Section 6 - Government Intervention

Question 1

What is taxation?

Answer 1

Taxation is the process by which a government collects money from individuals and businesses to fund public services and government operations.

Question 2

True or False: Direct taxes are levied on income and wealth.

Answer 2

True

Question 3

Fill in the blank: The main purpose of taxation is to __________.

Answer 3

generate revenue for public expenditure

Question 4

What are the two main types of taxes?

Answer 4

Direct taxes and indirect taxes.

Question 5

Multiple Choice: Which of the following is an example of an indirect tax? A) Income tax B) Value Added Tax (VAT) C) Corporation tax

Answer 5

B) Value Added Tax (VAT)

Question 6

What is a progressive tax system?

Answer 6

A progressive tax system is one where the tax rate increases as the taxable amount increases.

Question 7

True or False: Indirect taxes are included in the price of goods and services.

Answer 7

True

Question 8

What does the term ‘tax evasion’ refer to?

Answer 8

Tax evasion refers to the illegal act of not paying taxes owed to the government.

Question 9

Fill in the blank: The main principle of taxation is equity, which means taxes should be __________.

Answer 9

fair and just

Question 10

Short Answer: Name one advantage of a high tax rate.

Answer 10

It can provide sufficient funds for public services and infrastructure.

Question 11

What is a subsidy?

Answer 11

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

Question 12

True or False: Subsidies can lead to market distortions.

Answer 12

True

Question 13

Fill in the blank: Subsidies are often used to encourage __________ production.

Answer 13

increased

Question 14

What are the two main types of subsidies?

Answer 14

Direct subsidies and indirect subsidies.

Question 15

Multiple Choice: Which of the following is a common goal of subsidies? A) Increase prices B) Support low-income consumers C) Decrease production

Answer 15

B) Support low-income consumers

Question 16

What is the impact of subsidies on consumers?

Answer 16

Subsidies can lower prices for consumers, making goods and services more affordable.

Question 17

True or False: Subsidies can lead to overproduction in certain industries.

Answer 17

True

Question 18

What is the purpose of agricultural subsidies?

Answer 18

To stabilize farm incomes and ensure a stable food supply.

Question 19

Fill in the blank: Subsidies can be funded through __________.

Answer 19

tax revenue

Question 20

Multiple Choice: Which sector is least likely to receive subsidies? A) Renewable energy B) Tobacco C) Education

Answer 20

B) Tobacco

Question 21

What are price controls?

Answer 21

Government-imposed limits on the prices charged for goods and services.

Question 22

True or False: Price ceilings can lead to shortages.

Answer 22

True

Question 23

Fill in the blank: A __________ is a maximum price set by the government.

Answer 23

price ceiling

Question 24

What is a price floor?

Answer 24

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

Question 25

Multiple Choice: What is the primary goal of implementing price controls?

Answer 25

To protect consumers from rapid price increases.

Question 26

What is an example of a price ceiling?

Answer 26

Rent control in housing markets.

Question 27

True or False: Price floors can lead to surpluses.

Answer 27

True

Question 28

Short Answer: Name one potential negative effect of price controls.

Answer 28

Decreased supply of goods.

Question 29

What happens to market equilibrium when a price ceiling is set below the equilibrium price?

Answer 29

It creates a shortage.

Question 30

Fill in the blank: Price controls can result in __________, where consumers cannot find the product they want.

Answer 30

shortages

Question 31

What is regulation?

Answer 31

Regulation is the act of governing or controlling something, often through rules or laws set by a governing body.

Question 32

What is deregulation?

Answer 32

Deregulation is the process of removing restrictions or regulations in an industry, allowing for more free market conditions.

Question 33

True or False: Deregulation always leads to increased competition.

Answer 33

False

Question 34

What is privatization?

Answer 34

Privatization is the transfer of ownership of a business or public service from the government to private individuals or organizations.

Question 35

Fill in the blank: Regulation is often implemented to protect _______.

Answer 35

public interest

Question 36

What are some potential benefits of deregulation?

Answer 36

Potential benefits include increased competition, lower prices for consumers, and innovation.

Question 37

Short answer: Name one industry that has undergone significant deregulation.

Answer 37

The airline industry.

Question 38

Multiple choice: Which of the following is a reason for privatization? A) To increase government control B) To improve efficiency C) To reduce competition

Answer 38

B) To improve efficiency

Question 39

What is a common criticism of deregulation?

Answer 39

A common criticism is that it can lead to reduced consumer protections and increased risks.

Question 40

True or False: Privatization can lead to the exclusion of low-income individuals from essential services.

Answer 40

True

Question 41

Fill in the blank: The goal of regulation is often to ensure _______ and _______ in the market.

Answer 41

fairness, safety

Question 42

What role do regulatory agencies play?

Answer 42

Regulatory agencies enforce laws and regulations to ensure compliance and protect public interests.

Question 43

Multiple choice: Which of the following is NOT a type of regulation? A) Economic regulation B) Social regulation C) Corporate regulation

Answer 43

C) Corporate regulation

Question 44

Short answer: What is a potential downside of privatization?

Answer 44

A potential downside is that it can lead to higher costs for consumers.

Question 45

What is meant by 'market failure' in the context of regulation?

Answer 45

Market failure refers to situations where the free market does not allocate resources efficiently, necessitating regulatory intervention.

Question 46

True or False: All forms of regulation are considered beneficial.

Answer 46

False

Question 47

Fill in the blank: Deregulation can result in _______ for consumers in the short term.

Answer 47

lower prices

Question 48

What is an example of economic regulation?

Answer 48

Price controls in utilities.

Question 49

Multiple choice: Which of the following is a goal of regulation? A) To eliminate competition B) To protect consumers C) To create monopolies

Answer 49

B) To protect consumers

Question 50

Short answer: How can deregulation impact employment in an industry?

Answer 50

Deregulation can lead to job losses as companies streamline operations but may also create new jobs through increased competition.

Question 51

What is the primary goal of competition policy?

Answer 51

To promote fair competition and prevent monopolistic practices.

Question 52

True or False: Competition policy is only concerned with large corporations.

Answer 52

False

Question 53

Fill in the blank: Competition policy aims to protect the interests of ______ and consumers.

Answer 53

businesses

Question 54

What are anti-competitive practices?

Answer 54

Actions that reduce or eliminate competition in a market.

Question 55

Multiple Choice: Which of the following is an example of a merger that may be scrutinized under competition policy? A) Two local coffee shops B) A large tech company acquiring a smaller tech startup C) A grocery store opening a new location

Answer 55

B) A large tech company acquiring a smaller tech startup

Question 56

What is meant by market dominance?

Answer 56

A situation where a company has a significant share of the market, allowing it to control prices or exclude competition.

Question 57

True or False: Price fixing is considered a violation of competition policy.

Answer 57

True

Question 58

What is the role of regulatory authorities in competition policy?

Answer 58

To enforce competition laws and investigate anti-competitive behavior.

Question 59

Short Answer: Name one common tool used to assess market competition.

Answer 59

Market share analysis

Question 60

Fill in the blank: The ______ Act is a key legislation in many countries that addresses anti-competitive practices.

Answer 60

Antitrust

Question 61

What is government failure?

Answer 61

Government failure refers to a situation where government intervention in the economy leads to inefficient outcomes.

Question 62

True or False: Government failure can occur even when the intentions of policymakers are good.

Answer 62

True

Question 63

Fill in the blank: Government failure can result from ________ in the decision-making process.

Answer 63

bureaucratic inefficiencies

Question 64

Which of the following is a common cause of government failure? A) Market monopolies B) Information asymmetry C) Public goods D) All of the above

Answer 64

D) All of the above

Question 65

What is 'regulatory capture' in the context of government failure?

Answer 65

Regulatory capture occurs when regulatory agencies are dominated by the industries they are supposed to regulate.

Question 66

Short answer: Name one consequence of government failure.

Answer 66

One consequence of government failure is the misallocation of resources.

Question 67

True or False: Government failure is solely the result of poor policy decisions.

Answer 67

False

Question 68

What role do political incentives play in government failure?

Answer 68

Political incentives can lead to decisions that prioritize short-term gains over long-term welfare, contributing to government failure.

Question 69

Multiple choice: Which of the following can be a result of government failure? A) Increased efficiency B) Higher taxes C) Improved public services D) Enhanced competition

Answer 69

B) Higher taxes

Question 70

Short answer: How can government failure impact economic growth?

Answer 70

Government failure can hinder economic growth by creating barriers to investment and reducing overall efficiency in resource allocation.