Ch. 15 and 16: Mixed Economy and Money and Banking

Which types of goods has to be financed by the government?

• Merit

• Consumer

• Capital

• Public

What is an external benefit if a government decides to subsidize rail travel?

• Lower fares for train passengers

• A rise in government expenditure

• Reduced congestion on roads

• Increased crowding on trains

A firm installs a new equipment in order to reduce it's pollution emissions. What is the effect of this on private and external costs?

• Private costs: fall

  External costs: fall

• Private costs: fall

  External costs: rise

• Private costs: rise

  External costs: fall

• Private costs: rise

  External costs: rise

Why does the state/government have to intervene in the market?

• To increase the role of the price mechanism in allocating resources

• To prevent private sector firms from overcharging consumers

• To make the distribution of income more uneven

• To encourage the consumption of harmful products

What is the "minimum price"? Select all that apply.

• it is also called the "price floor"

• it is set above the equilibrium price

• it is also called the "price ceiling"

• it is set below the equilibrium price

What is the "maximum price"? Select all that apply.

• it is also called the "price floor"

• it is set above the equilibrium price

• it is also called the "price ceiling"

• it is set below the equilibrium price

What happens when a maximum price is imposed on the market? Choose all that apply.

• it will result in lower prices

• it will create a shortage

• it will increase demand

• it will reduce supply

What are 3 ways that the government can do to encourage people to consume merit goods?

• subsidize their production

• provide more information

  to people about the benefits of consuming them

• increase the taxes impose on them

• make it compulsory for people to consume/avail of them

What is a subsidy?

• a sum of money given by government as assistance for individuals or firms

• a sum of money charged by government from individuals or firms

• a sum of money donated by firms to charity

• a sum of money given by firms to the government

How is a mixed economy better than a market economy? Select all that apply.

• If market "fails", the government can put regulations in place

• consumers will have more information about the benefits of merit goods

• governments can finance the production of public goods

• people will realize the benefits of high taxes on demerit goods