Test 1 additional question Microeconomics

Fall 2017
Economics
United World College in Mostar
Question 1 - HL

1
(a) Define the following terms:
a. Price discrimination
b. Income elasticity of demand
(b) Use an appropriate diagram to explain why the new road system doesnt reflect the true cost
to society (paragraph 2)
(c) Using at least one appropriate diagram, explain why the price elasticity of demand (PED) is
different for the two main users of the road system.
(d) Using information from the text, and your knowledge of economics, discuss the arguments
for and against charging for the use of roads.

2
Question 2 SL

(a) Define the following terms:

a. Negative externalities
b. Resource allocation
(b) Using an appropriate diagram, explain how fatalities from malaria are likely to affect future
economic growth.
(c) Using a diagram that illustrates externalities, explain why a new plant based treatment would
be regarded as a merit good (paragraph 4).
(d) Discuss a decision by the governments to place large order for the new plant based
treatment as the only way to guarantee supply of the treatment (paragraph 4).