TNS Beaconhouse (DHA)

Mock Examination
DP2
Mar 2021
Economics

Higher Level
Paper 1

2nd March 2021

1 hour 30 minutes

Candidate Name
Teacher Hamza Zaidi

Instructions to candidates
 Do not open this examination paper until instructed to do so.
 You are not permitted access to any calculator for this paper.
 Section A: answer one question.
 Section B: answer one question.
 Use fully labelled diagrams and references to examples where appropriate.
 The maximum mark for this examination paper is [50 marks].
 Section A

Answer one question from this section.

Microeconomics

1.
a) Using an appropriate externalities diagram, explain why a government might decide to
impose a price floor on a demerit good.
[10 marks]

b) Evaluate the view that the most effective way in which the government can discourage the
consumption of demerit goods is through government regulations.
[15 marks]

2.
a) Explain why prices tend to be relatively rigid in oligopolistic markets.
[10 marks]

b) Discuss whether an oligopolistic firm should collude rather than compete.

[15 marks]
 Section B

Answer one question from this section.

Macroeconomics

3.
a) Explain how aggregate demand in an economy might be affected by a rise in the exchange rate
and a decrease in the income of major trading partners.
[10 marks]

b) To what extent is expansionary fiscal policy the best policy to achieve a reduction in the rate
of unemployment?
[15 marks]

4.
a) Explain how government spending might promote greater equity in an economy.
[10 marks]

b) Evaluate the view that government policies to promote greater equity will always have a
negative effect on efficiency.
[15 marks]