Government Intervention

Which graph represents an ad valorem tax?

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If demand is relatively elastic, which economic pillar faces the highest burden?

• Consumers

• Governments

• Financial Institutions

• Producers

What does price ceiling create?

• Excess Demand

• Consumer Surplus

• Excess Supply

• Producer Surplus

What is government intervention?

• taxes and subsidies

• is any action carried out by the government or public entity that affects the market economy

• when employees of the government decide to take action after contemplation whilst creating economic models to predict market economy

• a consequence of an industrial or commercial activity which affects other parties in turn being reflected in market prices

Corporate tax is an indirect tax

• True

• False

• It does not exist; it's a subsidy

How do subsidies create a net loss of total welfare?

• A negative externality is created

• It creates a burden on the government

• The total cost to tax payers exceeds the total increase in social surplus

• It creates a burden on the consumers

On what type of goods should a price ceiling be imposed?

• Normal

• Inferior

• Luxury

• Necessity

What area represents government spending on subsidy?

• B+C+E+F

• A+B+D+G+F

• B+F+D

• A+G+B+F

Which two of the following represent explanations of the rise in government spending which are based on ‘macroeconomic analysis’?

• ‘Displacement Theory’ which suggests that public spending is ratcheted upwards over time by social upheavals – as in the case of economic depressions or wars

• The state providing ‘public goods’ and ‘merit goods’ free at the point of use, which private markets are unable to do

• Rise in a country’s real National Income, when public services are ‘normal’ products with high income elasticities of demand

• Change in the composition of the various public sector ‘markets’ leading to greater public spending (e.g. ageing population incurring greater expenditure on healthcare)

• Increased privatisation reducing the role of the public sector

Should the rich be taxed in extremity relative to the so-called poor?

• Yes

• No

• I don't care

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• kg / purple^2