chapter 15 - mixed economy system

Question 1

definition of:

maximum price

Answer 1

when gov set market price below market equilibrium price to encourage consumption; cause excess demand and shortages

Question 2

definition of:

minimum price

Answer 2

when gov set market price above market equilibrium price to encourage firms to supply more output of a certain good or service; excess supply and surplus

Question 3

how does gov intervene to address market failure?

Answer 3

• subsidies
• education
• direct provision
• rules and regulation
• privatisation and nationalisation

Question 4

definition of:

privatisation

Answer 4

transfer of ownership of assets from public sector to private sector

Question 5

definition of:

nationalisation

Answer 5

purchase of private sector assets by gov

Question 6

how does education and advertising reduce consumption of cigarettes?

Answer 6

this raises awareness of the health risks

Question 7

how do rules and regulations help correct certain market failures?

Answer 7

gov impose rules; e.g minors not allowed to purchase cigar regs and consume alcohol