Cambridge International AS and A Level Economics

Chapter 8 Worksheet
Government microeconomic intervention
1 Crossword
1

2 3

5 6

7 8

9 10 11

12

13

14

Across Down
2 An amount of money 1 Allowance granted to firms allowing them to produce negative externalities:
over and above the can be bought and sold
minimum needed to 3 The purchase of assets by the state
keep resources in their 4 People should be treated in the same way
current use 5 This occurs due to overproduction or underconsumption in a free market
7 These confer ownership 6 This represents the opportunity cost of keeping resources in their current use
of a resource 8 Rules governing the behaviour of individuals and institutions
12 An example of this 9 The sale of public sector assets to the private sector
might be the Common 10 Sometimes referred to as organisational slack
Agricultural Policy 11 Those who are more able to contribute should contribute more
14 Represents groups of 13 The belief that providing information can alter behaviour
workers

© Cambridge University Press 2015 Cambridge International AS and A Level Economics Chapter 8 Worksheet 1
 Cambridge International AS and A Level Economics

2 Data response – too big to fail?

During the 2008 financial crisis, many big banks were bailed out by their national governments. Their collapse, it
was argued, would have had severe consequences for depositors who stood to lose huge amounts of their wealth.
They have been accused of being reckless with depositors’ money and taking excessive risks. Governments have
been accused, too, of not regulating financial institutions sufficiently. More recently, despite continued losses, some
banks have been criticised for awarding top managers with excessive bonuses and are therefore rewarding failure.
a What is meant by the term ‘bailed out’ in the context of the banks?  [2]

b What is meant by the term ‘x-inefficient’?  [3]

c To what extent does the evidence suggest that the banks are being x-inefficient? [8]

d Produce a report for your government that evaluates whether big banks should be nationalised in order to
prevent further financial instability in the future.

© Cambridge University Press 2015 Cambridge International AS and A Level Economics Chapter 8 Worksheet 2