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IB Economics HL 2.7 Role of Government in Microeconomics Question Bank

Evaluate government intervention using diagrams, welfare effects, assumptions and evidence about consumers, producers and public objectives.

Syllabus
First assessment 2022
Course
Economics HL
Level
HL

Exam points

  • Use intervention diagrams to explain price ceilings, floors, taxes and subsidies in a market.
  • Evaluate intervention by weighing efficiency, equity, unintended effects and outcomes for stakeholders.
  • Calculate intervention effects from diagrams and assess how consumer nudges change choices without changing prices.

Covered syllabus points

2.7.1—Reasons for government intervention2.7.2—Main forms of intervention2.7.3—Consequences of intervention2.7.4 (HL)—Consumer nudges2.7.5 (HL)—Intervention calculations

2.7 Role of government in microeconomics question 1

[Maximum number: 10]

Explain why governments impose price floors in the market for agricultural products.

2.7 Role of government in microeconomics question 2

[Maximum number: 10]

Question (a)

(a)

Explain one possible advantage and one possible disadvantage of governments setting a price floor in agricultural markets.

[ 4 ]

Question (b)

(b)

Draw and label on Figure 1 a curve that illustrates the price floor in Nissos that leads to a monthly surplus of 3 million kg of corn.

The monthly corn surplus created must be purchased by the government of Nissos.

[ 2 ]

Question (c)

(c)

State one measure that the government of Nissos might take to deal with this corn surplus, following the imposition of the price floor.

[ 1 ]

Question (d)

(d)

Using Figure 1, determine the size of the decrease in monthly corn consumption following the imposition of the price floor.

[ 1 ]

Question (e)

(e)

Using Figure 1, calculate the change in consumer expenditure on corn in Nissos.

[ 2 ]
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