CALCUTTA

INTERNATIONAL SCHOOL
Summative Exam - 1
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Subject : Economics HL & SL Paper : 1
Grade : IB 2
Date of Test : 16.09.2020

Full Marks : 50
Time : 1hr 55 min - Typing
1hr 30 min - Writing
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FOR HL STUDENTS ONLY:

SECTION :A : Answer one question from this section

Microeconomics

1. (a) Explain why firms in perfect competition can make economic

profit in the short run only. [10]

(b) Compare and contrast the market structures of monopoly and

perfect competition [15]

2. (a) Explain the possible negative externalities that might arise from
the increased use of cars. [10]

(b) Discuss economic policy options that a government could use to

reduce the negative externalities that might arise from the increased use
of cars. [15]

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SECTION B : Answer one question from this section

Macroeconomics

3(a) Explain what might happen to the level of inflation if a government

decides to move from a budget surplus to a budget deficit. [10]

(b) To what extent is an increase in interest rates the most effective cure
for inflation? [15]

4(a) Describe the phases of the business cycle. [10]

(b) “An increase in aggregate demand in an economy is always

desirable.” Discuss this statement. [15]

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FOR SL STUDENTS ONLY:

SECTION :A : Answer one question from this section

Microeconomics

1 (a) Explain the possible negative externalities that might arise from the
increased use of cars. [10]

(b) Discuss economic policy options that a government could use to

reduce the negative externalities that might arise from the increased use
of cars. [15]

2 (a) Suggest reasons why the price elasticity of demand for cigarettes
might have a different value from the price elasticity of demand for
foreign holidays. [10]
(b) Examine the usefulness of the knowledge of price elasticity of
demand to firms and governments. [15]

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SECTION :B : Answer one question from this section

Microeconomics

3. (a) Distinguish between structural unemployment and cyclical

unemployment. [10]

(b) Discuss policies that a government might use to reduce the levels of
structural unemployment and cyclical unemployment. [15]

4. (a) Describe the phases of the business cycle. [10]

(b) “An increase in aggregate demand in an economy is always

desirable.” Discuss this statement. [15]

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