AS & A Level Economics 9708 · Topic 8

Government microeconomic intervention (A Level): past paper questions

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Real questions on government microeconomic intervention (a level)

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In the syllabus

8.1 Government policies to achieve efficient resource allocation and correct market failure continued

application and effectiveness of measures to tackle different forms of market failure: • specific and ad valorem indirect taxes • subsidies • price controls • production quotas • prohibitions and licences • regulation and deregulation • direct provision • pollution permits • property rights • nationalisation and privatisation • provision of information • behavioural insights and ‘nudge’ theory.
government failure in microeconomic intervention: • definition of government failure • causes of government failure • consequences of government failure.

8.2 Equity and redistribution of income and wealth

difference between equity and equality.
difference between equity and efficiency.
distinction between absolute poverty and relative poverty.
the poverty trap.
policies towards equity and equality, for example: • negative income tax • universal benefits and means-tested benefits • universal basic income.

8.3 Labour market forces and government intervention

demand for labour as a derived demand.
factors affecting demand for labour in a firm or an occupation.
causes of shifts in and movement along the demand curve for labour in a firm or an occupation.
marginal revenue product (MRP) theory: • definition and calculation of marginal revenue product • derivation of an individual firm’s demand for labour using marginal revenue product.
factors affecting the supply of labour to a firm or to an occupation: • wage and non-wage factors.
causes of shifts in and movement along the supply curve of labour to a firm or an occupation.
wage determination in perfect markets: • equilibrium wage rate and employment in a labour market.
wage determination in imperfect markets: • influence of trade unions on wage determination and employment in a labour market • influence of government on wage determination and employment in a labour market using a national minimum wage • influence of monopsony employers on wage determination and employment in a labour market.
determination of wage differentials by labour market forces.
transfer earnings and economic rent: • definition of transfer earnings • definition of economic rent • factors affecting transfer earnings and economic rent in an occupation.

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