Government Intervention (Edexcel A Level Economics A)

Exam Questions

2 hours13 questions
1
Sme Calculator
1 mark

Regulation of firms that pollute is likely to be a problem because it

  • allows firms to use price signals

  • creates unintended consequences

  • fills information gaps for businesses

  • means lower administrative costs

Did this page help you?

2
Sme Calculator
1 mark

Which of these is not a cause of government failure?

  • Unintended consequences

  • Lack of administration costs

  • Information gaps

  • Distortion of price signals

Did this page help you?

3
Sme Calculator
1 mark

In which of the following contexts would the policy shown below be most likely to lead to an improvement in the allocation of resources compared to the free market output?

1-4-1-government-intervention---ad-valorem-tax
  • Flood defences

  • Healthcare

  • Petrol

  • Second-hand cars

Did this page help you?

4
Sme Calculator
1 mark

What is the fall in revenue for the producer from the imposition of an ad valorem tax as shown below?

1-4-1-government-intervention---ad-valorem-tax
  • Area B

  • Area A+B

  • Area P1Q1 - P2Q2

  • Area P1Q1 - P3Q2

Did this page help you?

5
Sme Calculator
1 mark

Which of the following options would be a likely consequence of a maximum price on rented accommodation

1-4-1-government-intervention---maximum-price_edexcel-al-economics
  • Large waiting lists for rented accommodation

  • More landlords entering the market to rent out their properties

  • A fall in supply of houses on the 'for sale' market

  • No effect because the maximum price is below the equilibrium price

Did this page help you?

6a
Sme Calculator
2 marks

The market for cakes is in equilibrium at a price of £1.10 and a quantity of 4,000.

VAT is imposed at 20%, leading to a new equilibrium price of £1.20 and a quantity of 3,000. 

What is the total amount of government revenue from the tax?

1-4-1-government-intervention---ad-valorem-tax
6b
Sme Calculator
2 marks

Explain one valid reason why the government might intervene in markets

Did this page help you?

1
Sme Calculator
4 marks

The EU tradable pollution permits scheme is expected to become more effective by 2020, due to recent reductions in the number of tradable pollution permits.

(Source adapted from: https://ec.europa.eu/clima/policies/ets_en)

Explain one likely effect of reducing the number of tradable pollution permits.

Did this page help you?

2
Sme Calculator
5 marks

The UK Rail Industry

Figure 1: UK government subsidy to Northern, a train operating company in Northern England

9ec0-01-q6-1-nov-2020-1

Refer to Figure 1. Explain the likely effect of the change in subsidy levels between 2017 and 2018 on rail fares.

Include a supply and demand diagram in your answer.

Did this page help you?

3
Sme Calculator
5 marks

With reference to Extract B, explain one reason for government intervention through regulation

Extract B

Free market approach

Are free markets incompatible with good health? If the solution to every problem involves banning advertising, raising prices and restricting availability, you might easily conclude that the free market is the disease and government regulation is the cure. From this perspective, the providers of food, alcohol and tobacco are determined to push the most unhealthy products on the public at the lowest prices. Contrary to this viewpoint, the profit motive is not unhealthy. Businesses have an obvious incentive to keep their customers alive and customers have a strong incentive to seek out healthier options. Any company that can make a scientifically sound health claim gains a competitive advantage over its rivals. Health sells. In contrast, government regulation can lead to negative health outcomes. Markets can correct themselves long before government failures are even acknowledged. Over a million Britons, almost all of whom are smokers or ex-smokers, use e-cigarettes, as a less hazardous product than cigarettes and yet e-cigarettes face increased regulations and in many countries they are banned. It is neither consistent nor ethical to prevent smokers from switching to much safer alternatives. Efforts to regulate e-cigarettes are a far greater threat to public health than the products themselves. We argue that the interests of consumers are nearly always better advanced by the provision of accurate information and free choice than by prohibitions and regulations. The government policy of small but steady tax rises on tobacco and ever-larger warning labels is becoming less effective and leads to unintended consequences.

(Source: adapted from http://www.iea.org.uk/blog/free-market-solutions-in-health- should-be-allowed-to-flourish, Christopher Snowdon, 11th July 2013)

Did this page help you?

1
Sme Calculator
25 marks

Refer Extract

Evaluate the microeconomic and macroeconomic effects of increased government spending on education to promote healthy eating in the UK (25)

Did this page help you?

2
Sme Calculator
25 marks

Refer Extract

Evaluate the likely microeconomic and macroeconomic effects of imposing a tax on HFSS foods (25)

Did this page help you?

3
Sme Calculator
25 marks

In 2015 a report by Public Health England recommended the imposition of a 20% tax on the sale of soft drinks that contain high levels of sugar.

Evaluate the likely microeconomic effects of such a tax (25)

Did this page help you?

4
Sme Calculator
12 marks

Discuss the likely success of policies to reduce the consumption of single‑use plastic bags in cities such as Istanbul (12)

Did this page help you?