2.9 Market failure: public goods questions for IB Economics

44 questions on Market failure: public goods, written by Augment in the style of IB exam papers. Six of them are below in full, to answer on paper.

  • IB Economics
  • Part of 2 Microeconomics
  • SL and HL

Questions by paper and level

SL and HL questions are for students at either level. HL only questions cover what only HL students study.

PaperSL and HLHL onlyAll
Paper 113215
Paper 226228
Paper 3HL only011
Every paper39544

Counted on

Questions to try

Written by Augment in the style of IB exams, not past papers. Answer them on paper, then check each one against its markscheme with a free account.

Question 1 · ECON-00021Paper 1 · 25 marks

An economy's use of its resources can be represented using a production possibilities curve (PPC).

  1. (a)

    Using a PPC, explain the difference between points on the curve, points inside the curve and points outside the curve.

    10 marks

  2. (b)

    Using real-world examples, evaluate the view that public goods should always be provided directly by the government.

    15 marks

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Question 2 · ECON-00041Paper 2 · 13 marks

Read the extract and answer the questions that follow.

Text A — Clinics or aircraft? Mirelland's budget dilemma

[1] Mirelland is an upper-middle-income economy in South America. Its government has set aside MRL 480 million (Mirelland lira) for new capital spending in 2026, to be divided between rural health clinics and military aircraft. Scarcity of public funds means that it cannot satisfy both the health ministry and the defence ministry in full.

[2] Each new rural clinic, fully equipped, costs MRL 12 million. Each military aircraft costs MRL 96 million. The defence ministry has requested three aircraft.

[3] Health campaigners point out that infant mortality in rural districts is twice the national average, while the defence ministry argues that national security is a public good that only the government can provide.

  1. (a)

    Define the term scarcity indicated in bold in the text (Text A, paragraph 1).

    2 marks

  2. (b)(i)

    Using information from Text A, paragraph 2, calculate the opportunity cost, in rural clinics, of buying the three aircraft requested by the defence ministry.

    2 marks

  3. (b)(ii)

    Using information from Text A, determine the maximum number of rural clinics that could be built if no aircraft were bought.

    1 mark

  4. (c)

    Using a production possibilities curve (PPC) diagram, explain the choice faced by Mirelland's government (Text A, paragraphs 1 and 2).

    4 marks

  5. (d)

    Explain two reasons why national security may be provided by the government rather than by the market (Text A, paragraph 3).

    4 marks

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Question 3 · ECON-00352Paper 3 · HL only · 11 marks

Voluntary donations to Lanthor's national parks

Entry to Lanthor's national parks is free, but visitors must book a parking space online. The parks agency relies partly on voluntary donations to maintain paths and protect wildlife. In 2023 the online booking form included an empty box in which visitors could enter a donation. In 2024 the box was filled in automatically with a donation of LTH 5, which visitors could delete or change before paying (LTH = Lanthorian thaler). The number of online bookings was 120 000 a month in both years.

Table 1: Online donations to Lanthor's national parks

2023

2024

Visitors who made a donation (% of bookings)

12

63

Average donation per donating visitor (LTH)

4.00

5.00

  1. (a)(i)

    Using Table 1, calculate the total value of donations per month in 2023.

    1 mark

  2. (a)(ii)

    Using Table 1, calculate the total value of donations per month in 2024.

    1 mark

  3. (a)(iii)

    Using your answers to parts (a)(i) and (a)(ii), calculate the percentage change in the total value of monthly donations between 2023 and 2024.

    2 marks

  4. (a)(iv)

    Identify the form of choice architecture used on the booking form in 2024.

    1 mark

  5. (a)(v)

    Outline what is meant by the free rider problem in the context of Lanthor's national parks.

    2 marks

  6. (a)(vi)

    Explain two reasons why some visitors made a donation even when the donation box was empty in 2023.

    4 marks

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Question 4 · ECON-00264Paper 1 · 25 marks

When goods are scarce, some method must be used to decide who obtains them.

  1. (a)

    Explain how the rationing function of the price mechanism allocates a good when its supply falls sharply.

    10 marks

  2. (b)

    Using real-world examples, discuss the view that health care should be allocated by the government rather than by the price mechanism.

    15 marks

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Question 5 · ECON-00044Paper 2 · 12 marks

Read the extract and answer the questions that follow.

Text A — The state and the market in Lunavia

[1] Lunavia is a high-income economy in northern Europe, often described as a mixed economy. Private firms produce most manufactured goods, food and retail services, and prices in these markets are set by demand and supply.

[2] The government owns the national railway and the electricity grid, provides free healthcare and schooling, and pays for street lighting and national defence. It also subsidizes rail fares, arguing that rail travel reduces road congestion and air pollution.

[3] In 2025, Lunavia's GDP was LNV 640 billion. Goods and services produced by the public sector were valued at LNV 172.8 billion.

  1. (a)

    Define the term mixed economy indicated in bold in the text (Text A, paragraph 1).

    2 marks

  2. (b)

    Using information from Text A, paragraph 3, calculate the percentage of Lunavia's GDP produced by the private sector in 2025.

    2 marks

  3. (c)

    Explain two reasons why the government of Lunavia, rather than private firms, pays for street lighting and national defence (Text A, paragraph 2).

    4 marks

  4. (d)

    Using an externalities diagram, explain why the government of Lunavia subsidizes rail fares (Text A, paragraph 2).

    4 marks

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Question 6 · ECON-00266Paper 1 · 25 marks

This question is about allocative efficiency in competitive markets.

  1. (a)

    Using a diagram, explain why producing either more or less than the equilibrium quantity in a competitive market would be allocatively inefficient.

    10 marks

  2. (b)

    Using real-world examples, discuss the view that free markets always achieve an allocatively efficient outcome.

    15 marks

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The notes on 2.9 Market failure: public goods

More questions in Microeconomics

  1. 2.1Demand
  2. 2.2Supply
  3. 2.3Competitive market equilibrium
  4. 2.4Critique of the maximising behaviour of consumers and producersHL only
  5. 2.5Elasticity of demand
  6. 2.6Elasticity of supply
  7. 2.7Role of government in microeconomics
  8. 2.8Market failure: externalities and common pool resources
  9. 2.9Market failure: public goodsThis page
  10. 2.10Market failure: asymmetric informationHL only
  11. 2.11Market failure: market powerHL only
  12. 2.12The market’s inability to achieve equityHL only

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