Government Intervention in the Price Mechanism

What is one of the general reasons for government intervention in the price mechanism?

• To increase market competition

• To stabilize prices

• To eliminate taxes

• To reduce government spending

How do maximum prices affect the market?

• They increase supply

• They create shortages

• They eliminate demand

• They increase taxes

What is the effect of minimum prices on the market?

• They create surpluses

• They reduce production costs

• They increase demand

• They lower taxes

Why do governments impose taxes?

• To increase inflation

• To generate revenue

• To decrease employment

• To eliminate subsidies

What is the difference between direct and indirect taxes?

• Direct taxes are paid by consumers, indirect taxes by producers

• Direct taxes are based on income, indirect taxes on goods and services

• Direct taxes are voluntary, indirect taxes are mandatory

• Direct taxes are temporary, indirect taxes are permanent

What are specific and ad valorem taxes?

• Taxes based on property value

• Taxes on luxury goods

• Fixed and percentage-based taxes

• Temporary and permanent taxes

What is meant by the canons of taxation?

• Principles of fair taxation

• Methods of tax evasion

• Types of tax deductions

• Strategies for tax reduction

How do subsidies affect the market?

• They increase prices

• They reduce supply

• They lower production costs

• They eliminate competition

What is the role of transfer payments in the market?

• To increase taxes

• To redistribute income

• To reduce inflation

• To eliminate subsidies

What are the advantages and disadvantages of nationalisation and privatisation?

• Nationalisation increases efficiency, privatisation reduces costs

• Nationalisation reduces competition, privatisation increases efficiency

• Nationalisation increases taxes, privatisation reduces government control

• Nationalisation eliminates subsidies, privatisation increases taxes