Microeconomics SL

1.

(a) Carefully distinguish between merit goods, demerit goods and public
goods.
(b) Evaluate the view that governments should always intervene in markets
for such goods as cigarettes and alcohol.
[May 2006]

2.

(a) Explain the importance of price in allocating scarce resources.

(b) Evaluate the possible consequences of implementing maximum and
minimum price controls.
[Nov 2005]
3.
(a) The basic economic problem is one of scarcity of productive
resources. Explain how resources are allocated between competing uses in a
market economy.
(b) Discuss the view that there is strong justification for government
intervention in the market for health care.
[May 2006]
4.
(a) Explain why underprovision of merit goods in an economy is
considered to be a market failure.
(b) Evaluate the possible measures that a government might use to
correct such a market failure.
[Nov 2006]
5.
(a) Explain the signalling and incentive functions of price in a market
economy.
(b) Evaluate the proposition that government intervention in the market
for tobacco
is justified.
[May 2007]
6.
(a) Using supply and demand analysis, explain why the price of
agricultural goods
tends to fluctuate more than the price of manufactured goods.
(b) Evaluate the possible role of price controls in agricultural markets.
[Nov 2007]
7.
(a) The price elasticity of demand and the price elasticity of supply for
many primary commodities tend to be low. Explain what is meant by this
statement, and how this contributes to the problem of price instability for
primary commodity producers.
(b) Evaluate the view that it is best to allow primary commodity prices to
be determined purely through the free interaction of market forces.
[May 2008]
8.
(a) Using an appropriate diagram, explain how negative externalities are
a type of market failure.

(b) Evaluate the measures that a government might adopt to correct

market failure arising from negative externalities.
[May 2009]
9.
(a) With the aid of at least one diagram, explain the difference between
a movement along an existing demand curve for a good and a shift of the
demand curve for a good.
(b) Evaluate the view that the market forces of demand and supply will
always lead to the best allocation of resources.
[May 2010]
10. (a) World food prices have increased sharply over the past five years.
With the aid of at least one diagram, explain how one possible demand factor
and one possible supply factor may have caused this increase.
(b) Consider the following two conflicting views:
Food prices are best left to market forces.
Government should intervene to control rising food prices.
Evaluate whether rising food prices should be left to market forces or controlled
by government.
[May 2010]
11. (a) Explain how taxes and subsidies differ in their effect on the market
price and quantity of a good.
(b) It is essential that a government supports its farmers by subsidizing
agricultural output. Evaluate this view.
[Nov 2010]
12. (a) Explain the importance of price elasticity of demand and crosselasticity of demand for business decision-making.
(b) Studies have shown that the demand for tobacco tends to be highly
price inelastic. Evaluate the view that governments can best reduce smoking
by substantially increasing taxes on cigarettes.
[May 2010]
13.

(a) Explain why negative externalities are an example of market failure.

(b) Evaluate three policies that governments might implement to reduce
negative externalities associated with the environment.
[Nov 2010]
14. (a) Explain the distinction between public goods and merit goods and
why these goods are examples of market failure.
(b) The operation of the free market is always the best way to allocate
scarce resources. Evaluate this statement.
[May 2011]
15. (a) Explain the roles of market forces and government in allocating
resources in a mixed economy.

(b) Evaluate the extent to which market forces should be used to lessen
the problem of environmental pollution.
[May 2011]
16. (a) Explain the differences between price elasticity of demand (PED) and
cross-elasticity of demand (XED).
(b) Discuss the usefulness of price elasticity of demand (PED) and crosselasticity of demand (XED) to businesses trying to increase their sales revenue.
[Nov 2011]

Microeconomics HL
1.

(a) Explain how a monopolist may be able to earn supernormal (abnormal)

profits in the long run.
(b) Production by a monopolist will always be against the interests of
consumers. Discuss.
[Spec]

2.

(a) Explain how profit is determined in perfect competition.

(b) Whatever the type of market structure, profit maximization will always
be the only goal of firms. Discuss.
[May 2005]

3.

(a) Explain the differences between monopolistic competition and oligopoly

as market structures.
(b) Discuss the differences between a collusive and a non-collusive oligopoly.
[Nov 2005]

4.

(a) Explain the necessary conditions for price discrimination to take place.
(b) Discuss the advantages and disadvantages of price discrimination for
consumers and producers.
[Nov 2006]

5.

(a) Explain how barriers to entry may affect market structure (10 marks)
(b) Evaluate the view that monopoly is an undesirable type of market
structure (15 marks)
[May 2007]

6.

(a) Explain the difference between short run equilibrium and long run
equilibrium in monopolistic competition (10 marks)
(b) Perfect competition is a more desirable market form than monopolistic
competition. Discuss. (15 marks)
[Nov 2007]

7.

(a) Explain how a firm operating in an oligopolistic market might attempt to

increase its market share (10 marks)
(b) Evaluate the view that producers, and not consumers, are the main
beneficiaries of oligopolistic market structures.
[May 2008]

8.
(a) Explain the concepts of allocative and productive (technical)
efficiency.
(b) Monopolies are inefficient and therefore always act against the
public interest.
Discuss this statement.
[Nov 2008]

9.
(a) In the theory of the firm, a distinction is made between short-run cost
curves and long-run cost curves. Using appropriate cost curve diagrams,
explain this distinction.
(b) Evaluate the view that greater economic efficiency will always be
achieved in perfect competition as compared to monopoly.
[May 2009]
10. (a) Using an appropriate diagram, explain how a monopolist might be
able to make supernormal (abnormal) profits in the short-run, and why these
profits might continue to be earned in the long-run.
(b) Evaluate the view that monopolistic competition is a more
economically desirable market form than monopoly.
[May 2011]
11. (a) Using at least one diagram, explain why a firm in perfect
competition might only be able to make supernormal (abnormal) profits in the
short-run and not in the long-run.
(b) Evaluate the view that perfect competition is a more desirable market
form
than oligopoly.
[May 2011]
12. (a) Explain the different objectives that a firm in an oligopolistic market
structure might try to achieve.
(b) Evaluate the view that an oligopolistic market is an inefficient market
structure.
[Nov 2011]

Macroeconomics SL/HL
1.

2.

3.

(a) What are the possible causes of inflation?

(b) Evaluate possible policies that might be used to lower the natural rate
of unemployment
[Spec]
(a) Describe the main causes of inflation.
(b) If inflation is a major problem faced by governments it must follow
that the opposite, deflation, is desirable. To what extent do you agree
with this statement?
[May 2005]
(a) Explain the costs of inflation and the costs of deflation.
(b) Evaluate demand-side policies as a means of reducing inflation.
[Nov 2005]

4.

(a) Explain the relationship between the Lorenz curve and the Gini
coefficient.
(b) Evaluate the effectiveness of the various methods that government
may use to redistribute income .
[Nov 2005]

5.

(a) Explain the difference between demand-side and supply-side policies.

(b) Higher economic growth can only be achieved through the
implementation of supply-side policies. Discuss.
[May 2006]

6.

(a) Identify the components of aggregate demand and briefly explain two
factors which might determine each of these components.
(b) Evaluate the likely impact on an economy of a substantial rise in the
level of interest rates
[May 2006]
7.
(a) Explain the following different types of unemployment:
frictional unemployment
cyclical/demand-deficient unemployment
real wage/classical unemployment
(b) Evaluate the effectiveness of the different measures available to
governments to
deal with the types of unemployment in (a).
[Nov 2006]
8.

(a) Explain how interest rates can be used to bring about an increase in
economic activity.
(b) Discuss the strengths and weaknesses of demand-side policies.
[Nov 2006]

9.

(a) What are the causes of inflation.

(b) Evaluate the possible effects of a persistently high inflation rate on a
countrys current account balance and its exchange rate.

[Nov 2006]
10.

(a) Explain why a government might find it difficult to maintain a low rate
of inflation as the economy approaches full employment.
(b) Evaluate the proposition that the priority in economic management
should be the maintenance of low unemployment.
[May 2007 HL]

11.
(a) Use AD/AS (aggregate demand/aggregate supply) diagrams to
explain the causes
of inflation.
(b) Evaluate the view that governments should make the control of
inflation their
highest priority.
[May 2007]
12.

13.

(a) Using one or more diagrams, explain the difference between the
equilibrium level of national income and the full employment level of
national income.
(b) Evaluate the policies a government may use to increase the full
employment level of national income.
[Nov 2007]
(a) Distinguish between cost push inflation and demand pull inflation.
(b) Evaluate the view that the consequences of inflation are more harmful

to an
economy than the consequences of unemployment.
[Nov 2007]
14.

(a) The effect of a decrease in aggregate demand on output and the price
level depends on the shape of the aggregate supply curve. Explain this
statement.
(b) Evaluate the likely effects of a falling rate of inflation on the
performance of an economy.
[May 2008]
15.

(a) Explain how fiscal policy could be used to increase aggregate

demand.
(b) In the long-run, a countrys economic performance can only be
improved through the implementation of supply-side policies. Evaluate this
statement.
[May 2008]
16.

17.

(a) Explain the difference between progressive taxation and regressive

taxation. (10 marks)
(b) Evaluate the possible effects of a decrease in direct taxation on a
countrys inflation rate, unemployment rate and balance of payments. (15
marks)
[Nov 2008]
(a) With the aid of diagrams, explain the causes of inflation.

(b) Evaluate the effectiveness of demand-side policies in reducing

inflation.
[Nov 2008]
18. (a) Explain the possible causes of a rise in the rate of inflation in an
economy.
(b) Evaluate the possible impact on economic performance that may
result from a government decision to bring inflation under control.
[May 2009]
19. (a) There are various types of unemployment. Explain how any three
types of unemployment may cause a rise in the unemployment rate of an
economy.
(b) Evaluate the view that the unemployment rate can be most
effectively reduced through the use of measures designed to increase
aggregate demand in an economy.
[May 2009]
20. (a) Aggregate demand consists of consumption, investment, government
spending and net exports (exports minus imports). Explain two factors that
may influence consumption and two factors that may influence government
spending.
(b) Evaluate the possible impact of an increase in consumption
expenditure on the performance of an economy.
[May 2010]
21. (a) Aggregate demand consists of consumption, investment, government
spending
and net exports (exports minus imports). Explain two factors that may
influence investment and two factors that may influence net exports.
(b) Evaluate the effectiveness of an increase in investment expenditure
on the performance of an economy.
[May 2010]
22.

(a) Explain why a country may wish to reduce its rate of inflation.
(b) Evaluate the likely impact on the economy of relying on higher
interest rates to reduce the rate of inflation.
[May 2010]
23.

(a) Explain why a country may wish to reduce its unemployment rate.
(b) Evaluate the likely effects on the economy of relying on demand-side
policies to reduce the unemployment rate.
[May 2010]
24. (a) Explain how supply-side improvements to an economy may be
achieved through the use of taxes and government spending.
(b) Evaluate the use of supply-side policies to reduce unemployment.
[Nov 2010]
25. (a) Using appropriate diagrams, explain the difference between demandside and supply-side economic policies.

(b) Evaluate the use of supply-side policies to improve the performance

of an economy.
[Nov 2010]
26. During the global financial crisis of 20082009, there was a fall in
consumer spending in many countries.
(a) Explain the factors which might be responsible for causing consumer
spending to fall.
(b) Evaluate the possible consequences of falling consumer spending for a
countrys macroeconomic performance.
[May 2011]

27.

(a) Explain two policies a government might use to redistribute income.

(b) Measures to promote greater income equality should be a key
feature of government economic policy. Evaluate this proposition.
[May 2011]
28. (a) Using appropriate diagrams, explain how an increase in government
spending could affect both aggregate demand and aggregate supply in an
economy.
(b) The lower the level of government spending, the better. Evaluate
this view.
[May 2011]
29. (a) Using appropriate diagrams, explain how a reduction in income tax
could affect both aggregate demand and aggregate supply in an economy.
(b) The lower the level of both direct and indirect taxation, the better.
Evaluate this view.
[May 2011]
30. (a) Explain what the multiplier is and, using a numerical example,
demonstrate how it can be calculated.
(b) Evaluate whether real Gross Domestic Product (GDP) can be increased
by the use of demand-side policies.
[Nov 2011 HL]
31. (a) Explain three factors that could cause an economy to go into
recession.
(b) Evaluate the effectiveness of governments using demand-side
policies to take an economy out of a recession.
[Nov 2011]