Government intervention Flashcards
What are the government policies used to deal with externalities?
Taxation, Subsidies, Fines, Regulation, Pollution permits.
What are the advantages and disadvantages of taxation to address externalities?
Advantages: Discourages harmful activities, Generates government revenue.
Disadvantages: May increase costs for consumers, Hard to set the right tax level.
What are the advantages and disadvantages of subsidies?
Advantages: Encourages beneficial activities, Promotes economic growth in positive sectors.
Disadvantages: Expensive for governments, Risk of misallocation or dependency.
What are the advantages and disadvantages of fines?
Advantages: Provides a deterrent against harmful behavior, Simple to implement.
Disadvantages: May not be significant enough to deter large firms, Requires enforcement mechanisms.
What are the advantages and disadvantages of regulation?
Advantages: Ensures compliance with clear standards, Protects public and environmental interests.
Disadvantages: Can be costly to enforce, May limit innovation and flexibility.
What are the advantages and disadvantages of pollution permits?
Advantages: Encourages efficient pollution reduction, Creates a market for pollution control.
Disadvantages: Initial allocation can be unfair, Monitoring and enforcement are necessary.
How does government regulation promote competition?
By reducing barriers to entry, breaking up monopolies, and supporting small businesses.
How does government regulation limit monopoly power?
By enforcing anti-monopoly laws and preventing firms from dominating the market.
How does government regulation protect consumer interests?
By ensuring fair pricing, safety standards, and preventing exploitation.
How does government regulation control mergers and takeovers?
By evaluating whether mergers reduce competition or harm consumers.
What are the reasons for introducing a minimum wage?
To reduce poverty, To ensure a fair wage for workers, To reduce income inequality, To boost worker productivity and morale.
What are the advantages of a minimum wage?
Reduces exploitation of workers, Increases living standards, Can stimulate consumer spending.
What are the disadvantages of a minimum wage?
Increases costs for businesses, May lead to unemployment if firms cannot afford higher wages, Could reduce competitiveness in global markets.
How does the introduction of a minimum wage affect the labour market?
It creates a wage floor, ensuring workers earn a minimum amount. Can lead to excess supply of labour (unemployment) if the wage is set above equilibrium.
What happens when the minimum wage is increased?
Higher wages for workers. Potential increase in unemployment if firms reduce hiring. Shifts in the labour supply and demand curves.
What diagram is used to show the impact of a minimum wage?
A labour market diagram showing the supply and demand for labour, with the minimum wage as a horizontal line above the equilibrium wage.
