A-LevelEconomicsGovernment microeconomic intervention9708/12 · Oct/Nov 2015 · Q181 Mark
The diagram shows the market for onions in equilibrium at point X. The government has a stock of onions and wants to establish a new equilibrium at point Y. Which actions should the government take? [Figure 18.1]
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AIt should buy an amount equal to XY and subsidise producers by a sum equal to YZ.
BIt should buy an amount equal to XY and tax producers by a sum equal to YZ.
CIt should sell an amount equal to XY and subsidise producers by a sum equal to YZ.
DIt should sell an amount equal to XY and tax producers by a sum equal to YZ.
✓ Correct answer
A: It should buy an amount equal to XY and subsidise producers by a sum equal to YZ.
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