Government Intervention

Which statement is false?

• Indirect taxes are taxes on spending to buy goods and services. 

• Indirect taxes are paid to the government by consumers. 

• Indirect taxes are paid to the government by producers. 

• Indirect taxes give rise to government revenues. 

Tags

indirect taxes

Ceteris paribus, indirect taxes lead to:

• a surplus, or excess supply 

• a rightward (downward) shift of the supply curve 

• a leftward (upward) shift of the supply curve 

• a shortage, or excess demand 

Tags

indirect taxes

Ceteris paribus, price ceilings lead to 

• a surplus, or excess supply 

• a rightward (downward) shift of the supply curve 

• a leftward (upward) shift of the supply curve 

• a shortage, or excess demand 

Tags

price controls

price ceiling

Ceteris paribus, subsidies lead to

• a surplus, or excess supply 

• a rightward (downward) shift of the supply curve 

• a leftward (upward) shift of the supply curve 

• a shortage, or excess demand 

Tags

subsidies

Ceteris paribus, price floors lead to 

• a surplus, or excess supply 

• a rightward (downward) shift of the supply curve 

• a leftward (upward) shift of the supply curve 

• a shortage, or excess demand 

Tags

price controls

price floor

Which statement is true? 

• The imposition of an indirect tax results in a disequilibrium price and quantity. 

• The imposition of an indirect tax results in a lower price for consumers and higher price   for producers.

• The imposition of an indirect tax results in a higher equilibrium price and lower   equilibrium quantity. 

• The imposition of an indirect tax results in loss of government revenue. 

Tags

indirect taxes

The objective to increase firms’ revenues, such as farmers, may be achieved by

• subsidies and price ceilings 

• subsidies and price floors 

• indirect taxes and price floors 

• indirect taxes and price ceilings 

Tags

price controls

price floor

subsidies

Indirect taxes may be imposed to 

• make housing more affordable for poor people 

• support the wages of low-skilled workers 

• decrease consumption of harmful goods 

• increase consumption of goods desirable for society 

Tags

indirect taxes

Price ceilings may be imposed to

• make housing more affordable for low-income people 

• support the wages of low-skilled workers 

• decrease consumption of harmful goods 

• increase consumption of goods desirable for society 

Tags

price controls

price ceiling

Subsidies may be imposed to 

• make housing less affordable for poor people 

• support the wages of low-skilled workers 

• decrease consumption of harmful goods 

• increase consumption of goods desirable for society

Tags

subsidies