1.4 - Government Intervention Flashcards

1
Q

What type of tax creates a non-parallel shift to a supply curve

A

Ad valorem

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2
Q

What are disadvantages of subsidies (4)

A

Encourage laziness
Opportunity cost
Lower standard goods produced
Elasticity of demand determines effectiveness

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3
Q

What happens if a new maximum price is below equilibrium

A

More demand but a shortage of supply, excess demand

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4
Q

What happens if a new minimum price is above equilibrium

A

Less demand but increased supply, excess supply

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5
Q

What type of market structure do minimum prices work against

A

Monopsony power

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6
Q

What are minimum price cons (4)

A

Consumers pay more
Resources wasted when excess goods destroyed
Resources allocated inefficiently
High opportunity cost

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7
Q

Cons of regulation (3)

A

Expensive to monitor and enforce
Firms may face higher costs and close
Value judgement needed

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8
Q

Pros of deregulation (2)

A

Reduced government interference
Reduced bureaucracy increases efficiency

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9
Q

What type of firm needs regulation

A

Natural monopolies

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10
Q

What are causes of government failure (4)

A

Information gaps
Excessive admin costs
Unintended consequences of interventions
Distortion of price signals

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11
Q

What are NHS market failures (2)

A

Targets mean quality of care reduced
Lots of money is spent on admin rather than medical care

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12
Q

What are agricultural price supports market failures (2)

A

Overproduction of certain crops led to waste
Inefficient resource allocation

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