Junio Mock P1 MS [40 marks]
1.
[Maximum mark: 10]
(a)
Explain two forms of government intervention in markets.
[10]
Markscheme
Marks should be allocated according to the paper 1 markbands for May 2022 forward, part A.
Answers may include:
Terminology: government intervention, markets.
Theory: explanation of any two of the following forms of government
intervention: price ceilings (maximum prices), price floors (minimum
prices), indirect taxes, subsidies, direct provision of services, command
and control regulation and/or legislation. An import tariff intervention
and related diagram is equally rewarded.
Diagram: showing how governments intervene in markets (price
ceilings, price floors, indirect taxes and/or subsidies).
A maximum of [6] should be awarded if only one form of government intervention is explained.
2.
[Maximum mark: 10]
(a)
Explain why, in the case of healthcare and education, positive
externalities might cause market failure.
Markscheme
Refer to Paper 1 markbands for May 2022 forward, available under the "My tests" tab > supplemental
materials.
Answers may include:
Terminology: positive externalities, market failure.
[10]
Explanation: of healthcare and education as merit goods which
generate external benefits, as well as private benefits, and whose
consumption is therefore likely to be less than the socially optimal
level if left to the free market to provide; explanation of positive
externalities in the case of healthcare, eg control the spread of
contagious diseases and healthy workers being more productive; and
an explanation of the positive externalities in the case of education, eg
the positive relationship between education, productivity,
employment, innovation and economic growth.
Diagram: positive externalities of consumption diagram showing MSB
above MPB, MSB not equalling MSC and welfare loss.
A maximum of [6] should be awarded if only one of healthcare or education is explained and developed.
Assessment Criteria
Part (a) 10 marks
3.
[Maximum mark: 10]
(a)
Explain two possible causes of deflation.
[10]
Markscheme
Answers may include:
Definition: deflation.
Explanation: any determinant of AD that could shift it to the left, eg
falling consumer or business confidence, falling consumption, falling
investment, falling government spending, or any determinant that
shifts AS to the right, eg falling costs of raw materials or labour,
increased productivity, rising exchange rate.
Diagram: AD/AS diagram to show falling AD or increasing AS in such a
way that the average price level falls.
4.
[Maximum mark: 10]
(a)
Explain two goals of fiscal policy.
[10]
Markscheme
Marks should be allocated according to the paper 1 markbands for May 2022 forward, part A.
Answers may include:
Terminology: fiscal policy.
Theory: explanation of any two of the following goals: low and stable
inflation, low unemployment, increase short run economic growth,
promote a stable economic environment for long-term growth, reduce
business cycle fluctuations, equitable distribution of income and/or
external balance.
Diagram: Appropriate diagram(s) to show attainment of the two goals
chosen.
A maximum of [6] should be awarded if only one goal of fiscal policy is explained.
Candidates who explain and diagram the supply-side effects of fiscal policy should also be fully rewarded.
The goals of fiscal policy can be explained either through why it is used (e.g. stable inflation) or how it is
used (e.g. cutting tax). Both approaches should be equally rewarded.
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