1
2 marks
Define the term subsidy indicated in bold in the text (Text E, paragraph 2) (opens in a new tab).
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Role of Government In Microeconomics (DP IB Economics: SL): Exam Questions
1 hour16 questions
2
2 marks
Case Study
Extract A, paragraph 4
Over the recent years, housing crises have become increasingly prevalent across Europe. House prices and rents have been rising in every single EU member state. In Greece, rents increased by 37% between 2018 and 2022.
Figure 1 below shows the demand and supply for rented housing in Athens, Greece. The monthly market-determined rent for properties in Athens is at €14 per square metre.
Using Figure 1, calculate the total monthly expenditure on rented housing in Athens.
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3
2 marks
Case Study
Extract A, paragraph 2
Cotton is a water-intensive crop. According to the WWF, it takes more than 20 litres of water to produce just one kilogramme of cotton. The demand for cotton in the fast fashion industry contributes to increased cotton production worldwide and is thus responsible for the negative impact on water resources.
Still, there are countries that heavily subsidise their cotton farmers so that they are able to meet the high global demand.
The United States has implemented subsidies and support programmes for cotton farmers. Under the Cotton Transition Assistance Programme (CTAP), the U.S. government pays $0.03 per kg of cotton, while 8.3 billion kgs of cotton were produced in 2021 in the U.S.
Using the information above, calculate the total cost of the subsidy to the U.S. government in 2021.
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4
1 mark
Case Study
Demand and supply for tickets:
Using Figure 1, identify the per-unit subsidy for tickets.
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5
2 marks
Case Study
Demand and supply for tickets:
Using Figure 1, calculate the total cost of this travel subsidy to the Austrian government.
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6
2 marks
Case Study
Extract B, paragraph 3
To address mounting environmental issues, the Austrian government is even considering using consumer nudges to increase the use of cleaner and more sustainable forms of transport by Austrian citizens.
Define the term nudge.
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7
3 marks
Case Study
Text C, Paragraph 1
To address concerns over market volatility, the South African government imposed a price ceiling on maize and a price floor on wheat. The goal was to protect consumers from rising food costs and ensure fair prices for farmers.
Describe the difference between a price ceiling and a price floor as indicated (Text C, paragraph 1).
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8
2 marks
Case Study
Text D, Paragraph 3
The Nigerian government collected significant government revenue from taxes on oil exports in 2022. The revenue was allocated to large-scale infrastructure projects.
State two ways the Nigerian government uses its government revenue from oil exports (Text D, paragraph 3).
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9
2 marks
Case Study
Extract C, paragraph 1
Over the recent years, housing crises have become increasingly prevalent across Europe. House prices and rents have been rising in every single EU member state. In Greece, rents increased by 37% between 2018 and 2022.
Figure 1 below shows the demand and supply for rented housing in Athens, Greece. The monthly market-determined rent for properties in Athens is at €14 per square metre.
To deal with the surging housing costs and to ensure affordability of housing, a most basic good, authorities in Greece are considering implementing a rent control. The Athens municipality is looking into setting the monthly cap on rent at €10 per square metre.
Using Figure 1, calculate the resulting shortage.
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10
2 marks
Case Study
Extract C, paragraph 1
Figure 1 below shows the demand and supply for rented housing in Athens, Greece. The monthly market-determined rent for properties in Athens is at €14 per square metre.
Using Figure 1, calculate the change in producer surplus following the imposition of the rent control.
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1
4 marks
Case Study
Text A, Paragraph 2
Over the recent years, housing crises have become increasingly prevalent across Europe. House prices and rents have been rising in every single EU member state. In Greece, rents increased by 37% between 2018 and 2022.
In Athens, Greece, the monthly market-determined rent for properties in Athens is €14 per square metre.
To deal with the surging housing costs and to ensure affordability of housing, a most basic good, authorities in Greece are considering implementing a rent control. The Athens municipality is looking into setting the monthly cap on rent at €10 per square metre.
Explain two possible consequences of the rent control in Athens.
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2
4 marks
Case Study
Text A, Paragraph 2
In an effort to generate revenue for public services, Ireland's government has introduced a new tax on sugary drinks. This tax, set at a fixed amount per litre, aims to increase government funds while potentially impacting consumption patterns. Some businesses have expressed concern that the higher prices could reduce sales, while public health officials suggest that the tax could provide both economic and social benefits.
Using a demand and supply diagram, explain how a specific tax on sugary drinks could affect the sugary drinks market in Ireland.
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1
15 marks
Using real-world examples, evaluate the effectiveness of price ceilings in the market for rented housing.
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2
10 marks
Explain how an indirect tax will not reduce the quantity demanded in the same way for different products.
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3
10 marks
Explain how subsidies can be used to increase the consumption of merit goods.
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4
10 marks
Explain the distinction between a specific tax and an ad valorem tax.
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