Government Intervention

Question 1

Indirect Tax

Answer 1

Tax levied on consumers at the point of sale for particular g+s, rather than directly on incomes

Question 2

Subsidies

Answer 2

Cash payments or tax concessions

Question 3

Direct action

Answer 3

Where the government correct market failure themselves (e.g., provide public goods)

Question 4

Government Regulations

Answer 4

-Laws, legislation put in place to correct market failure

Question 5

Advertisement

Answer 5

Governments advertising so as to educate individuals on inefficient allocation of resources (e.g., sustainable energy education)

Question 6

One example of government intervention which is an inefficient allocation of resources

Answer 6

-In 2021-22, the federal and state governments spent $11.6 billion in fossil fuel subsidies
-Alteration to relative prices
-Greater volume of production of coal
-This causes an increase in negative production externalities (climate change, worsened air quality)
-Allocative efficiency is not achieved
-Decrease in intertemporal efficiency