9708 Unit 8.1 Government Intervention to correct market failure

What is the primary purpose of a Pigouvian tax?

• To raise government revenue.

• To reward firms for environmental practices.

• To internalise the externality.

• To promote export.

What does it mean when an externality is internalized?

• Firms are rewarded for good behavior.

• Firms pay for the external cost they cause.

• Third parties compensate the firms.

• External costs are ignored.

How does indirect taxation reduce the effects of negative externalities?

• By directly limiting production.

• By increasing the good's price to reflect the external cost.

• By promoting exports.

• By decreasing government revenue.

What is a potential downside of indirect taxation for national industries?

• They might become more eco-friendly.

• Their international competitiveness might decline.

• Their domestic competitiveness might increase.

• They might receive more subsidies.

Why might firms relocate abroad due to indirect taxation?

• To increase their tax burden.

• To ensure more employment in the home country.

• To avoid the tax and its associated costs.

• To contribute more to their home economy.

What can happen to firms that don’t comply with regulations?

• They can receive awards.

• They can be punished, often with fines.

• They can be encouraged to pollute more.

• They can be granted more licenses.

What did the Indonesian government implement regarding palm oil licenses?

• They promoted deforestation.

• They encouraged more palm oil production.

• They placed moratoria on new palm oil licenses.

• They deregulated the industry.

Which certification pushes palm oil producers in Indonesia towards sustainable practices?

• GPO (Global Palm Oil)

• EPO (Eco Palm Oil)

• ISPO (Indonesian Sustainable Palm Oil)

• IPO (Indonesian Palm Oil)

What's a major downside of strict regulations for some firms?

• They might expand their operations.

• They might close or relocate to another country.

• They might pay fewer taxes.

• They might get more government support.

What do pollution permits allow?

• Unlimited pollution by firms.

• Production of any kind of good.

• A certain level of pollution.

• Firms to avoid taxes.