Section 6 - Government Intervention

Question 1

Indirect tax

Answer 1

Imposed on the purchase of goods or services

Question 2

Specific tax

Answer 2

A fixed amount that’s charged per unit of a particular good

Question 3

Ad Valorem Tax

Answer 3

Charged as a proportion of the price of a good

Question 4

Subsidy (positive externality)

Answer 4

encourage the production and consumption of goods and services with positive externalities

Question 5

Subsidy (negative externality)

Answer 5

Encourage the purchase and use of goods/services which reduce negative externalities

Question 6

Subsidy

Answer 6

Paid to producers by the government

Question 7

Maximum price (Price ceiling)

Answer 7

Set to increase consumption of a merit good or to make a necessity more affordable

Question 8

Minimum price (Price floors)

Answer 8

Set to make sure that suppliers get a fair price

Question 9

State provision (gov expenditure)

Answer 9

Where the government provides certain good or services

Question 10

Privatisation

Answer 10

The transfer of the ownership of a firm/industry from the public sector to the private sector

Question 11

Competitive tendering

Answer 11

Private firms bid (or compete) to gain a contract to provide a service for the government

Question 12

Public Private Partnerships (PPPs)

Answer 12

A private firm works with a government to build something or provide a service for the public

Question 13

Regulations

Answer 13

Rules that are enforced by an authority and they’re usually backed up with legislation

Question 14

Legislation

Answer 14

Legal action can be taken against those that break the rules

Question 15

Deregulation

Answer 15

Removing or reducing regulations

Question 16

Competition Policy

Answer 16

Applying rules to make sure businesses and companies compete fairly with each other

Question 17

Competition and Markets Authority (CMA)

Answer 17

Monitor competition to look out for unfair monopolistic behaviour

Question 18

Regulatory bodies

Answer 18

Regulate specific markets and are responsible for regulating prices, monitoring safety and product standards, and encouraging competition.

Question 19

Payment Protection Insurance (PPI)

Answer 19

Insurance that’s used to repay debt should the borrower be unable to do so

Question 20

Roaming Charges

Answer 20

Charges for data usage, calls or texts, made or received, when abroad

Question 21

Cost benefit analysis

Answer 21

Considering the total costs and benefits of a major project

Question 22

Government intervention

Answer 22

the actions taken by the government to influence the market and regulate economic activity

Question 23

Government failure

Answer 23

When government intervention causes a misallocation of resources in a market

Question 24

Regulatory capture

Answer 24

firms covered by regulatory bodies, influence the decisions of the regulator to ensure that the outcomes favour the companies and not the consumers

Question 25

Common agricultural policy (CAP)

Answer 25

Aim to correct market failure caused by fluctuating prices for agricultural products and provide a stable income for farmers