Interventionist believe that ...

• allowing markets to operate with minimal government interference will create the best outcomes for society

• the price mechanism is central to the allocation of scarce resources

• the free market if left to itself will lead to market failures i.e. a misallocation of resources

• decisions regarding what, how and for whom to produce should be determined by the choices of economic agents driven by the pursuit of self-interest

Free market economists believe that ...

• allowing markets to operate with minimal government interference will create the best outcomes for society

• the planning mechanism is central to the allocation of scarce resources

• the free market if left to itself will lead to the optimum allocation of resources

• decisions regarding what, how and for whom to produce should be determined by the government in society's interest

Which of the following are benefits of dependency on the primary sector for an LEDC? (Choose more than one option)

• Labour intensive

• Absorbs low skilled labour

• PED < - 1

• Comparative advantage

Which of the following are problems of dependency on the primary sector for an LEDC? (Choose more than one option)

• Unstable output due to natural environment

• Protectionism in developed countries can lead to unfair competition

• PED < - 1

• Comparative advantage

The Prebisch-Singer Hypothesis states that:

• the price of commodities will increase relative to manufactured products over time

• the price of commodities will decline relative to manufactured products over time

• the price of manufactured goods will decline relative to commodities over time

• the price of commodities relative to manufactured products will remain stable over time

Which of the following statements regarding buffer stock schemes is true? (Choose more than one option)

• Government sets a target price (TP) which will enable farmers to make an acceptable return

• The ceiling price is the highest market price the product can reach before triggering government intervention

• The floor price is lowest market price the product can reach before triggering government intervention

• The government sell surpluses when price reaches ‘floor’. and purchase surpluses when price reaches ‘ceiling’

Which of the following statements is true regarding maximum prices? (Choose more than one option)

• A maximum price is set below market equilibrium

• It makes the product less affordable

• It can lead to shortages

• It generates lower returns for producers

Which of the following statements is true regarding minimum prices? (Choose more than one option)

• A minimum price is set above market equilibrium

• It makes the product less affordable

• It can lead to shortages

• It generates higher returns for producers

Which of the following statements are true regarding the removal of a subsidy on fuel? (Choose more than one option)

• It will shift the supply curve to the left

• It will increase consumer surplus

• It will increase producer surplus

• It will increase inflationary pressure

Which of the following statements is true regarding fair trade? (Choose more than one option)

• It ensure producers receive a ‘fair’ price – usually above market price

• It helps farmers plan ahead and invest

• It can lead to undersupply

• It pays a social premium to improve social welfare in rural communities