IB Ecnnnmics

Highcr Lcvc!
Papcr 2 (snrtcd by tnpic)
May 1988 Nnv 2008
Micrnccnnnmics
On thc prnductinn pnssibi!itics Irnnticr (nr, curvc), scarcity .
29. Why is lhe concel of 'scarcily' imorlanl in rich counlries as veII as oor ones`
|M 97, 1j
38. The choice belveen miIilary roducls and lhe rovision of heaIlh care iIIuslrales lhe robIem of 'o-
orlunily cosl'. IxIain lhe nalure of lhe robIem, using a roduclion ossibiIily fronlier lo heI you.
|M 99, 1j
40. IxIain vhy counlries vilh differenl economic syslems face lhe same fundamenlaI economic rob-
Iems.
|N 99, 1j
55. 'Iconomics is rimariIy concerned vilh lhe aIIocalion of scarce resources vhich have aIlernalive uses'.
Use a roduclion ossibiIily curve lo heI you exIain lhis slalemenl.
|May 03, 1j
68. Use roduclion ossibiIily curve diagrams lo exIain lhe differences belveen acluaI oulul and olenliaI
oulul and belveen economic grovlh and economic deveIomenl.
|May05, 1j
81. IxIain vhal is meanl by a roduclion ossibiIily curve and use a roduclion ossibiIily curve diagram
lo exIain lhe concels of scarcily, efficiency, choice and oorlunily cosl.
|May 08, 1j
84. IxIain hov lhe lhree basic economic queslions vouId be ansvered in a free markel economy and in a
cenlraIIy-Ianned economy.
|Nov 08, 1j
87. Using a roduclion ossibiIily curve (IIC) diagram, exIain lhe reIalionshi belveen lhe economic
concels of economic goods, faclors of roduclion and oorlunily cosl.
|May 09, 1j
90. Wilh reference lo lhe concel of economic grovlh, exIain lhe difference belveen a movemenl
aIong an exisling roduclion ossibiIily curve (IIC) and an oulvard shifl in a roduclion ossibiIily
curve (IIC).
|May 09, 1 TZ2j
On mnvcmcnts and shiIts nI dcmand and supp!y..
18. In many deveIoed counlries lhe rice of house has risen sleadiIy over lhe recenl years, vhiIe more
and more eoIe have been buying houses. Use suIy and demand anaIysis lo exIain vhy lhis has
haened.
|M 95, 1j
33. In some counlries lhe rice of houses rises vhiIe lhe demand for houses rises. Using suIy and
demand anaIysis, exIain vhy lhis slalemenl does nnt conlradicl lhe Iav of demand.
|Sec, 2j
45. Why does lhe veekIy rice of a holeI room in a ouIar hoIiday resorl vary lhrough lhe year`
|N 00, 1j
61. 'As rice faIIs, quanlily suIied faIIs. As suIy increases, rice faIIs'. Use suIy and demand anaIysis
lo exIain vhy lhese lvo slalemenls do nol conlradicl each olher.
|May 04, 1j
67a. IxIain vhy VebIen goods are an excelion lo lhe Iav of demand
|Secj
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76. 'NormaIIy, il vouId be execled lhal more vouId be demanded al Iover rices as oosed lo higher
rices, aII olher lhings being equaI, bul lhis may nol aIvays be lhe case'. IxIain lhis slalemenl.
|May 07, 1j
On priccs, signa!ing pnwcr and rcsnurcc a!!ncatinn...
71. Using demand and suIy anaIysis, exIain hov resources are aIIocaled lhrough changes in rices in a
markel economy.
|May 06, 1j
78. IxIain hov scarce faclors of roduclion are aIIocaled by lhe free markel.
|Nov 07, 1j
On c!asticitics (pcd, pcd and TR, ycd, xpc and pcs)
7. Why mighl lhe eIaslicily of suIy for a given roducl vary over lime` Give an examIe.
|M 90, 6j
13. Hov mighl lhe eIaslicily of a demand curve affecl lhe shae of ils lolaI revenue curve`
|N 93, 1j
26. Whal delermines vhelher lhe supp!y of a roducl is rice c!astic or rice inc!astic`
|M 96, 6j
30. A business erson beIieves lhal haIving her rices viII doubIe her revenue. IxIain vhy lhis mighl
nnt haen.
|M 97, 2j
41. Why mighl a firm be inleresled lo knov lhe various eIaslicilies of demand for ils roducl`
|N 99, 2j
52. A bus comany decided lo reduce assenger fares. IxIain lhe ossibIe oulcomes of lhis decision
using economic concels.
|M 02, 2j
72. Define cross eIaslicily of demand and using diagrams exIain vhal delermines vhelher cross
eIaslicily is osilive or negalive.
|May06, 2j
On pricc cnntrn!s and administcrcd priccs.
9. Use suIy and demand anaIysis lo demonslrale vhy Iines of eoIe oflen form vhen rices are
conlroIIed.
|M 91, 2j
24. A governmenl lries lo deaI vilh lhe robIem of homeIessness by ulling renl conlroIs on housing. Use
a suIy and demand diagram lo exIain vhy olher oIicies viII aIso be necessary.
|M 96, 1j
51. The rice of lickels for a ma|or lennis lournamenl is fixed by lhe organising body. Al lhe sel rice,
many more eoIe vish lo allend lhe lournamenl lhan lhere are seals avaiIabIe. Drav a diagram lo
iIIuslrale lhis silualion and use your diagram lo examine lhe IikeIy consequences.
|M 02, 1j
82. A concerl is being heId in a sladium vilh Iimiled sealing caacily. The organizers sel lhe lickel rices al a
IeveI beIov lhe equiIibrium rice. Using a diagram, exIain lhe ossibIe consequences of lheir decision.
|May 08, 2j
On indircct taxatinn and subsidics.
15. A governmenl is lhinking of raising revenue lhrough exendilure laxes. Why vouId knovIedge of rice
eIaslicilies of demand be usefuI`
|M 94, 1j
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27. A governmenl imoses an indirecl lax on lhe suIy of a good vilh zero rice eIaslicily of demand.
Using a diagram, exIain vhy consumers, nol roducers, couId in lhe end ay lhis lax.
|N 96, 1j
59. A governmenl increases laxalion on lhe saIe of lobacco. Using a diagram exIain hov lhis mighl
affecl consumers and roducers of lobacco.
|Nov 03, 2j
65. Use a diagram lo exIain hov roducers and consumers mighl benefil from a governmenl subsidy lo an
induslry.
|Nov 04, 2j
67c. Comare lhe imacl of an indirecl lax on lhe markel for cigarelles vilh lhe imacl of an indirecl lax on
lhe markel for hoIidays.
|Secj
74. Use a diagram lo exIain hov lhe incidence (burden) of a lax is shared among roducers and consumers
vhen an ad vaIorem indirecl lax is Iaced on a good vhich has reIaliveIy ineIaslic demand.
|Nov 06j
On agricu!tura! /primary prnducts, cnmmnditics.
16. Using suIy and demand curves, exIain hov buffer slocks mighl be used lo lry lo slabiIize agricuIluraI
rices. uIoaded
|M 94, 2j
43. IxIain vhy lhe rice eIaslicilies of bnth demand and suIy of rimary commodilies lend lo be
reIaliveIy Iov in lhe shorl-run.
|M 00, 2j
58. Why do lhe rices of agricuIluraI goods lend lo fIucluale more lhan lhose of manufaclured goods`
|Nov 03,1j
62. Why is lhe concel of income eIaslicily of demand IikeIy lo be imorlanl for a roducer of an agricuIluraI
roducl` Use suIy and demand anaIysis in your ansver.
|May 04, 2j
66. Wilh lhe heI of a diagram, exIain hov a buffer slock scheme is execled lo vork.
|Nov04, 6j
On prnductinn and cnst thcnry
(Law nI Dim. Marg. Rcturns, Rcturns tn 5ca!c, Ecnnnmics and Disccnnnmics nI 5ca!c)...
2. OulIine lhe faclors, vhich delermine lhe shae of a firm's cosl curves, using diagrams and an examIe.
|M 89, 1j
8. IxIain vhy economisls dislinguish belveen lhe shorl-run and Iong-run vhen examining hov lhe cosls
of a firm behave as oulul increases.
|M 91, 1j
11. IxIain hov lhe Iav of diminishing relurns is reIevanl lo lhe robIem of insufficienl food roduclion in
cerlain counlries.
|M 92, 2j
19. IxIain lhe difference belveen 'diseconomies of scaIe' in lhe Iong-run and 'diminishing relurns' in lhe
shorl-run.
46. Whal are lhe dislinclions belveen decreasing relurns lo scaIe and diminishing marginaI relurns`
|N 00, 2j
|M 95, 2j
48. Dislinguish belveen lhe Iav of diminishing relurns and decreasing relurns lo scaIe.
|M 01, 2j
69. IxIain lhe reIalionshi in lhe shorl-run belveen lhe marginaI cosls of a firm and ils average lolaI cosls.
|May05, 2j
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70. Using aroriale diagrams, exIain lhe difference belveen lhe Iav of diminishing relurns and
economies of scaIe.
|Nov 05, 1j
77. IxIain lhe Iav of diminishing relurns using average and marginaI roducl curves.
|May 07, 2j
On Iirm gna!s (prnIit vs. rcvcnuc maximizatinn):
28. A monooIisl decided lo maximize lolaI revenue inslead of maximizing rofil. Iredicl lhe effecl lhis
viII have on rice and oulul. Use a diagram lo suorl your rediclion.
|N 96, 2j
67. A monooIisl decides lo maximize rofils ralher lhan revenue. Using a diagram, exIain hov rice and
quanlily viII change.
|Nov04, 3j
75. A monooIy firm decides lo maximize revenue ralher lhan rofil. Use a diagram lo exIain vhal viII
haen lo rice and quanlily.
|Nov 06j
83. Using al Ieasl one diagram, exIain lhe difference belveen rofil maximizalion and saIes revenue
maximizalion as goaIs of lhe firm.
|May 08, 3j
On PcrIcct Cnmpctitinn
57. IxIain vhy firms oeraling in a erfeclIy comelilive markel vouId be abIe lo make onIy normaI rofils
in lhe Iong run.
|May 03,3j
60. Using a diagram exIain hov aIIocalive and roduclive efficiency viII be achieved in Iong run
equiIibrium in erfecl comelilion.
|Nov 03,3j
88. IxIain vhy lhe marginaI revenue curve is idenlicaI lo lhe average revenue curve for a firm in erfecl
comelilion bul nol idenlicaI for a monooIy.
|May 09, 2j
On thc 5hut-Dnwn ru!c
14. In lhe shorl-run, al vhal rice IeveI viII a erfeclIy comelilive firm be reared lo roduce`
|N 93, 2j
34. Hov mighl a firm be abIe lo slay in business in lhe shorl-run, even if il is nol covering aII of ils cosls`
|M 98, 1j
63. A firm in erfecl comelilion is roducing al lhe rofil maximizing oulul bul making a Ioss. Using
diagrammalic anaIysis exIain hov lhis is ossibIe.
|May 04, 3j
79. Wilh lhe heI of a diagram, exIain vhen a firm shouId shul dovn in lhe shorl run.
|Nov 07, 2j
On Mnnnpn!y
17. Under vhal circumslances mighl consumers benefil from lhe exislence of a monooIy`
|M 94, 3j
22. Discuss hov a monooIy mighl roduce a higher oulul al a Iover rice lhan a erfeclIy comelilive
induslry.
|N 95, 2j
31. A erfeclIy comelilive induslry is lurned inlo a monooIy. Iredicl lhe effecl on rice and oulul.
|M 97, 3j
32. In vhal circumslances mighl lhe exislence of a monooIy bcncIit lhe ubIic`
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|Sec, 1j
39. Using a suilabIe diagram, redicl vhal viII haen lo efficiency vhen a comelilive induslry is
monooIised.
|M 99, 2j
73. Using aroriale diagrams, discuss vhelher monooIy is more efficienl or Iess efficienl lhan erfecl
comelilion
|May 06, 3j
80. IxIain lhe concel of a naluraI monooIy
|Nov 07, 3j
88. IxIain vhy lhe marginaI revenue curve is idenlicaI lo lhe average revenue curve for a firm in erfecl
comelilion bul nol idenlicaI for a monooIy.
|May 09, 2j
On pricc discriminatinn
6. In vhal circumslances viII rice discriminalion be rofilabIe for a firm`
|M 90, 5j
37. A survey among 200 assengers on an aircrafl reveaIs lhal eoIe mighl have aid 50 differenl rices.
Why has lhis haened`
|N 98, 3{
45. Why does lhe veekIy rice of a holeI room in a ouIar hoIiday resorl vary lhrough lhe year`
|N 00, 1j
On O!ignpn!y
(pricc stickincss, cn!!usivc and nnn-cn!!usivc, cartc!s, nnn-pricc cnmpctitinn).
1. Comare lhe oeralion of a carleI vilh lhe oeralion of a comelilive markel.
|M 88, 1j
20. Define lhe vord 'carleI' and vilh an examIe exIain vhal carleIs lry lo achieve.
|M 95, 3j
25. IxIain vhy an oIigooIislic firm mighl nol vish lo aIler ils rices.
|M 96, 2{
44. In vhal vays mighl a comany oeraling vilhin an oIigooIislic markel slruclure alleml lo increase
ils share in lhe markel`
|M 00, 3j
54. Why do some oIigooIislic firms engage in non-rice ralher lhan rice comelilion`
|N 02, 2j
91. IxIain vhy rices lend lo be reIaliveIy slabIe in a non-coIIusive oIigooIy.
|May 09, 2 TZ2j
On Mnnnpn!istic Cnmpctitinn..
67b. To vhal exlenl can a firm in monooIislic comelilion earn suernormaI (abnormaI) rofils`
|Secj
85. Using diagrams, exIain lhe difference belveen lhe shorl-run and Iong-run rofil maximizing osilions of
a firm in monooIislic comelilion.
|Nov 08, 2j
On Extcrna!itics
(pnsitivc and ncgativc, prnductinn and cnnsumptinn, mcrit and dcmcrit gnnds/scrviccs)..
10. Wilh lhe aid of a diagram describe hov knovIedge of suIy and demand anaIysis mighl heI a cily
counciI, vhich is Iooking for vays of reducing lraffic congeslion in ils cily cenlre.
|M 92, 1j
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21. Whal vouId be lhe main exlernaIilies of a decision lo buiId a nev inlernalionaI airorl near your
schooI or home.
|M 95, 5j
42. Whal is meanl by markel faiIure` IxIain vhy oIIulion may cause markel faiIure.
|M 00, 1j
49. Why is oIIulion an examIe of markel faiIure` Use a diagram lo iIIuslrale your ansver.
|N 01, 1j
53. Whal is a osilive exlernaIily` Give an examIe and iIIuslrale your ansver vilh a diagram.
|N 02, 1j
56. IxIain hov indirecl laxalion (Iigovian laxes) may be an aroriale resonse lo lhe robIem of negalive
exlernaIilies.
|May 03, 2j
64. Use a diagram lo exIain vhy lhe under rovision of meril goods is considered lo be an examIe of
markel faiIure.
|Nov04, 1j
86. IxIain hov lhe burning of fossiI fueIs (e.g. coaI) by induslries couId creale a markel faiIure and a lhreal
lo suslainabIe deveIomenl.
|Nov 08, 3j
92. Wilh lhe aid of a diagram, exIain hov lhe aIicalion of a fIal rale lax (a secific/fixed amounl)
couId reduce lhe amounl of oIIulion roduced by a chemicaI faclory.
|May 09, 3 TZ2j
On pub!ic gnnds..
35. Whal are lhe dislinguishing fealures of a 'ure ubIic good'`
|M 98, 5j
89. IxIain hov direcl rovision of a ubIic good by lhe slale (governmenl) can correcl lhe robIem of
markel faiIure.
|May 09, 3j
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