allocative efficiency?

Question 3

1 mark

In a perfectly competitive market, the government imposes an effective price ceiling below the equilibrium price. Which of the following statements accurately describes the immediate consequences of this intervention?

Question 4

1 mark

Which of the following conditions must be met for a market to achieve allocative efficiency?

Question 5

1 mark

A specific good generates a positive externality, meaning its social benefit exceeds its private benefit. Without intervention, the market produces less than the socially optimal quantity. If the government introduces a unit subsidy that is greater than the marginal external benefit at the socially optimal output level, which of the following is most likely to occur?

Question 6

2 marks

In a market with no externalities, state the condition involving marginal benefit (\( MB \)) and marginal cost (\( MC \)) that must be met to ensure economic efficiency is achieved.

Write your answer out first, then check it against the worked solution.

Question 7

4 marks

Provide an example of a good or service that typically exhibits a positive externality in consumption and explain why it leads to under-provision in a free market.

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Question 8

5 marks

Analyze how an effective import quota on a good affects domestic consumer surplus and producer surplus, assuming a small open economy.

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