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) Carefully distinguish between merit goods and public goods, illustrating your answer with
examples. [10 marks]
b) To what extent is it desirable that a government should provide public goods AND merit
goods? [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) Carefully distinguish between merit goods and public goods, illustrating your answer with
examples. [10 marks]
b) To what extent is it desirable that a government should provide public goods AND merit
good? [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) Carefully distinguish between merit goods and public goods, illustrating your answer with
examples. [10 marks]
b) To what extent is it desirable that a government should provide public goods AND merit
goods? [15 marks]