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intervention.","correct":true,"explanation":"Market failure means resources are not allocated efficiently by the price mechanism, so government intervention may improve resource allocation and increase welfare."},{"text":"Market equilibrium causes resources to be misallocated, providing the rationale for intervention.","correct":false,"explanation":"Market equilibrium is where demand equals supply and is not itself a reason for intervention. The relevant problem is market failure, which causes resources to be misallocated."},{"text":"Economic growth causes resources to be misallocated, providing the rationale for intervention.","correct":false,"explanation":"Economic growth refers to rising real output and does not necessarily misallocate resources. Market failure is the problem that provides the rationale for government intervention."},{"text":"Price stability causes resources to be misallocated, providing the rationale for intervention.","correct":false,"explanation":"Price stability concerns the general price level rather than resource allocation. Market failure causes resources to be misallocated and therefore justifies possible intervention."}]},{"id":"b0336235-544a-4e17-8cba-77605d390f2e","cardType":"basic","points":3,"front":"What three objectives commonly guide government intervention?","back":"

Efficiency
Equity
Stability

","mcqOptions":[{"text":"

Efficiency
Equity
Stability

","correct":true,"explanation":"Government intervention commonly aims to improve efficiency, promote equity in the distribution of income or resources, and maintain economic stability."},{"text":"

Inflation
Profit
Competition

","correct":false,"explanation":"Inflation is an economic problem, profit is a business outcome, and competition is a market structure. The usual objectives are efficiency, equity, and stability."},{"text":"

Growth
Liquidity
Specialisation

","correct":false,"explanation":"Growth can be a macroeconomic objective, but liquidity and specialisation are not the standard three guiding objectives here. They are efficiency, equity, and stability."},{"text":"

Revenue
Choice
Exports

","correct":false,"explanation":"Revenue, consumer choice, and exports may be affected by policy but are not the standard objectives listed. Government intervention commonly targets efficiency, equity, and stability."}]},{"id":"bc6895d8-fc2f-49f8-a2a8-f44e54cb16f7","cardType":"basic","points":3,"front":"Name three ways governments influence resource allocation.","back":"

Taxation and subsidies
Regulation and price controls
Public expenditure and state provision

","mcqOptions":[{"text":"

Taxation and subsidies
Regulation and price controls
Public expenditure and state provision

","correct":true,"explanation":"Governments influence resource allocation through price incentives such as taxes and subsidies, direct rules and controls, and spending or provision of goods and services."},{"text":"

Advertising and branding
Wage bargaining and recruitment
Private saving and investment

","correct":false,"explanation":"These are mainly private-sector activities rather than direct government methods of allocating resources. The relevant methods are taxation and subsidies, regulation and price controls, and public expenditure and state provision."},{"text":"

Imports and exports
Interest rates and exchange rates
Profit maximisation and competition

","correct":false,"explanation":"Trade and macroeconomic variables can influence allocation indirectly, while profit maximisation is a firm objective. The three stated government methods are taxation and subsidies, regulation and price controls, and public expenditure and state provision."},{"text":"

Consumer preferences and incomes
Production targets and inventories
Market entry and exit

","correct":false,"explanation":"These describe market forces or firm decisions, not the main policy instruments in the question. Governments influence allocation through taxation and subsidies, regulation and price controls, and public expenditure and state provision."}]},{"id":"48c3e44c-b211-4d53-aab4-1e02291bd887","cardType":"basic","points":2,"front":"Why might government intervention fail to improve welfare?","back":"Government failure can occur when intervention misfires and creates further inefficiency.","mcqOptions":[{"text":"Government failure can occur when intervention misfires and creates further inefficiency.","correct":true,"explanation":"Government failure occurs when a policy intended to correct market failure produces unintended effects, misallocates resources, or creates greater inefficiency than the original problem."},{"text":"Market failure can occur when intervention misfires and creates further inefficiency.","correct":false,"explanation":"Market failure describes shortcomings of the price mechanism, not unsuccessful government policy. When intervention misfires and creates further inefficiency, this is called government failure."},{"text":"Information failure can occur when intervention misfires and creates further inefficiency.","correct":false,"explanation":"Information failure is one possible cause of poor decisions, but the general term for intervention worsening welfare is government failure. It includes unintended consequences and policy misjudgement."},{"text":"External failure can occur when intervention misfires and creates further inefficiency.","correct":false,"explanation":"External failure is not the standard term for unsuccessful public policy. Government failure occurs when intervention misfires and creates further inefficiency or reduces welfare."}]},{"id":"04fec9f3-8aff-42c2-aff1-48bd9146b405","cardType":"basic","points":1,"front":"What must a Pigouvian tax equal to fully correct a negative externality?","back":"A Pigouvian tax must equal the marginal external cost at the socially optimal quantity.","mcqOptions":[{"text":"A Pigouvian tax must equal the marginal external cost at the socially optimal quantity.","correct":true,"explanation":"To fully internalise a negative externality, the tax must equal the marginal external cost at the socially optimal quantity, making private and social costs align there."},{"text":"A Pigouvian tax must equal the marginal private cost at the socially optimal quantity.","correct":false,"explanation":"Taxing marginal private cost would not specifically correct the externality. The tax must equal the marginal external cost at the socially optimal quantity so the external damage is included."},{"text":"A Pigouvian tax must equal the average external cost at the socially optimal quantity.","correct":false,"explanation":"Using average rather than marginal external cost does not necessarily align marginal private cost with marginal social cost. The required tax equals the marginal external cost at the optimum."},{"text":"A Pigouvian tax must equal the marginal social benefit at the socially optimal quantity.","correct":false,"explanation":"Marginal social benefit measures the benefit from an additional unit, not the external damage requiring correction. A Pigouvian tax must equal the marginal external cost at the socially optimal quantity."}]},{"id":"de38d999-3dd2-4c01-9883-7af746e6604c","cardType":"basic","points":2,"front":"What happens to output if the marginal external cost is £40 but the tax is only £20?","back":"Output remains above the social optimum because part of the external cost remains unpriced.","mcqOptions":[{"text":"Output remains above the social optimum because part of the external cost remains unpriced.","correct":true,"explanation":"A £20 tax covers only half of the £40 marginal external cost, so some external damage remains outside the market price and output stays above the social optimum."},{"text":"Output remains at the social optimum because the tax fully reflects the external cost.","correct":false,"explanation":"The £20 tax is below the £40 marginal external cost, so it does not fully internalise the externality. Output therefore remains above the social optimum."},{"text":"Output falls below the social optimum because the tax exceeds the external cost.","correct":false,"explanation":"The tax does not exceed the external cost; it is only £20 compared with £40. The under-sized tax leaves part of the cost unpriced, so output remains above the social optimum."},{"text":"Output becomes zero because the tax prevents all production.","correct":false,"explanation":"A tax that is half the marginal external cost would reduce output but would not normally eliminate production. Output remains above the social optimum because the externality is only partly priced."}]},{"id":"3042881e-c76b-4574-af97-b1e562709fe6","cardType":"basic","points":1,"front":"Give one UK example of a tradeable permit scheme.","back":"The UK Emissions Trading Scheme is a UK tradeable permit scheme.","mcqOptions":[{"text":"The UK Emissions Trading Scheme is a UK tradeable permit scheme.","correct":true,"explanation":"The UK Emissions Trading Scheme allows regulated participants to trade emissions allowances, creating a market in permits and providing an incentive to reduce pollution."},{"text":"The National Living Wage is a UK tradeable permit scheme.","correct":false,"explanation":"The National Living Wage is a minimum wage policy, not a system of tradable pollution allowances. The UK Emissions Trading Scheme is the relevant UK example."},{"text":"The Soft Drinks Industry Levy is a UK tradeable permit scheme.","correct":false,"explanation":"The Soft Drinks Industry Levy is a corrective tax on sugary drinks, not a market for transferable permits. A UK tradeable permit example is the UK Emissions Trading Scheme."},{"text":"The Renewable Heat Incentive is a UK tradeable permit scheme.","correct":false,"explanation":"The Renewable Heat Incentive provided financial support for renewable heating rather than tradable emissions allowances. The UK example here is the UK Emissions Trading Scheme."}]},{"id":"33355f95-9fb2-4723-b096-8abcd1ffe6d8","cardType":"basic","points":1,"front":"Give one UK example of a corrective tax.","back":"The Soft Drinks Industry Levy is a UK corrective tax.","mcqOptions":[{"text":"The Soft Drinks Industry Levy is a UK corrective tax.","correct":true,"explanation":"The Soft Drinks Industry Levy raises the cost of drinks with high sugar content, aiming to reduce consumption and the negative externalities associated with poor health."},{"text":"The UK Emissions Trading Scheme is a UK corrective tax.","correct":false,"explanation":"The UK Emissions Trading Scheme is based on tradable emissions allowances rather than a direct tax per unit of pollution. The corrective tax example is the Soft Drinks Industry Levy."},{"text":"The National Living Wage is a UK corrective tax.","correct":false,"explanation":"The National Living Wage sets a legal minimum hourly wage and is not a tax. The UK corrective tax example given is the Soft Drinks Industry Levy."},{"text":"The Bank of England base rate is a UK corrective tax.","correct":false,"explanation":"The Bank of England base rate is an interest rate used in monetary policy, not a tax on goods creating external costs. The relevant corrective tax is the Soft Drinks Industry Levy."}]},{"id":"4f5ac8c4-5b4c-4fb2-9d4f-3a3ac4d9549a","cardType":"basic","points":2,"front":"How does a per-unit indirect tax affect the supply curve?","back":"An indirect tax shifts the supply curve vertically upwards by the amount of the tax.","mcqOptions":[{"text":"An indirect tax shifts the supply curve vertically upwards by the amount of the tax.","correct":true,"explanation":"A per-unit indirect tax raises firms’ costs by the same amount for every unit, shifting the supply curve vertically upwards by the tax per unit."},{"text":"An indirect tax shifts the supply curve vertically downwards by the amount of the tax.","correct":false,"explanation":"A downward shift represents a subsidy or lower production costs, not a tax. An indirect tax raises costs and shifts the supply curve vertically upwards."},{"text":"An indirect tax shifts the supply curve horizontally leftwards by the amount of the tax.","correct":false,"explanation":"A per-unit tax is represented by a vertical cost increase, not by moving the supply curve horizontally. The supply curve shifts vertically upwards by the tax amount."},{"text":"An indirect tax shifts the supply curve vertically upwards by the amount of the subsidy.","correct":false,"explanation":"The direction is correct, but the shift must be measured by the tax per unit, not a subsidy. The tax shifts supply vertically upwards by the amount of the tax."}]},{"id":"393566de-8b00-4c3e-a0f1-3cadd2866a56","cardType":"basic","points":2,"front":"Why do consumers bear a larger share of an indirect tax when demand is more inelastic?","back":"The more price inelastic demand is relative to supply, the larger the share of the tax passed to consumers.","mcqOptions":[{"text":"The more price inelastic demand is relative to supply, the larger the share of the tax passed to consumers.","correct":true,"explanation":"When demand is relatively inelastic, consumers reduce quantity demanded only slightly after a price rise, allowing firms to pass a larger share of the tax on through higher prices."},{"text":"The more price inelastic demand is relative to supply, the larger the share of the tax passed to producers.","correct":false,"explanation":"Relatively inelastic demand gives consumers less ability to reduce purchases, so more tax is passed to them. Producers bear more when demand is relatively elastic or supply is relatively inelastic."},{"text":"The more price inelastic demand is relative to supply, the larger the share of the tax passed to the government.","correct":false,"explanation":"The government receives the tax revenue, but tax incidence concerns how the burden is divided between buyers and sellers. With inelastic demand, the larger burden falls on consumers."},{"text":"The more price inelastic demand is relative to supply, the larger the share of the tax passed to foreign suppliers.","correct":false,"explanation":"Tax incidence in this context is divided between domestic consumers and producers, not specifically foreign suppliers. Relatively inelastic demand means a larger share is passed to consumers."}]},{"id":"39acb09c-204e-4b53-b2b4-a7385570b7ca","cardType":"basic","points":2,"front":"What happens to equilibrium price and quantity after an indirect tax?","back":"The price rises from $P_1$ to $P_2$ and quantity falls from $Q_1$ to $Q_2$.","mcqOptions":[{"text":"The price rises from $P_1$ to $P_2$ and quantity falls from $Q_1$ to $Q_2$.","correct":true,"explanation":"An indirect tax raises firms’ costs, shifting supply upwards. The new equilibrium has a higher consumer price and a lower quantity traded, from $Q_1$ to $Q_2$."},{"text":"The price falls from $P_1$ to $P_2$ and quantity rises from $Q_1$ to $Q_2$.","correct":false,"explanation":"This reverses the effects of taxation and describes a typical subsidy outcome. An indirect tax raises the price and reduces quantity: the price rises from $P_1$ to $P_2$ while quantity falls from $Q_1$ to $Q_2$."},{"text":"The price rises from $P_2$ to $P_1$ and quantity falls from $Q_2$ to $Q_1$.","correct":false,"explanation":"The labels have been reversed. After the tax, $P_2$ is the higher price and $Q_2$ is the lower quantity, so the correct changes are from $P_1$ to $P_2$ and from $Q_1$ to $Q_2$."},{"text":"The price remains at $P_1$ and quantity remains at $Q_1$.","correct":false,"explanation":"A tax shifts supply and changes the market equilibrium, so neither the price nor quantity normally stays at its original level. The price rises from $P_1$ to $P_2$ and quantity falls from $Q_1$ to $Q_2$."}]},{"id":"a7325c98-1c9c-4a0b-9a3f-73938af7bbd0","cardType":"basic","points":2,"front":"How does an indirect tax set equal to the external cost affect output?","back":"The tax equal to the external cost internalises the externality and cuts output towards the social optimum.","mcqOptions":[{"text":"The tax equal to the external cost internalises the externality and cuts output towards the social optimum.","correct":true,"explanation":"Setting the tax equal to marginal external cost makes producers and consumers face the full social cost, reducing the negative externality and moving output towards the social optimum."},{"text":"The tax equal to the external cost internalises the externality and cuts output towards the private optimum.","correct":false,"explanation":"The private optimum is the unregulated market outcome and does not account fully for external damage. A correctly set tax moves output towards the social optimum."},{"text":"The tax equal to the external cost internalises the externality and increases output towards the social optimum.","correct":false,"explanation":"A tax raises production costs and reduces output of a good with a negative externality. It cuts output towards the social optimum, rather than increasing it."},{"text":"The tax equal to the external cost internalises the externality and leaves output at the market optimum.","correct":false,"explanation":"The unregulated market outcome is not generally socially optimal when external costs exist. A tax equal to the external cost shifts output towards the social optimum."}]},{"id":"eb5b2bec-6e9c-47d1-ab33-34a5d5a1373a","cardType":"basic","points":2,"front":"What does the deadweight welfare loss from an indirect tax represent?","back":"The tax eliminates mutually beneficial trades between $Q_2$ and $Q_1$.","mcqOptions":[{"text":"The tax eliminates mutually beneficial trades between $Q_2$ and $Q_1$.","correct":true,"explanation":"The tax reduces quantity from $Q_1$ to $Q_2$, preventing trades whose benefits exceed their costs. The lost gains from these mutually beneficial trades form deadweight welfare loss."},{"text":"The tax creates mutually beneficial trades between $Q_2$ and $Q_1$.","correct":false,"explanation":"The reduction in quantity means some trades no longer occur; it does not create additional trades. Deadweight welfare loss represents mutually beneficial trades eliminated between $Q_2$ and $Q_1$."},{"text":"The tax transfers all consumer surplus between $Q_2$ and $Q_1$ to producers.","correct":false,"explanation":"Tax incidence does not transfer all consumer surplus to producers, and welfare loss is not simply a transfer. It represents mutually beneficial trades eliminated between $Q_2$ and $Q_1$."},{"text":"The tax increases total surplus between $Q_2$ and $Q_1$.","correct":false,"explanation":"The lost trades reduce total surplus rather than increasing it. The deadweight welfare loss from the tax is the value of mutually beneficial trades eliminated between $Q_2$ and $Q_1$."}]},{"id":"fc9c307e-4e19-4d36-b839-42b4e86e49be","cardType":"basic","points":1,"front":"How is government revenue from a per-unit indirect tax calculated?","back":"Government revenue equals the tax per unit multiplied by the quantity sold after the tax.","mcqOptions":[{"text":"Government revenue equals the tax per unit multiplied by the quantity sold after the tax.","correct":true,"explanation":"Each unit sold generates the tax per unit, so total government revenue is calculated by multiplying the per-unit tax by the post-tax quantity traded."},{"text":"Government revenue equals the tax per unit multiplied by the quantity sold before the tax.","correct":false,"explanation":"Using the pre-tax quantity ignores the reduction in sales caused by the tax. Government revenue equals the tax per unit multiplied by the quantity sold after the tax."},{"text":"Government revenue equals the price per unit multiplied by the quantity sold after the tax.","correct":false,"explanation":"Price multiplied by quantity gives total sales revenue, not tax revenue. Government revenue specifically equals the tax per unit multiplied by the post-tax quantity sold."},{"text":"Government revenue equals the tax per unit added to the quantity sold after the tax.","correct":false,"explanation":"Tax revenue requires multiplication because the same tax is collected on every unit sold; adding the tax to quantity mixes different units. The correct calculation is tax per unit multiplied by post-tax quantity."}]},{"id":"09e1f241-17e5-48fd-a428-3ed1585d3680","cardType":"basic","points":2,"front":"How does a per-unit subsidy affect the supply curve?","back":"A subsidy shifts supply vertically downwards by the amount of the subsidy.","mcqOptions":[{"text":"A subsidy shifts supply vertically downwards by the amount of the subsidy.","correct":true,"explanation":"A per-unit subsidy lowers firms’ effective costs by the same amount for every unit, shifting the supply curve vertically downwards by the subsidy per unit."},{"text":"A subsidy shifts supply vertically upwards by the amount of the subsidy.","correct":false,"explanation":"An upward shift represents higher costs, such as those caused by an indirect tax. A subsidy lowers costs and shifts supply vertically downwards by its amount."},{"text":"A subsidy shifts supply horizontally rightwards by the amount of the subsidy.","correct":false,"explanation":"The effect of a per-unit subsidy is shown as a vertical reduction in firms’ costs, not a horizontal movement. Supply shifts vertically downwards by the subsidy amount."},{"text":"A subsidy shifts supply vertically downwards by the amount of the tax.","correct":false,"explanation":"The direction is correct, but the size of the shift is determined by the subsidy per unit, not a tax. Supply shifts vertically downwards by the amount of the subsidy."}]},{"id":"030e6b6a-f9ba-459a-8fa5-23d38f919bf4","cardType":"basic","points":2,"front":"What is the effect of a subsidy on the market for a merit good?","back":"The price paid by consumers falls and quantity rises towards the socially optimal level.","mcqOptions":[{"text":"The price paid by consumers falls and quantity rises towards the socially optimal level.","correct":true,"explanation":"A subsidy lowers the consumer price and increases consumption of a merit good, helping correct underconsumption and moving quantity towards the socially optimal level."},{"text":"The price paid by consumers rises and quantity falls towards the socially optimal level.","correct":false,"explanation":"A subsidy reduces effective costs and normally lowers the price paid by consumers while increasing quantity. For a merit good, quantity rises towards the socially optimal level."},{"text":"The price paid by consumers falls and quantity rises towards the privately optimal level.","correct":false,"explanation":"The private optimum is the market outcome without correcting the merit good’s underconsumption. A subsidy is intended to move quantity towards the socially optimal level."},{"text":"The price paid by consumers remains unchanged and quantity falls towards the socially optimal level.","correct":false,"explanation":"A subsidy generally lowers the consumer price and increases quantity, rather than leaving price unchanged and reducing consumption. Its purpose for a merit good is movement towards the socially optimal level."}]},{"id":"dca00590-37b2-4e73-92f2-bddbd566d04b","cardType":"basic","points":2,"front":"Why is a subsidy not a cost-free way of raising output?","back":"The subsidy has an opportunity cost because the government spending could fund alternative public expenditure.","mcqOptions":[{"text":"The subsidy has an opportunity cost because the government spending could fund alternative public expenditure.","correct":true,"explanation":"Government funds are scarce, so spending on a subsidy prevents that money being used for alternative public services or projects. The value of the best forgone alternative is the subsidy’s opportunity cost."},{"text":"The subsidy has an administrative cost because the government spending could fund alternative public expenditure.","correct":false,"explanation":"Administrative costs may arise, but they are not the main reason a subsidy is not cost-free. The correct concept is opportunity cost: government spending on the subsidy cannot fund the best alternative public expenditure."},{"text":"The subsidy has an external cost because the government spending could fund alternative public expenditure.","correct":false,"explanation":"An external cost is imposed on third parties, whereas this issue concerns how scarce government funds are allocated. The correct answer is opportunity cost because alternative public expenditure must be forgone."},{"text":"The subsidy has a transaction cost because the government spending could fund alternative public expenditure.","correct":false,"explanation":"Transaction costs relate to arranging or enforcing exchanges and do not describe the sacrificed use of public funds. The correct answer is opportunity cost because the spending could have funded another public service."}]},{"id":"7adceac8-a2bb-4715-9701-2568254139eb","cardType":"basic","points":2,"front":"Why does a maximum price below equilibrium cause a shortage?","back":"A maximum price below equilibrium causes excess demand, producing a shortage.","mcqOptions":[{"text":"A maximum price below equilibrium causes excess demand, producing a shortage.","correct":true,"explanation":"Below the equilibrium price, consumers want to buy more while producers supply less. Quantity demanded therefore exceeds quantity supplied, creating excess demand and a shortage."},{"text":"A maximum price below equilibrium causes excess supply, producing a shortage.","correct":false,"explanation":"A price below equilibrium reduces the quantity supplied and increases the quantity demanded, so excess demand occurs. Excess supply would result from a price set above equilibrium, not below it."},{"text":"A maximum price below equilibrium causes excess demand, producing a surplus.","correct":false,"explanation":"The demand relationship is identified correctly, but the consequence is reversed. When quantity demanded exceeds quantity supplied, the market experiences a shortage rather than a surplus."},{"text":"A maximum price below equilibrium causes reduced demand, producing a shortage.","correct":false,"explanation":"A lower price normally increases quantity demanded, so reduced demand is the wrong relationship. The correct explanation is excess demand, because buyers want more than firms are willing to supply."}]},{"id":"901ea2d0-ba4b-4b09-9a13-284ef084fea6","cardType":"basic","points":2,"front":"Why does a minimum price above equilibrium cause a surplus?","back":"A minimum price above equilibrium causes excess supply, producing a surplus.","mcqOptions":[{"text":"A minimum price above equilibrium causes excess supply, producing a surplus.","correct":true,"explanation":"Above equilibrium, producers are willing to supply more while consumers demand less. Quantity supplied therefore exceeds quantity demanded, creating excess supply and a surplus."},{"text":"A minimum price above equilibrium causes excess demand, producing a surplus.","correct":false,"explanation":"A price above equilibrium encourages greater supply and discourages demand, so excess supply occurs. Excess demand would produce a shortage, not the surplus associated with a binding minimum price."},{"text":"A minimum price above equilibrium causes excess supply, producing a shortage.","correct":false,"explanation":"The cause is correctly identified, but excess supply means that sellers offer more than buyers purchase. This creates unsold output and therefore a surplus, not a shortage."},{"text":"A minimum price above equilibrium causes reduced supply, producing a surplus.","correct":false,"explanation":"A higher guaranteed price increases the quantity producers are willing to supply rather than reducing it. The correct relationship is excess supply, which leaves a surplus in the market."}]},{"id":"51a15060-f5fd-4519-94cf-0612ea7928a9","cardType":"cloze","points":null,"front":"If a subsidy exceeds the true marginal external benefit, output is pushed beyond the [ ].","back":"If a subsidy exceeds the true marginal external benefit, output is pushed beyond the social optimum.","mcqOptions":[{"text":"social optimum","correct":true,"explanation":"The social optimum is the output where marginal social benefit equals marginal social cost. A subsidy larger than the true external benefit pushes production beyond this welfare-maximising level."},{"text":"market equilibrium","correct":false,"explanation":"Market equilibrium is determined by private demand and supply and may ignore external benefits. The relevant boundary for an excessive subsidy is the social optimum, beyond which marginal social cost exceeds social benefit."},{"text":"profit-maximising output","correct":false,"explanation":"Profit maximisation describes a firm’s private decision and does not account fully for external benefits. The correct term is social optimum, where total social welfare is maximised."},{"text":"social cost minimum","correct":false,"explanation":"Minimising social cost alone does not identify the welfare-maximising output, because benefits must also be considered. The correct term is social optimum, found where marginal social benefit equals marginal social cost."}]},{"id":"b254b6af-0554-4f6b-87b0-36c6e30bcb72","cardType":"cloze","points":null,"front":"The [ ] charges manufacturers according to the sugar content of drinks.","back":"The Soft Drinks Industry Levy charges manufacturers according to the sugar content of drinks.","mcqOptions":[{"text":"Soft Drinks Industry Levy","correct":true,"explanation":"The Soft Drinks Industry Levy is a UK charge on manufacturers of drinks containing specified levels of sugar. It is intended to reduce sugar consumption and encourage reformulation."},{"text":"Sugar Tax Credit","correct":false,"explanation":"A tax credit reduces a taxpayer’s liability and is not the UK levy on sugary drinks. The correct term is Soft Drinks Industry Levy, which charges manufacturers according to sugar content."},{"text":"Soft Drinks Retail Duty","correct":false,"explanation":"The policy is charged to manufacturers rather than being a retail duty paid by shops. Its correct name is the Soft Drinks Industry Levy."},{"text":"Sugary Beverages Sales Levy","correct":false,"explanation":"This is not the official name of the UK policy and incorrectly suggests a levy on sales. The correct term is Soft Drinks Industry Levy, charged to manufacturers based on sugar content."}]},{"id":"9fa62cc9-feb5-4fec-9534-fa5f1d19d11f","cardType":"cloze","points":null,"front":"With a £2 tax, a price rise from £3.00 to £4.20 means consumers bear [ ] of the tax burden.","back":"With a £2 tax, a price rise from £3.00 to £4.20 means consumers bear 60% of the tax burden.","mcqOptions":[{"text":"60%","correct":true,"explanation":"The consumer price rises by £1.20, from £3.00 to £4.20. Dividing this increase by the £2 tax gives 0.6, so consumers bear 60% of the tax burden."},{"text":"40%","correct":false,"explanation":"This is the producer’s share of the £2 tax, since £2.00 minus the £1.20 consumer price increase equals £0.80, or 40%. Consumers bear the remaining 60%."},{"text":"50%","correct":false,"explanation":"A 50% answer would imply consumers bear £1 of the £2 tax. The actual price increase is £1.20, so consumer incidence is £1.20 divided by £2, equal to 60%."},{"text":"80%","correct":false,"explanation":"This likely comes from treating the £1.20 price rise as £1.60 or confusing the price increase with the producer share. The actual consumer burden is £1.20 out of £2, or 60%."}]},{"id":"3834c98b-f237-4dd6-aebe-7cd09672d28d","cardType":"cloze","points":null,"front":"Consumer incidence is calculated as $(P_2-P_1) \\times \\text{[...]}$ .","back":"Consumer incidence is calculated as $(P_2-P_1) \\times \\boxed{Q_2}$ .","mcqOptions":[{"text":"$$Q_2$","correct":true,"explanation":"Consumer incidence measures the extra amount paid per unit by consumers multiplied by the quantity purchased after the tax. Therefore, $(P_2-P_1)$ is multiplied by $Q_2$."},{"text":"$$Q_1$","correct":false,"explanation":"Using $Q_1$ applies the original quantity to the post-tax price increase. Tax incidence is calculated on the quantity traded after taxation, so the correct quantity is $Q_2$."},{"text":"$$Q_2-Q_1$","correct":false,"explanation":"$$Q_2-Q_1$ measures the change in quantity, not the number of units bearing the consumer price increase. Consumer incidence uses the post-tax quantity $Q_2$."},{"text":"$$Q_1+Q_2$","correct":false,"explanation":"Adding the two quantities double-counts the relevant market volume and does not represent units bought after the tax. The correct multiplier is the post-tax quantity, $Q_2$."}]},{"id":"eec93c78-b34f-46c8-a627-8a65cb695203","cardType":"cloze","points":null,"front":"Producer incidence is calculated as $(\\text{tax}-(P_2-P_1)) \\times \\text{[...]}$ .","back":"Producer incidence is calculated as $(\\text{tax}-(P_2-P_1)) \\times \\boxed{Q_2}$ .","mcqOptions":[{"text":"$$Q_2$","correct":true,"explanation":"Producer incidence is the tax per unit absorbed by sellers multiplied by the quantity traded after taxation. Hence $(\\text{tax}-(P_2-P_1))$ is multiplied by $Q_2$."},{"text":"$$Q_1$","correct":false,"explanation":"$$Q_1$ is the quantity before taxation, so it does not measure the units traded at the post-tax incidence. The correct formula uses the after-tax quantity $Q_2$."},{"text":"$$Q_2-Q_1$","correct":false,"explanation":"The difference between quantities measures the fall in output caused by the tax, not the total number of units on which producers bear the burden. The correct multiplier is $Q_2$."},{"text":"$$Q_1+Q_2$","correct":false,"explanation":"Adding pre-tax and post-tax quantities is not an economically meaningful measure of taxed transactions. Producer incidence applies to the post-tax quantity traded, $Q_2$."}]},{"id":"a7696019-da58-494c-95ad-cc24384ee49c","cardType":"cloze","points":null,"front":"Free state education and NHS healthcare are examples of direct [ ].","back":"Free state education and NHS healthcare are examples of direct state provision.","mcqOptions":[{"text":"state provision","correct":true,"explanation":"State provision occurs when the government directly supplies a good or service, often free at the point of use. Education and NHS healthcare are examples because public bodies provide them."},{"text":"state regulation","correct":false,"explanation":"State regulation changes or controls private-sector behaviour through rules, standards, or restrictions. Free education and NHS healthcare instead involve direct government supply, known as state provision."},{"text":"state subsidisation","correct":false,"explanation":"A subsidy lowers producers’ costs or consumers’ prices but does not necessarily mean the state supplies the service itself. The examples given are direct state provision."},{"text":"state taxation","correct":false,"explanation":"Taxation raises government revenue by charging households or firms, whereas these services are directly supplied by the state. The correct term is state provision."}]}]}],"examCountdown":{"examDate":"2027-05-10","paperLabel":"Paper 1"},"heading":"1.8.9 Government intervention in markets","title":"1.8.9 Government intervention in markets Flashcards","topbar":{"backHref":"/a-level/economics/aqa/flashcards"},"topicSidebar":"$L38"}]}],"topicId":"c79af554-6468-500b-ae26-439ee07b75b9","walled":"$L39"}],"$L3a","$L3b"]