Lesson 4.1.8.9
4.1.8.9 Government intervention in markets Quiz: AQA Economics, Unit 1
20 questions
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Lesson 4.1.8.9, Government intervention in markets: 20 multiple choice questions for the AQA Economics (7136), Unit 1: Individuals, firms, markets and market failure, written with Revision Ninja.
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The 20 questions
-
What is the main economic justification for government intervention in a market?
- Profit maximisation
- Complete deregulation
- Market failure
- Government failure
-
Which method of government intervention alters resource allocation directly through state spending?
- Price capping
- Public expenditure
- Indirect taxation
- Market deregulation
-
What is the main goal of imposing an indirect tax on a demerit good?
- Increase supply
- Subsidise production
- Reduce consumption
- Lower market price
-
What is the intended market effect of granting a subsidy for a merit good?
- Increased production costs
- Higher market price
- Reduced total output
- Lower consumer price
-
What market outcome occurs when a maximum price is set below equilibrium?
- Market equilibrium
- Producer surplus growth
- Excess supply
- Excess demand
-
Which policy corrects negative environmental externalities by extending property rights to firms?
- State provision
- Pollution permits
- Maximum price controls
- Indirect taxation
-
Which intervention is an example of regulation used to address market failure?
- Maximum price caps
- Ad valorem taxation
- Production subsidies
- Mandatory safety standards
-
What is the primary objective of government intervention to cap residential rents?
- Promoting elasticity
- Maximising tax revenue
- Reducing production costs
- Improving affordability
-
Why do governments typically use a policy mix rather than a single intervention?
- Elimination of scarcity
- Zero opportunity cost
- Guaranteed budget surplus
- Multiple market failures
-
Which price control is set below free market equilibrium to protect consumers from high prices?
- Indirect tax
- Minimum price
- Maximum price
- Production quota
-
What is a key advantage of state provision of merit goods like healthcare?
- Excessive firm profit
- Reduced tax burden
- Increased accessibility
- Higher consumer prices
-
What term describes a scenario where government intervention leads to a net welfare loss?
- Regulatory capture
- Government failure
- Market failure
- Negative externality
-
To fully internalise a negative externality, an indirect tax should equal which value?
- Marginal private cost
- Average revenue
- Marginal external cost
- Total fixed cost
-
When intervening to redistribute income, what is a major economic trade-off facing governments?
- Inflation versus exports
- Fixed versus variable
- Efficiency versus equity
- Supply versus demand
-
What market imbalance is directly caused by setting a binding minimum price?
- Excess demand
- Excess supply
- Price deflation
- Market equilibrium
-
Which policy directly internalises the negative external costs generated by polluters?
- Subsidised production
- Market deregulation
- Maximum wage cap
- Pigouvian tax
-
What is a major financial risk for governments setting minimum prices for agricultural goods?
- Lower tax receipts
- Buying excess stock
- Immediate market shortages
- Surplus tax revenue
-
Why might a government choose price cap regulation over a tax on monopoly profits?
- Guarantees tax income
- Directly controls prices
- Increases entry barriers
- Eliminates all costs
-
Why is it difficult for governments to set the optimal corrective tax on pollution?
- Imperfect information
- Infinite elasticity
- Fixed exchange rates
- Zero external costs
-
What is a primary economic downside of providing subsidies for merit goods?
- Opportunity cost
- Increased pollution
- Higher consumer prices
- Reduced production levels
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