EcoHL P2 M03 M - INTERNATIONAL BACCALAURAT BACHILLERATO c...

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MARKSCHEME May 2003 ECONOMICS Higher Level Paper 2 4 pages M03/330/H(2)M+ INTERNATIONAL BACCALAUREATE BACCALAURÉAT INTERNATIONAL BACHILLERATO INTERNACIONAL c
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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. Emphasis in this answer needs to be on an explanation of the economic problem of unlimited wants, limited resources, scarcity, choice and opportunity cost, and should relate to a two good model of the economy, using a PPC. Allow a maximum of [5 marks] if there is no use of a PPC. To obtain full marks, the PPC must be used to explain the economic problem rather than existing as a “bolt-on”. N.B . Answers which emphasise efficiency and shifts in the PPF are not central to this answer . 2. Explain how the use of expenditure / indirect taxation might be an appropriate response to the problem of negative externalities. Candidates might usefully begin by explaining what is meant by negative externalities; and that indirect taxation might be an appropriate response to market failure caused by the generation of negative externalities, where the problem is one of overproduction/consumption at the free market price. Good candidates will use the standard MSC/MSB diagram, or
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