Market Failure and Government Intervention

What is a primary reason for government intervention in markets?

• To correct market failure

• To support monopolies

• To increase government revenue

• To decrease the supply of goods

Which of the following is an example of government intervention?

• Banning the consumption of beneficial goods

• Decreasing the minimum school leaving age

• Encouraging the production of demerit goods

• Providing healthcare and education

What is the main indirect tax in the UK?

• Ad valorem tax

• Specific tax

• Income tax

• Corporate tax

How do indirect taxes affect market price and demand?

• No effect on market price or demand

• Decrease market price and increase demand

• Increase market price and contract demand

• Decrease both market price and demand

What is the effect of a subsidy on the supply curve?

• Remains unchanged

• Shifts to the right

• Shifts to the left

• Becomes vertical

What could be a cause of government failure?

• Efficient allocation of resources

• Distortion of price signals

• Perfect information

• Decrease in administrative costs

What is a specific tax?

• A percentage of income

• A set tax per unit

• A tax on property

• A tax on imports

What is an unintended consequence of government intervention?

• Unexpected reactions from consumers

• Lower administrative costs

• Increased efficiency in markets

• Perfect market equilibrium

What does the incidence of tax depend on?

• The price elasticity of demand

• The producer's preference

• The government's budget

• The type of good

Why might subsidies lead to government failure?

• They always decrease government revenue

• They ensure efficient allocation of resources

• They reduce the administrative costs

• They might encourage inefficiency in firms