IB Economics HL 2.7 Role of Government in Microeconomics Topic Practice

For providing a limited explanation of one advantage or one disadvantage, award a maximum of [1].

For an accurate explanation of one advantage or one disadvantage or a limited explanation of both, award a maximum of [2].

For providing an accurate explanation of one advantage or one disadvantage and a limited explanation of one disadvantage or one advantage, award a maximum of [3].

For providing two accurate explanations, award a maximum of [4].

Level

Marks

0

The work does not meet a standard described by the descriptors below.

1

The written response is limited.

1-2

Advantages may include:

- supporting farmers' incomes/increasing producer surplus

- decreasing income inequality

- reducing rural-urban migration

- decreasing price instability in agricultural markets.

Disadvantages may include:

- higher prices for consumers

- overproduction of farm products (surplus) / misallocation of resources / allocative inefficiency

- increased government expenditure

- opportunity cost of financing the scheme

Any other valid response.

2

The written response is accurate.

3-4

Accurate explanations of advantages may include:

- supporting farmers' incomes, because farmers may have low and/or unstable incomes

- decreasing income inequality, because rural areas have lower incomes than urban areas

- reducing rural-urban migration, because urban areas have high unemployment and lower living standards due to population density

- decreasing price instability in agricultural markets, which may occur because of weather and other random factors.

Accurate explanations of disadvantages may include:

- consumers will pay higher prices for food, which is a necessity

- overproduction of farm products / misallocation of resources, because too much land is used for agriculture

- increased government expenditure, which requires higher taxes or (increased) government borrowing

- opportunity cost of financing the scheme, because spending on other needs will have to be foregone.

Any other valid and explained response.

Award [1] for a horizontal line above the equilibrium price.

Award [1] for the line being drawn at $10.
If the line is not labelled a maximum of [1] may be awarded.
OFR applies.

Marking guidance:

Award [1] for one accurate possible measure.
Measures may include:
- destroying the surplus
- storing for future use (possible future drought)
- exporting abroad at a lower price
- overseas food aid
- purchasing the surplus
- providing foodbanks or low-income families with (rationed) surplus
- any other valid measure.

1 million kg is sufficient for [1].
No workings are required.

Marking guidance:

OFR applies.

$8 \times 6=\$ 48$ million
$10 \times 5=\$ 50$ million
Any valid working is sufficient for [1].

Change $=\$ 2$ million OR an increase of $\$ 2$ million.
An answer of 2 or 2 million or $\$ 2$ million without working is sufficient for [1].

Marking guidance:

OFR applies.
For full marks to be awarded the response must provide valid working and include correct units.