Theme 1: Government Intervention and Failure

Question 1

Does a minimum price create a shortage or surplus?

Answer 1

Surplus

Question 2

Explain 2 disadvantages of information provision

Answer 2

Expensive, consumers may not listen

Question 3

Explain 2 disadvantages of regulation

Answer 3

Doesn’t work with price mechanism, takes a long time to implement

Question 4

Explain 2 disadvantages of state provision

Answer 4

Expensive, no competition so can be inefficient

Question 5

Explain 3 benefits of tradeable pollution permits

Answer 5

Caps pollution, lowers abatement costs, raises revenue

Question 6

Explain 3 disadvantages of pollution permits

Answer 6

Hard to enforce, hard to know how many to allocate, raises costs of production