2.7 Government Intervention

Question 1

subsidy

Answer 1

financial assistance made by governments to sppliers which will lower the price and increase production

Question 2

direct tax

Answer 2

tax upon income

Question 3

indirect tax

Answer 3

an expenditure and sales tax upon goods and services - collected by suppliers and passed onto governments

Question 4

specific tax

Answer 4

when a specific amount is imposed on a good, regardless of the cost

Question 5

Ad Valorem tax

Answer 5

calculated as a percentage of the selling price of the product

Question 6

incidence of a tax

Answer 6

who actually pays the tax - what percentage is paid by the suppliers and what percentage is paid by the consumers

Question 7

government revenue

Answer 7

the amount of government revenue that will be achieved through tax

Question 8

welfare loss

Answer 8

loss of efficiency in the society

Question 9

dead-weight loss

Answer 9

loss of producer and consumer surplus

Question 10

merit goods

Answer 10

goods or services which consumers will often undervalue but which the government believe to provide positive externalities