Estonia has among the world's fastest internet speeds. The government permits both direct and indirect taxes to be paid online. According to the World Bank, it is very easy for a firm to obtain construction permits and register property in Estonia. A low level of government regulation influences how easy it is to start up and run a firm. Many new firms are labour-intensive, although some become more capital-intensive as they expand.
(a)[2]
Identify one example each of a direct tax and an indirect tax.
(b)[4]
Explain two reasons why growth may lead a firm to become more capital-intensive.
(c)[6]
Analyse, using a production possibility curve (PPC) diagram, the possible impact of faster internet speeds on economic growth.
(d)[8]
Discuss whether an economy would benefit from reduced government regulation or not.
Worked solution & mark scheme
This 20-mark question has a full step-by-step worked solution and mark scheme. One marking point: “Income tax / corporation tax are direct taxes” …