Ib Economics Review Questions Microeconomics
Ib Economics Review Questions Microeconomics
Ib Economics Review Questions Microeconomics
15.
(a)
Explain
what
externalities
are
and
how
they
may
arise.
(b)
Discuss
whether
governments
should
always
involve
themselves
in
markets
with
substantial
externalities.
16.
(a)
What
are
the
main
features
of
an
oligopolistic
market?
(b)
Do
oligopolies
work
in
favor
of,
or
against
the
interest
of
consumers?
17.
(a)
What
do
economists
mean
by
externalities
or
spillover
effects?
(b)
How
does
an
understanding
of
externalities
(spillover
effects)
assists
economists
in
analyzing
environmental
problems?
18.
(a)
What
are
natural
monopolies
and
why
are
they
considered
a
danger
if
left
unregulated?
(b)
Is
nationalization
of
natural
monopolies
the
best
method
of
improving
their
economic
efficiency?
19.
(a)
Distinguish
between
private
costs
and
benefits
and
social
costs
and
benefits.
(8)
(b)
Explain
how
an
increase
in
the
number
of
cars
n
the
roads
of
a
country
might
lead
to
a
misallocation
of
resources.
(8)
(c)
Evaluate
the
ways
in
which
a
government
might
remedy
this
misallocation.
(9)
20.
(a)
Carefully
explain
what
is
it
that
price,
income
and
cross
elasticities
of
demand
are
meant
to
measure.
(b)
Discuss
the
practical
importance
of
the
concept
of
price
elasticity
of
demand
for
(i)
business
organizations
(ii)
the
government
21.
(a)
Why
do
environmental
issues
cause
problems
to
economists?
(b)
What
solutions
might
an
economist
suggest
to
the
problem
of
overfishing?
22.
(a)
State
the
law
of
demand
and
distinguish
between
movements
along
the
demand
curve
and
shifts
of
the
demand
curve.
(10)
(b)
Explain,
with
the
help
of
diagrams,
the
effect
of
an
increase
in
the
price
of
petrol
is
likely
to
have
on
(i)
The
market
for
cars.
(ii)
The
market
for
coal.
(15)
23.
Monopoly
price
is
higher
and
output
smaller
than
is
socially
ideal.
The
public
is
a
victim.
(J.K.
Galbraith,
1974)
(a)
Explain
to
economic
reasoning
behind
the
statement
that
monopoly
price
is
higher
and
output
smaller
than
is
socially
ideal.
(12)
(b)
Do
you
agree
that
the
public
is
always
the
victim
of
monopoly?
Justify
your
answer.
(13)
24.
(a)
Why
are
environmental
problems
considered
to
be
an
example
of
market
failure?
(10)
(b)
To
what
extent
can
government
intervention
correct
this
failure?
25.
(a)
Under
what
conditions
is
price
discrimination
possible
and
profitable?
(12)
(b)
Who
gains
and
who
loses
from
price
discrimination?
Illustrate
your
answer
with
examples.
(13)
26.
(a)
Using
suitable
diagrams,
explain
why
there
is
likely
to
be
an
absence
of
long
run
economic
profits
in
perfect
competition.
(12)
(b)
To
what
extent
might
consumers
benefit
from
increased
competition
between
firms?
(13)
27.
(a)
How
does
a
monopoly
maintain
supernormal
(or
abnormal)
profit
in
the
long
run?
(12)
(b)
Is
monopoly
always
undesirable?
(13)
28.
Discuss
and
evaluate
the
proposition
that
perfect
competition
is
a
more
efficient
market
structure
than
monopoly.
29.
(a)
Why
is
pollution
an
example
of
market
failure?
(10)
(b)
To
what
extent
can
the
market
system
protect
the
environment?
(15)
30.
(a)
What
does
an
economist
mean
by
efficiency
in
the
operation
of
a
firm?
(10)
(b)
Discuss
whether
the
achievement
of
efficiency
is
possible
and
desirable.
(15)
31.
(a)
What
role
do
prices
play
in
the
allocation
of
resources
in
free
market
economics?
(b)
Evaluate
the
options
available
to
governments
to
overcome
the
failure
of
markets
arising
from
the
production
and
consumption
of
demerit
goods.
Illustrate
your
answer
with
the
examples
where
possible.
32.
(a)
Outline
the
ways
in
which
monopoly
power
might
arise.
(b)
Evaluate
the
extent
to
which
governments
should
seek
to
control
the
growth
of
monopoly
power.
33.
National
policies
and
international
agreements
must
be
implemented
in
order
to
reduce
global
environmental
problems.
(a)
Using
the
concepts
of
market
failure,
explain
the
statement
above
from
an
economists
point
of
view.
(b)
With
references
to
both
national
policies
and
international
agreements,
present
and
evaluate
three
solutions
that
could
be
recommended
by
economists.
34.
Discuss
the
economic
arguments
for
and
against
imposing
substantially
higher
levels
of
taxation
on
the
sale
of
alcohol.
35.
(a)
In
what
ways
do
firms
operating
in
different
market
structures
compete?
(b)
Discuss
the
view
that
the
more
competition
there
is
within
each
industry,
the
better.
36.
(a)
Explain
the
concepts
of
maximum
and
minimum
price
controls.
(b)
Evaluate
the
idea
that
government
intervention
in
the
form
of
price
ceilings
and
price
floors
is
well
intentioned,
but
often
leads
to
undesirable
side
effects.
37.
(a)
Explain
how
a
monopolist
may
be
able
to
earn
supernormal
(abnormal)
profits
in
the
long
run
(10
marks)
(b)
Production
by
a
monopolist
will
always
be
against
the
interests
of
consumers.
Discuss.
(15
marks)
38.
(a)
Explain
how
profit
is
determined
in
perfect
competition
(10
marks)
(b)
Whatever
the
type
of
market
structure,
profit
maximization
will
always
be
the
only
goal
of
firms.
Discuss.
(15
marks)
39.
(a)
Explain
the
differences
between
monopolistic
competition
and
oligopoly
as
market
structures
(10
marks)
(b)
Discuss
the
differences
between
a
collusive
and
a
non-collusive
oligopoly
(10
marks)
40.
(a)
Carefully
distinguish
between
merit
goods,
demerit
goods
and
public
goods
(10
marks)
(b)
Evaluate
the
view
that
governments
should
always
intervene
in
markets
for
such
goods
as
cigarettes
and
alcohol
(15
marks)
41.
(a)
Explain
the
necessary
conditions
for
price
discrimination
to
take
place
(10
marks)
(b)
Discuss
the
advantages
and
disadvantages
of
price
discrimination
for
consumers
and
producers
(15
marks)
42.
(a)
Explain
how
barriers
to
entry
may
affect
market
structure
(10
marks)
(b)
Evaluate
the
view
that
monopoly
is
an
undesirable
type
of
market
structure
(15
marks)
43.
(a)
Explain
the
difference
between
short
run
equilibrium
and
long
run
equilibrium
in
monopolistic
competition
(10
marks)
(b)
Perfect
competition
is
a
more
desirable
market
form
than
monopolistic
competition.
Discuss.
(15
marks)
43.
(a)
Explain
how
a
firm
operating
in
an
oligopolistic
market
might
attempt
to
increase
its
market
share
(10
marks)
(b)
Evaluate
the
view
that
producers,
and
not
consumers,
are
the
main
beneficiaries
of
oligopolistic
market
structures
44.
(a)
Explain
the
determinants
of
price
elasticity
of
demand.
(10
marks)
(b)
A
deterioration
in
a
countrys
terms
of
trade
will
always
be
disadvantageous
for
the
current
account
balance.
Evaluate
this
statement
using
the
concept
of
price
elasticity
of
demand.
(15
marks)
45.
(a)
Explain
the
concepts
of
allocative
and
productive
(technical)
efficiency.
(10
marks)
(b)
Monopolies
are
inefficient
and
therefore
always
act
against
the
public
interest.
Discuss
this
statement.
(15
marks)