中文（繁體）
中文（简体）
English
IB Economics: Market Failure and Intervention (Challenge, 10 Questions)
IB Economics: Market Failure and Intervention (Challenge, 10 Questions)
The challenge paper asks students to build the cost curves themselves, then applies the results to carbon taxes, permits, buffer purchases and the tax incidence formula, all with answers.
Quick answer Answers in order: Q = 40 units, P = 60 dollars, Q = 32 units, P = 68 dollars, 16 dollars, 16 dollars, 20,000 dollars, 900 dollars, 3,600 dollars, 20 units, 1,600 dollars; 200 dollars, 75%; 6 dollars.
01 Paper details (check answers afterwards)
| Item | Detail |
|---|---|
| Questions | 10 questions |
| Suggested time | about 40 minutes |
| Difficulty mix | Challenge 10 |
| Chapter | Chapter: IB Economics: Market Failure and Government Intervention |
| Level | IB DP |
02 Questions (10 items)
- ChallengeDemand is P = 100 – Q, marginal private cost is MPC = Q + 20 and marginal external cost is MEC = 0.5Q. Find the free-market quantity and price.
- ChallengeMarginal social cost is MSC = 1.5Q + 20. Find the socially optimum quantity and price.
- ChallengeFind the Pigouvian tax per unit needed to reach the social optimum.
- ChallengeFind the deadweight loss from the free-market quantity.
- ChallengeA factory makes 1000 units, each emitting 0.5 tonnes of carbon dioxide. A carbon tax of 40 dollars per tonne applies. Find the total tax.
- ChallengeA permit cap of 600 units is split equally among 4 firms at 150 units each. Firm A can cut emissions at 10 dollars a unit and permits trade at 25 dollars. If A cuts 60 units and sells the freed permits, find its gain.
- ChallengeA price floor of 30 dollars gives quantity supplied of 500 and quantity demanded of 380. If the government buys the whole surplus, find the cost.
- ChallengeEducation has MPB = 100 – Q, a marginal external benefit of 20 dollars and a marginal social cost of 40 dollars. Find the gap between the market and optimum quantity.
- ChallengeA subsidy of 20 dollars per unit is used to reach the optimum quantity. Find the total subsidy cost and the original deadweight loss.
- ChallengeDemand has a price elasticity of 0.4 and supply of 1.2. A per-unit tax of 8 dollars is imposed. Find the share and amount borne by consumers.
03 Answers and one-line notes
| # | Answer | One-line note |
|---|---|---|
| 1 | Q = 40 units, P = 60 dollars | Only private cost is counted: 100 – Q = Q + 20, so 2Q = 80, Q = 40 and P = 60. |
| 2 | Q = 32 units, P = 68 dollars | 100 – Q = 1.5Q + 20, so 2.5Q = 80, Q = 32 and P = 68. |
| 3 | 16 dollars | The tax equals marginal external cost at the optimum: MEC = 0.5 x 32 = 16 dollars. |
| 4 | 16 dollars | Deadweight loss = 0.5 x (40 – 32) x (20 – 16) = 0.5 x 8 x 4 = 16 dollars. |
| 5 | 20,000 dollars | Emissions are 1000 x 0.5 = 500 tonnes, so the tax is 500 x 40 = 20,000 dollars. |
| 6 | 900 dollars | Selling 60 permits brings 60 x 25 = 1,500 dollars and abatement costs 60 x 10 = 600 dollars, so the gain is 900 dollars. |
| 7 | 3,600 dollars | The surplus is 500 – 380 = 120 units, so the cost is 120 x 30 = 3,600 dollars. |
| 8 | 20 units | The market gives 100 – Q = 40 so Q = 60, while the optimum needs 120 – Q = 40 so Q = 80, a gap of 20 units. |
| 9 | 1,600 dollars; 200 dollars | Subsidy cost is 20 x 80 = 1,600 dollars and deadweight loss is 0.5 x 20 x 20 = 200 dollars. |
| 10 | 75%; 6 dollars | The consumer share is 1.2 / (0.4 + 1.2) = 0.75, that is 75%, and 8 x 0.75 = 6 dollars. |
04 What to do after marking
- After marking, redo only the wrong items and write down which step went wrong (formula, unit, or misread number).
- Repeat the same item two days later; move to the next paper only when both attempts are correct.
- Parents only need the answer and note columns; there is no need to explain every item.
Find a tutor freeTutor Registration →
Questions and answers are written originally by the TutorZone team and are not taken from any school, publisher or examination authority paper. Every value is checked by computer.