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Role of Government in Microeconomics · Paper 1 — Free Economics HL Practice Questions

1FoundationSAQ-SEffects of government policies on markets4 marksPaper 1~6 min

The government of Kenya introduces a specific tax of

\text{KSh}\,50

per kilogram on imported sugar to protect domestic sugar producers.

(a)

Define the term "indirect tax". [2 marks]

(b)

Explain one effect of this import tax on domestic sugar producers in Kenya. [2 marks]

Solutions

2FoundationSAQ-SEffects of government policies on markets4 marksPaper 1~6 min

A rice farmer in Vietnam receives a government subsidy of

2000

dong per kilogram of rice produced.

(a)

Define the term "subsidy." [2 marks]

(b)

Using a supply and demand , explain one likely effect of this subsidy on the equilibrium price and quantity of rice in Vietnam. [2 marks]

Solutions

3MasterySAQ-SEffects of government policies on markets4 marksPaper 1~6 min

The government of Ghana is considering a per-unit subsidy on the production of malaria vaccines to increase vaccination rates. Currently, the market is at equilibrium with a price of

50

cedis per dose and

10{,}000

doses sold per month. The subsidy reduces the price paid by consumers to

40

cedis per dose, while producers receive

60

cedis per dose. As a result, the quantity traded rises to

12{,}000

doses per month.

(a)

Using a fully labelled supply and demand , show the effect of this subsidy on the market for malaria vaccines. [1 mark]

(b)

Using the data provided, calculate the total monthly cost of this subsidy to the government. [1 mark]

(c)

Evaluate whether the fiscal cost of this subsidy is justified. [2 marks]

Solutions

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