Multiple Choice
Which of the following factors typically decrease as a result of protectionist policies?
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7. Externalities
Externalities: Social Benefits and Social Costs
Multiple Choice
Which of the following is an example of a supply shock?
A
A sudden increase in oil prices due to geopolitical conflict
B
A government-imposed price ceiling on bread
C
A decrease in the tax rate for consumers
D
A rise in consumer demand for electric vehicles
Verified step by step guidance1
Understand the concept of a supply shock: it is an unexpected event that suddenly changes the supply of a good or service, leading to a sudden change in its price or availability.
Analyze each option to determine if it affects supply or demand: a supply shock directly impacts the production or availability of goods, while demand changes affect consumers' willingness to buy.
Evaluate 'A sudden increase in oil prices due to geopolitical conflict': this directly affects the cost and availability of oil, which is an input in many production processes, thus impacting supply.
Consider 'A government-imposed price ceiling on bread': this is a policy intervention affecting price but not an unexpected change in supply itself.
Review 'A decrease in the tax rate for consumers' and 'A rise in consumer demand for electric vehicles': both affect demand rather than supply, so they are not supply shocks.
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