Microeconomics: MF and Govt Intervention

Econs Questions 1) Government frequently imposes indirect taxes in order to influence the pattern of consumers expenditure. The effectiveness of such policy measures, however, depends crucially on how consumers respond. a)Explain with the help of examples the concepts of PED and PES. [10 marks] b)Discuss the view that Govt efforts to intervene in the working of the free market through indirect taxation inevitably create more problems than they solve. [15 marks] 2) Evaluate the view that a government such as that of Singapore should use a policy of tradable permits to try to correct the market failure resulting from the existence of a negative externality. [15 marks] 3) The bottom 30% of the working families in Singapore has now experienced stagnating real household incomes for eight to ten years. If wages continue to stagnate, there is a limit to poverty alleviation through working longer and harder, or driving the unemployment rate lower. a) Explain the case for government intervention in the market for vocational training. b) Discuss whether you agree that employment creation is no longer the best method to alleviate poverty in Singapore. 4) To solve income inequality, the USA uses a minimum wage law while Singapore believes that improving the skills of workers is the best solution. a) Explain why income inequality is a source of market failure. b) Using economic theory, analyse whether the above view is no longer the best method to alleviate poverty in Singapore. 5) Singapore government allocates the largest amount of the fiscal budget to MINDEF and MOE. Discuss whether the expenditure in defence and education by the Singapore government contributes to the economic goals of efficiency and economic growth. 6) Explain whether public housing could be considered to be a example of a public good or private good. 7) The pricing of water should be left to market forces. However, some governments choose to subsidise water while others place a tax on it. Comment. 8) The wonders of free market often disappear when assumptions are relaxed. a) Explain how the free market could bring wonders to the economy. b) Discuss the view that the government would often fare better than the free market when the assumptions are relaxed.

Microeconomics: MF and Govt Intervention

9) Consider different forms of market failure in Singapore and evaluate their significance for the efficient working of the economy. 10) Compared with Dec 2008, the consumer price index remained stable in December 2009. Higher costs of transport and communication and health care were offset by the lower cost of housing. a) Explain the reasons for the rising costs of healthcare in Singapore. b) Assess the desirability of the government fully subsidizing healthcare expenditure in Singapore. 11) Consumers and producers are generally assumed by economists to be motivated by selfinterest. a) Explain how, according to economists, the pursuit of self-interest can help to address the problem of limited resources and unlimited wants. b) Assess whether the price mechanism will always allocate scarce resources in the most efficient manner for all goods and services in the market economy. 12) a) Explain why government intervention is advocated in the markets both for public goods and for goods where externalities are present. b) In the UK, entry to national museums and art galleries are free of charge and tickets to see the opera are heavily subsidized. In contrast, to Japan, entry to national museums and art galleries come at a high price and a ticket to see the opera is among the most expensive in the world. Assess the economic case for these two different approaches. 13) a) Explain why imperfect information and immobility of factors of production may lead to market failure. b) Evaluate the policies currently used by the Singapore government to correct these causes of market failure.