IB 1 Test: Market failure

Time allowed: 1 hour (and 5 minutes reading time)

CHOOSE ONE QUESTION FROM THE CHOICE BELOW

Use real world examples and diagrams where appropriate

Q1. a) Explain the concept of negative externalities of production [10 marks]

b) Evaluate three policies that may be used by government to reduce external costs of
production [15 marks]
??
Q2. a) Explain why underprovision of merit goods in an economy is considered to be a
market failure. [10 marks]
b) Evaluate the possible measures that a government might use to correct such a
market failure. [15 marks]
Nov 06 SL1
IB 1 Test: Market failure

Time allowed: 1 hour (and 5 minutes reading time)

CHOOSE ONE QUESTION FROM THE CHOICE BELOW

Use real world examples and diagrams where appropriate

Q1. a) Explain the concept of negative externalities of production [10 marks]

b) Evaluate three policies that may be used by government to reduce external costs of
production [15 marks]

Q2. a) Explain why underprovision of merit goods in an economy is considered to be a

market failure. [10 marks]
b) Evaluate the possible measures that a government might use to correct such a
market failure. [15 marks]

IB 1 Test: Market failure

Time allowed: 1 hour (and 5 minutes reading time)

CHOOSE ONE QUESTION FROM THE CHOICE BELOW

Use real world examples and diagrams where appropriate

Q1. a) Explain the concept of negative externalities of production [10 marks]

b) Evaluate three policies that may be used by government to reduce external costs of
production [15 marks]

Q2. a) Explain why underprovision of merit goods in an economy is considered to be a

market failure. [10 marks]
b) Evaluate the possible measures that a government might use to correct such a
market failure. [15 marks]