Government Intervention

What is the primary purpose of a specific tax in economics?

• To reduce pollution
• To raise government revenue
• To benefit producers
• To improve market efficiency

Which of the following is a likely consequence of imposing a subsidy?

• Higher consumer prices
• Higher market prices

• Higher market output
• Improves distortion of market allocation

What is the main goal of a minimum price policy?

• To prevent prices falling too low
• To prevent prices rising too high
• To encourage investment
• To reduce income inequality

How does a maximum price affect the market if set below equilibrium?

• It creates a surplus
• It creates a shortage
• It has no effect
• It improves efficiency

What happens to consumer surplus when a specific tax is introduced?

• It increases
• It decreases
• It remains constant
• It is unaffected

Which of these is an example of a subsidy?

• Government grants to firms
• Taxes on goods
• Subsidies on imports
• Public healthcare funding

What is a common result of a minimum price on agricultural goods?

• Excess demand
• Excess supply
• Stable equilibrium
• Improves efficiency

Why might a government impose a maximum price on rental housing?

• To reduce housing supply
• To reduce tenant demand
• To stabilise rental costs
• To reduce exploitation

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

• Shifts left
• Shifts right
• Shifts parallel
• Shifts perpendicularly

What does a specific tax do to the price consumers pay?

• Decreases
• Increases
• Remains unchanged
• Causes surplus