book4

Question 1

maximum price

Answer 1

maximum permissible price that producers may legally charge for a particular good or service.

Question 2

minimum price (legislation)

Answer 2

minimum permissible price that producers may legally charge for a particular good or service.

Question 3

minimum wage

Answer 3

workers are guaranteed a wage above the market equilibrium wage.

Question 4

transfer payments (no graph)

Answer 4

expenditure by the government in which it receives no goods and services in return

Question 5

government vouchers (initial equilibrium is allocative efficient)

Answer 5

redeemable by households for specific goods and services

Question 6

progressive direct taxation ( no graph )

Answer 6

direct taxation - taxes levied by the government directly on the income, wealth and profits of individuals and firms

progressive tax - takes a lager proportion of income from higher income earners than it does from lower income earners

Question 7

indirect tax (specific tax vs ad valorem tax) [tax incidence]

Answer 7

tax levied on goods and services

specific tax - tax levied on fixed amount per unit sold

ad valorem tax - tax levied as a percentage of the selling price

Question 8

production subsidy (initial equilibrium is allocative efficient) [subsidy incidence]

Answer 8

payment made by the government to producers to encourage the production of cetrain goods or services.