2.4.1 Methods of Intervention

• Government intervention in microeconomics aims to correct market failures and achieve broader social objectives
• What is the primary purpose of regulations in microeconomics?

  Govern market behavior
• Match the method of government intervention with its description:

  Price Controls ↔️ Setting maximum or minimum prices

  Taxes/Subsidies ↔️ Imposing financial charges or payments

  Regulations ↔️ Implementing rules and standards
• Government intervention in microeconomics includes methods such as price controls, taxes/subsidies, and regulations
• Order the following effects of a government subsidy:

  1️⃣ Increase in Quantity Demanded

  2️⃣ Decrease in Price Paid by Consumers

  3️⃣ Increase in Producer Surplus
• What is an example of a subsidy provided by the government?

  Electric vehicle subsidies
• Match the effect of taxes with its description:

  Reduced Quantity Demanded ↔️ Higher prices decrease purchasing power

  Increased Price for Consumers ↔️ Tax burden is passed on

  Decreased Producer Surplus ↔️ Producers receive less revenue

  Government Revenue ↔️ Funds for public services
• Regulations aim to correct market failures and ensure fair competition.


  True
• What is an example of a regulation that increases compliance costs for businesses?

  Environmental regulations
• Government intervention includes setting maximum or minimum prices for goods and services.


  True
• Subsidies are provided to encourage the consumption of goods with positive externalities
• What is a minimum wage law an example of?

  Price floor
• Subsidies increase the quantity demanded of a good by lowering its price for consumers.


  True
• Subsidies lead to an increase in producer surplus
• What is one effect of taxes on consumer prices?

  They increase
• Why do governments impose taxes?

  To generate revenue
• Regulations ensure that products meet specific quality and safety standards
• A minimum price is set above the market equilibrium to prevent prices from falling too low.

  True
• What is a trade-off of price ceilings?

  Shortages
• Price controls involve setting maximum or minimum prices for goods and services.


  True
• Taxes are used to reduce the consumption of goods with negative externalities
• Market failures occur when markets fail to allocate resources efficiently.


  True
• What is an example of a price floor implemented by the government?

  Minimum wage laws
• Subsidies are government payments to encourage the consumption of goods with positive externalities.


  True
• Taxes reduce the quantity demanded of goods by increasing their prices
• What is an example of a tax implemented by the government?

  Sugary drink tax
• Regulations ensure that products meet specific quality and safety standards
• Government intervention in microeconomics aims to correct market failures
• What is a price ceiling an example of?

  Price control
• Regulations are used to govern market behavior and protect consumers and the environment.


  True
• A tax on cigarettes is an example of a tax designed to reduce the consumption of goods with negative externalities
• What happens to the price paid by consumers when a subsidy is provided?

  It decreases
• Taxes increase the price consumers pay for goods and services.


  True
• Taxes lead to a decrease in producer surplus
• Regulations aim to correct market failures and protect consumers.

  True
• What is one effect of environmental regulations?

  Reduced pollution
• A maximum price is set below the market equilibrium