Chapter 7 - Government Intervention

Question 1

What is government intervention in the market?

Answer 1

Government intervention in the market refers to the actions taken by a government to affect the economy and influence market outcomes.

Question 2

True or False: Government intervention can lead to market failures.

Answer 2

True

Question 3

Name one reason why governments intervene in markets.

Answer 3

To correct market failures.

Question 4

What is a market failure?

Answer 4

A market failure occurs when the allocation of goods and services is not efficient.

Question 5

Fill in the blank: Price controls can be either ______ or ______.

Answer 5

ceilings; floors

Question 6

What is a price ceiling?

Answer 6

A price ceiling is a maximum price set by the government for a particular good or service.

Question 7

What is a price floor?

Answer 7

A price floor is a minimum price set by the government for a particular good or service.

Question 8

True or False: Subsidies are a form of government intervention.

Answer 8

True

Question 9

What is a subsidy?

Answer 9

A subsidy is a financial assistance provided by the government to support a specific industry or economic sector.

Question 10

Name one advantage of government intervention.

Answer 10

It can help protect consumers from monopolies.

Question 11

What is regulation?

Answer 11

Regulation is the use of laws and rules by the government to control or manage economic activities.

Question 12

True or False: Deregulation is the removal of government restrictions in a market.

Answer 12

True

Question 13

What is an externality?

Answer 13

An externality is a cost or benefit incurred by a third party who did not choose to incur that cost or benefit.

Question 14

Fill in the blank: Negative externalities can lead to ______.

Answer 14

overproduction

Question 15

What is a public good?

Answer 15

A public good is a good that is non-excludable and non-rivalrous, meaning it is available for everyone to use without reducing its availability to others.

Question 16

Give an example of a public good.

Answer 16

National defense.

Question 17

True or False: Government intervention always leads to better market outcomes.

Answer 17

False

Question 18

What is the role of the Central Bank in government intervention?

Answer 18

To regulate the money supply and interest rates to stabilize the economy.

Question 19

Fill in the blank: The ______ is responsible for implementing monetary policy.

Answer 19

Central Bank

Question 20

What is fiscal policy?

Answer 20

Fiscal policy refers to government spending and tax policies used to influence economic conditions.

Question 21

Name one potential disadvantage of government intervention.

Answer 21

It can lead to inefficiency in resource allocation.

Question 22

True or False: All government interventions are successful.

Answer 22

False

Question 23

What is a quota?

Answer 23

A quota is a government-imposed limit on the quantity of a good that can be produced or imported.

Question 24

Explain the term a command economy

Answer 24

A command economy is an economic system where almost all factors of production are owned by the state, there is maximum government interference, decision making is centralised and individuals work for the common good.

Question 25

Explain the term a free enterprise economy.

Answer 25

Almost all factors of production are privately owned, there is minimal government interference, decision making is done by individuals/entrepreneurs and self interest is a motivator.

Question 26

What is a demerit good?

Answer 26

A demerit good is a good that if over-consumed or over-produced can impose negative external costs on third parties.

Question 27

Examples of negative production externalities.

Answer 27

Carbon emissions from the provision of air travel.

Question 28

Examples of negative consumption externalities.

Answer 28

The consumption of petrol, diesel, coal and home-heating oil, which contributes to the production of carbon.

Question 29

Implications of the sugar-sweetened drinks tax.

Answer 29

- The quantity of sugary drinks consumed by individuals. - Reduced further burden on the health system. - Healthier drinks become more attractive.

Question 30

Implications of carbon tax.

Answer 30

- Demand for fossil fuels decrease - Environmentally friendlier alternatives become more attractive. - Unemployment will rise.

Question 31

Implications of the plastic bag tax.

Answer 31

Est in 2002. - Change in consumer behaviour. - Suppliers are more likely to supply paper bags. - Litter from plastic bags and the amount of plastic bags.

Question 32

Implications on disposable non-recyclable drink cups.

Answer 32

- The price of drinks served in disposable cups will increase. - Incentivise consumers to use 'keep cups.' - Loss in sales for vendors.

Question 33

The residential property scheme.

Answer 33

- Help to Buy scheme for first time buyers. - Maximum of 30,000 euro. - Introduced in response to the Central Bank restrictions on the size of mortgages.

Question 34

Implications of minimum unit pricing of alcohol.

Answer 34

- Costs to the health system. - Costs to the justice system.