IB Econ HL Paper 2 Short Topics Test Prep p. 1
P2 MAY 95
1. In many developed countries the price of houses has risen steadily over recent years while more and more
people have been buying houses. Use supply and demand analysis to explain why this has happened.
Concept Bank:
2. Explain the difference between ‘diseconomies of scale’ in the long run and ‘diminishing returns’ in the short
run. Concept Bank:
IB Econ HL Paper 2 Short Topics Test Prep p. 2
3.
Define the word ‘cartel’ and with an example explain what cartels try to achieve. Concept Bank:
4.
Using a production possibility curve explain the difference between a country’s growth rate and its potential
growth rate. Concept Bank:
IB Econ HL Paper 2 Short Topics Test Prep p. 3
5.
What would be the main externalities of a decision to build a new international airport near your school or
home? Concept Bank:
6.
Why might knowledge of the shape of a country’s Phillips Curve be useful to government officials?
Concept Bank:
IB Econ HL Paper 2 Short Topics Test Prep p. 4
P2 MAY 96
1.
A government tries to deal with the problem of homelessness by putting rent controls on housing. Use a
supply and demand diagram to explain why other policies will also be necessary. Concept Bank:
2.
Explain why an oligopolistic firm might not wish to alter its prices. Concept Bank:
IB Econ HL Paper 2 Short Topics Test Prep p. 5
3.
Keynesians and Monetarists have different views of the likely shape of a country’s aggregate supply curve.
Using diagrams show how these shapes can affect macroeconomic policy. Concept Bank:
4.
What measurements would you need to take in order to calculate the value of a country’s multiplier?
Concept Bank:
IB Econ HL Paper 2 Short Topics Test Prep p. 6
5.
A firm is trying to sell in export markets. What factors can influence its competitiveness? Concept Bank:
6.
What determines whether the supply of a product is price elastic of price inelastic? Concept Bank:
IB Econ HL Paper 2 Short Topics Test Prep p. 7
P2 MAY97
1.
Why is the concept of “scarcity” important in rich countries as well as poor ones? Concept Bank:
2.
A business person believes that halving her prices will double her revenue. Explain why this might not
happen. Concept Bank:
IB Econ HL Paper 2 Short Topics Test Prep p. 8
3.
A perfectly competitive industry is turned into a monopoly. Predict the effect on price and output.
Concept Bank:
4.
Many people never travel to another country and never need to exchange currencies. Explain how their
everyday lives can still be affected by exchange rates. Concept Bank:
IB Econ HL Paper 2 Short Topics Test Prep p. 9
5.
Explain why a country coming out of recession might experience a balance of payments deficit Concept
Bank:
6.
What are the main problems involved in obtaining a measure of inflation? Concept Bank:
IB Econ HL Paper 2 Short Topics Test Prep p. 10
P2 MAY 98
1.
How might a firm be able to stay in business in the short run even if it is not covering all of its costs?
Concept Bank:
2.
State what Keynesian economists mean by the terms ‘equilibrium level of income’ and ‘full employment
level of income’ and explain why these two levels of income might not be equal to each other. Concept
Bank:
IB Econ HL Paper 2 Short Topics Test Prep p. 11
3.
Why are vegetables from Africa on sale in European shops while many Africans are undernourished?
Concept Bank:
4.
Discuss why higher interest rates might be good news for some people but bad news for others. Concept
Bank:
IB Econ HL Paper 2 Short Topics Test Prep p. 12
5.
What are the distinguishing features of a ‘pure public good’? Concept Bank:
6.
With the aid of a supply and demand diagram explain how changes in imports and exports con be expected
to affect a floating exchange rate. Concept Bank:
IB Econ HL Paper 2 Short Topics Test Prep p. 13
P2 MAY 99
1.
The choice between military products and the provision of health care illustrates the problem of
“opportunity costs”. Explain the nature of this problem using a production possibility frontier to help you.
Concept Bank:
2.
Using a suitable diagram predict what is likely to happen to efficiency when a competitive industry is
monopolized. Concept Bank:
IB Econ HL Paper 2 Short Topics Test Prep p. 14
3.
Why might an increase in government expenditure have a greater multiplier effect than a corresponding
reduction in direct taxes? Concept Bank:
4.
Explain why a ‘deterioration’ in the terms of trade could bring about an improvement in the balance of
payments on current account Concept Bank:
IB Econ HL Paper 2 Short Topics Test Prep p. 15
5.
Outline the possible advantage of a country specializing in manufactured goods instead of primary products.
Concept Bank:
6.
What is structural unemployment and what measures might governments take to combat it? Concept
Bank:
IB Econ HL Paper 2 Short Topics Test Prep p. 16
P2 N99
1.
Explain why countries with different economic systems face the same fundamental economic problem.
Concept Bank:
2.
Why might a firm be interested in knowing the various elasticities of demand for its product? Concept
Bank:
IB Econ HL Paper 2 Short Topics Test Prep p. 17
3.
A company builds a new production unit in a certain country. Explain how this investment is likely to have
a “multiplier’ effect, and discuss reasons why this effect might take time to work. Concept Bank:
4.
A Less Developed Country exports tea and imports most of its consumer durables. Explain why the terms
of trade are likely to move against this country and discuss the consequences. Concept Bank:
IB Econ HL Paper 2 Short Topics Test Prep p. 18
5.
Explain why primary school education for girls is considered by many economists to be a particularly
worthwhile investment by Less Developed Countries. Concept Bank:
6.
What do you understand by the term “suitable development”? Give an example of development which you
believe is not suitable and explain why. Concept Bank:
IB Econ HL Paper 2 Short Topics Test Prep p. 19
P2 M00
1.
What is meant by ‘market failure’? Explain why pollution may cause market failure. Concept Bank:
2.
Explain why the price elasticities of both demand and supply of primary commodities tend to be relatively
low in the short run. Concept Bank:
IB Econ HL Paper 2 Short Topics Test Prep p. 20
3.
In what ways might a company operating within an oligopolistic market structure attempt to increase its
share of the market? Concept Bank:
4.
Why might an increase in a country’s budget deficit be followed by an increase in its external deficit?
Concept Bank:
IB Econ HL Paper 2 Short Topics Test Prep p. 21
5.
For what reasons might a country’s exchange rate rise? Concept Bank:
6.
The government of a less developed country decides to reduce the extent of income and wealth inequality.
What methods could the government use to achieve its goal? Concept Bank:
IB Econ HL Paper 2 Short Topics Test Prep p. 22
P2 N00
1.
Why does the weekly price of a hotel room in a popular holiday resort vary through the year? Concept
Bank:
2.
What are the distinctions between decreasing returns to scale and diminishing marginal returns? Concept
Bank:
IB Econ HL Paper 2 Short Topics Test Prep p. 23
3.
What is ‘crowding out’ and why do some economists consider it important? Concept Bank:
4.
What factors determine the competitiveness of a country in international trade? Concept Bank:
IB Econ HL Paper 2 Short Topics Test Prep p. 24
5.
Distinguish between the forms of aid which a developing country might receive. Concept Bank:
6.
What is the natural rate of unemployment? Concept Bank:
IB Econ HL Paper 2 Short Topics Test Prep p. 25
P2 M01
1.
Briefly explain what is meant by ‘consumer sovereignty’. For what reasons might it only partly exist in real
world markets? Concept Bank:
2.
Distinguish between the law of diminishing returns and decreasing returns to scale. Concept Bank:
IB Econ HL Paper 2 Short Topics Test Prep p. 26
3.
What is demand pull inflation and what can governments do about it? Concept Bank:
4.
Use demand and supply analysis to explain the possible effects of currency speculation on a country’s
exchange rate. Concept Bank:
IB Econ HL Paper 2 Short Topics Test Prep p. 27
5.
As countries reach an advanced stage of development, the tertiary sector tends to expand relatively faster
than the primary and secondary sectors. Why is this the case? Concept Bank:
6.
Poor people in less developed countries often derive little benefit from economic growth. Why might this
be so? Concept Bank:
IB Econ HL Paper 2 Short Topics Test Prep p. 28
P2 N01
1.
Why is pollution an example of market failure? Use a diagram to illustrate your answer. Concept Bank:
2.
Using real world examples, illustrate the difference between producer sovereignty and consumer
sovereignty. Concept Bank:
IB Econ HL Paper 2 Short Topics Test Prep p. 29
3.
Define ‘crowding out’. What is its importance in macroeconomic policy making? Concept Bank:
4.
A government decides to raise interest rates. How might this affect the external account? Concept Bank:
IB Econ HL Paper 2 Short Topics Test Prep p. 30
5.
Explain why a deterioration in the terms of trade could bring about an improvement in the balance of
payments in current account. Concept Bank:
6.
What is human capital? Explain its importance in economic development Concept Bank:
P2 M02
1.
The price for tickets for a major tennis tournament is fixed by the organizing body. At the set price, many
more people wish to attend the tournament than there are seats available. Draw a diagram to illustrate this
situation and use your diagram to examine the likely consequences. Concept Bank:
2.
A bus company decides to reduce passenger fares. Explain the possible outcomes of this decision using
economic concepts. Concept Bank:
3.
Use an aggregate demand/aggregate supply diagram to analyze the likely effects of an increase in interest
rates. Concept Bank:
4.
Examine two reasons why a government might wish to control increases in its expenditure. Concept
Bank:
5.
Explain why the depreciation of a country’s exchange rate might not improve its balance of payments?
Concept Bank:
6.
In what ways might a more equal distribution of income contribute to economic development. Concept
Bank:
P2 N 02
1.
What is a positive externality? Give an example and illustrate your answer with a diagram. Concept Bank:
2.
Why do some oligopolistic firms engage in non-price rather than price competition? Concept Bank:
3.
Explain the effects of inflation on a country’s international competitiveness. Concept Bank:
4.
Use an aggregate demand/aggregate supply diagram to analyze the likely effects of an increase in income
tax. Concept Bank:
5.
What is a voluntary export restraint and who is likely to benefit from it? Concept Bank:
6.
Why might a less developed country find difficulty in maintaining stable export revenues? Concept Bank:
P2 M03
1.
‘Economics is primarily concerned with the allocation of scarce resources which have alternative uses’. Use
a production possibility curve to help you explain this statement. Concept Bank:
2.
Explain how indirect taxation (Pigovian taxes) may be an appropriate response to the problem of negative
externalities. Concept Bank:
IB Econ HL Paper 2 Short Topics Test Prep p. 31
3.
Explain why firms operating in a perfectly competitive market would be able to make only normal profits in
the long run. Concept Bank:
4.
Explain why might the goal of full employment conflict with the goal of economic growth? Concept
Bank:
5.
What impact is a substantial rise in the level of interest rates in a country likely to have on its balance of
payments? Concept Bank:
6.
Explain two reasons why international indebtedness is a problem for less developed countries. Concept
Bank:
P2 N03
1.
Why do the prices of agricultural goods tend to fluctuate more than those of manufactured goods?
Concept Bank:
2.
A government increases taxation on the sale of tobacco. Using a diagram explain how this might affect
consumers and producers of tobacco. Concept Bank:
3.
Using a diagram explain how allocative and productive efficiency will be achieved in long run equilibrium in
perfect competition. Concept Bank:
4.
Why might a country’s current account balance worsen as it approaches full employment? Concept Bank:
5.
Explain two benefits which might arise from international trade. Concept Bank:
6.
Explain two ways in which multinational corporations might hinder the development of less developed
countries. Concept Bank:
IB Econ HL Paper 2 Short Topics Test Prep p. 32
P2 M04
1.
‘As price falls, quantity supplied falls. As supply increases, price falls’. Use supply and demand analysis to
explain why these two statements do not contradict each other. Concept Bank:
2.
Why is the concept of income elasticity of demand likely to be important for a producer of an agricultural
product? Use supply and demand analysis in your answer. Concept Bank:
3.
A firm in perfect competition is producing at the profit maximizing output but making a loss. Using
diagrammatic analysis explain how this is possible. Concept Bank:
4.
Use an aggregate demand/aggregate supply diagram to explain how cost push inflation may occur and
outline two ways in which it might be controlled. Concept Bank:
5.
Explain how in theory balance of payments deficits and surpluses on current account are automatically
adjusted under a system of flexible exchange rates. Illustrate your answer using supply and demand analysis.
Concept Bank:
6.
Use a production possibility curve to explain the distinction between economic growth and economic
development Concept Bank: