Chapter 6 Methods Of Intervention

Question 1

What is a subsidy?

Answer 1

A subsidy is a financial support provided by the government to reduce the cost of a product or service.

Question 2

Indirect taxes

Answer 2

Helps get rid of unwanted market failure externalities

Question 3

What are maximum prices

Answer 3

A price set by the government which is bellow market equilibrium.

Question 4

What is the purpose of a minimum price set by the government?

Answer 4

To ensure that prices do not fall below a level that would threaten the financial viability of producers.

Question 5

What is a pollution permit?

Answer 5

A pollution permit is a license that allows a company to emit a certain amount of pollutants, intended to limit environmental damage.

Question 6

What is state provision?

Answer 6

Gov can directly provide public goods such as street lighting

Question 7

Define property rights.

Answer 7

Property rights are legal rights to use, manage, and transfer ownership of resources or property.

Question 8

Regulation

Answer 8

A wide range of legal or other restrictions

Question 9

What is the effect of imposing a tax on a good?

Answer 9

It typically increases the price of the good and can decrease the quantity demanded.

Question 10

Provision of information

Answer 10

Gov provides info to people to help make rational descions e.g. warning signs