government intervention

Question 1

main reasons for government intervention

Answer 1

1. earn government revenue
2. support firms
3. support households on low incomes
4. influence levels of production
5. influence levels of consumption
6. correct market failure
7. promote equity

Question 2

tax revenue

Answer 2

indirect taxes( spending or producers)
direct taxes (income and wealth consumers)

Question 3

business development loans

Answer 3

finance offered to businesses at low interest rates

Question 4

transfer payments

Answer 4

use of tax revenues to redistribute income and wealth in order to promote equity

Question 5

negative externalities

Answer 5

external costs imposed on stakeholders not involved in an economic transaction
ex: production and consumption of tobacco products

Question 6

merit goods

Answer 6

positive external benefits to stakeholders not directly involved in a transaction
ex: education and healthcare services
Marginal social benefit> marginal public private benefit

Question 7

non excludable goods

Answer 7

non payers benefit directly like national defense

Question 8

non rivalrous

Answer 8

one person’s consumption of the public good doesn’t reduce amount available for other parties
also national defense