IB Economics HL 2.9 Market Failure Public Goods Topic Practice

Answers may include:
- definition of public goods
- PPF diagram to show the trade-off between public good and private goods. Candidates should not be expected to use a diagram for this part of the question
- explanation of the relationship between the characteristics of public goods, the free rider problem and market failure
- examples of public goods and/or consequences of their direct provision
- synthesis or evaluation (discuss).

Discussion may include: the extent to which public goods exist, the opportunity cost of providing public goods, the extent to which the government understands what is best in terms of allocating resources and moral hazard.

Assessment Criteria

Level ..... Marks
0 The work does not meet a standard described by the descriptors below. ..... 0
1 There is little understanding of the specific demands of the question. Relevant economic terms are not defined. There is very little knowledge of relevant economic theory. There are significant errors. ..... 1-5
2 There is some understanding of the specific demands of the question. Some relevant economic terms are defined. There is some knowledge of relevant economic theory. There are some errors. ..... 6-9
3 There is understanding of the specific demands of the question. Relevant economic terms are defined. Relevant economic theory is explained and applied. Where appropriate, diagrams are included and applied. Where appropriate, examples are used. There is an attempt at synthesis or evaluation. There are few errors. ..... 10-12
4 There is understanding of the specific demands of the question. Relevant economic terms are clearly defined. Relevant economic theory is clearly explained and applied. Where appropriate, diagrams are included and applied effectively. Where appropriate, examples are used effectively. There is evidence of appropriate synthesis or evaluation. There are no significant errors. ..... 13-15

s may include:
- definition of a public good
- diagrams to show market failure and the associated welfare loss may be used but no diagram is necessarily expected
- distinction between a private good and a public good. Explanation of why market failure is likely to occur in the case of public goods, with reference to the free rider problem. Rivalry and excludability. Explanation of why public goods are often provided directly by the government
- examples of public goods
- synthesis or evaluation (discuss).
Discussion may include: an evaluation of whether public goods should always be directly provided by the government in terms of possible alternatives and the possible problems of direct provision, eg the opportunity cost, political conflict and possible benefits, eg economies of scale. Candidates may also discuss the possible creation of government debt to finance public goods, consideration of what the social benefits might be, the difficulty of measurement of such benefits and, therefore, the prospect of a misallocation of resources since government will not necessarily accurately assess need.
Examiners should be aware that candidates may take a different approach which, if appropriate, should be rewarded.
Opinions or conclusions should be presented clearly and should be supported by appropriate examples.
Assessment Criteria
Part (b) 15 marks
Level ..... Marks
0 The work does not reach a standard described by the descriptors below. ..... 0
1 There is little understanding of the specific demands of the question. Relevant economic terms are not defined.
There is very little knowledge of relevant economic theory. There are significant errors. ..... 1-5
2 There is some understanding of the specific demands of the question.
Some relevant economic terms are defined.
There is some knowledge of relevant economic theory. There are some errors. ..... 6-9
3 There is understanding of the specific demands of the question.
Relevant economic terms are defined.
Relevant economic theory is explained and applied.
Where appropriate, diagrams are included and applied. Where appropriate, examples are used.
There is an attempt at synthesis or evaluation.
There are few errors. ..... 10-12
4 There is clear understanding of the specific demands of the question.
Relevant economic terms are clearly defined.
Relevant economic theory is clearly explained and applied.
Where appropriate, diagrams are included and applied effectively. Where appropriate, examples are used effectively. There is evidence of appropriate synthesis or evaluation.
There are no significant errors. ..... 13-15
Macroeconomics