(5.) Economics HL. Paper 2, Techniques.

2.

Consider this question: "Explain what is meant by a production possibility curve and use a production possibility curve diagram to explain the concepts of scarcity, choice and opportunity cost" If you draw a perfect production possibility curve and explain it well, but do not explain the concepts of scarcity, choice and opportunity cost, how many points do you get?

2/10
3/10
4/10
5/10

Correct Answer

A. 3/10

Explanation

Let's just say, always try and answer the full question.

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3.

Consider the same question: "Explain what is meant by a production possibility curve and use a production possibility curve diagram to explain the concepts of scarcity, choice and opportunity cost" When illustrating "choice", which point on the diagram should be used?

A point outside the curve
A point inside the curve
A point along the curve
A point outside the diagram

Correct Answer

A. A point along the curve

Explanation

If you choose a point inside the curve you are not only illustrating that there is a choice of producing more of the manufacturing good and less of the agricultural good (or vice versa), but also the potential of producing more of both goods simultaneously. That would be to complicate the illustration, thus choose a point along the curve

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4.

Consider the same question: "Explain what is meant by a production possibility curve and use a production possibility curve diagram to explain the concepts of scarcity, choice and opportunity cost" Does making a choice to move from a point inside the PPF curve to the actual curve involve opportunity costs?

Yes
No
Yo

Correct Answer

A. No

Explanation

Moving from a point inside the production possibility curve (PPF) to the actual curve does not involve opportunity costs. The PPF represents the maximum combination of goods or services that can be produced given the available resources and technology. Points inside the curve indicate that resources are not fully utilized, meaning there is potential for more production without sacrificing other goods. Therefore, moving from a point inside the curve to the actual curve does not require giving up any alternative goods, and thus, there is no opportunity cost involved.

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1

5.

Consider this question: "A concert is held in a stadium with limited seating capacity. The organizers set the ticket prices at a level below the equilibrium price. Using a diagram, explain the possible consequences of their decision." What would earn full marks?

Accurate diagram and explanation of equilibrium price
Accurate diagram and explanation of equilibrium price + detailed discussion of one consequence
Accurate diagram and explanation of equilibrium price + detailed discussion of two consequences
Accurate diagram and explanation of equilibrium price + less detailed discussion of two consequences

Correct Answer

A. Accurate diagram and explanation of equilibrium price + detailed discussion of two consequences

Explanation

To earn full marks, the answer should include an accurate diagram and explanation of the equilibrium price. Additionally, it should provide a detailed discussion of two consequences that may result from the organizers setting ticket prices below the equilibrium price. This demonstrates a thorough understanding of the topic and the ability to analyze the situation from multiple perspectives.

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6.

Consider this question: "A government decides to raise personal income tax rates. Using diagrams, explain one possible demand-side consequence and one possible supply-side consequence of this decision" For this question, the definitions alone account for 3/10 marks. Which definitions?

Income tax, demand-side consequence and supply-side consequence
Income tax, aggregate demand and aggregate supply
Income tax

Correct Answer

A. Income tax, aggregate demand and aggregate supply

Explanation

Remember that "demand-side consequence" and "supply-side consequence" is just a way of saying "change in aggregate demand" and "change in aggregate supply".

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7.

Consider this question: "Explain why a depreciation of a country's exchange rate may not always lead to an improvement in its current account of the balance of payments" There are many keywords in this question: depreciation, exchange rate, current account (of balance of payments). How many points have you secured if you define them all to start with?

2 points
3 points
4 points

Correct Answer

A. 3 points

Explanation

A depreciation of a country's exchange rate may not always lead to an improvement in its current account of the balance of payments because it can have various effects on the economy. While a depreciation can make a country's exports cheaper and more competitive, it can also make imports more expensive, leading to a higher import bill. Additionally, a depreciation can also increase the cost of servicing foreign debt, which can negatively impact the current account. Therefore, the relationship between exchange rate depreciation and the current account is complex and depends on various factors such as the elasticity of demand for exports and imports, the composition of a country's exports and imports, and the level of foreign debt.

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8.

Consider the same question: "Explain why a depreciation of a country's exchange rate may not always lead to an improvement in its current account of the balance of payments" This question suggests that there is a condition for the improvement of the current account to take place after the depreciation. The condition is known as the "Marshall-[...] condition"

Correct Answer
Lerner

9.

Consider the same question: "Explain why a depreciation of a country's exchange rate may not always lead to an improvement in its current account of the balance of payments" Given that the Marshall-Lerner condition is satisfied, the improvement will still not be immediate due to the fact that it takes time to change. Write down the letter that signifies this time-effect.

Correct Answer
J

Explanation
(J-curve effect)

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10.

Assume you forget to mention both the J-curve effect and the Marshall-Lerner condition and fluff about other stuff, how many marks can you earn?

6 marks
7 marks
8 marks

Correct Answer

A. 6 marks

Explanation

If you forget to mention both the J-curve effect and the Marshall-Lerner condition and fluff about other stuff, you can earn 6 marks. This implies that even though you may have provided some incorrect or irrelevant information, you can still receive partial credit for the remaining aspects of the question.

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(5.) Economics Hl. Paper 2, Techniques.

You have 60 minutes to write your paper 2. How do you use your time?

Quiz Preview

Consider the same question: "Explain what is meant by a production possibility curve and use a production possibility curve diagram to explain the concepts of scarcity, choice and opportunity cost" When illustrating "choice", which point on the diagram should be used?

Consider this question: "A concert is held in a stadium with limited seating capacity. The organizers set the ticket prices at a level below the equilibrium price. Using a diagram, explain the possible consequences of their decision." What would earn full marks?

Consider this question: "A government decides to raise personal income tax rates. Using diagrams, explain one possible demand-side consequence and one possible supply-side consequence of this decision" For this question, the definitions alone account for 3/10 marks. Which definitions?

Assume you forget to mention both the J-curve effect and the Marshall-Lerner condition and fluff about other stuff, how many marks can you earn?