Government Involvement in the Economy Quiz

What are the three main reasons why governments become involved in the economy?

• Public goods and services, externalities, regulations

• Taxes, imports, exports

• Advertising, marketing, sales

• Production, consumption, distribution

Which of the following is an example of a private good?

• Car

• National defence

• Public park

• Street lighting

Why does the government provide services like health, education, and transport?

• They create large external benefits to the economy

• They are too expensive for businesses

• Only the government can produce them

• They are not needed by society

What is a private good?

• A good whose ownership is restricted to the group or individual that purchased it

• A good provided for free to everyone

• A good that cannot be owned by anyone

• A good that is always produced by the government

What is an example of a public good provided by the government?

• National defence

• Mobile phones

• Fast food

• Designer clothes

Why does the government impose high taxes on cigarettes?

• To discourage their use and pay for the cost to society

• To make cigarettes more popular

• To increase the profits of tobacco companies

• To encourage people to smoke more

What is an externality?

• A consequence of an economic activity that affects other people

• A product sold in foreign markets

• A government regulation

• A type of private good

Which of the following is an example of a negative externality?

• Second-hand smoke from cigarettes

• Free education

• Public transport

• National defence

How does the government reduce external costs from pollution?

• By taxing businesses that pollute

• By encouraging more pollution

• By giving subsidies to polluters

• By ignoring environmental damage

As of 2020, what was the tax on petrol in Australia per litre?

• 42.3 cents

• 10 cents

• 100 cents

• 5 cents