Question 21N.1.HL.TZ0.1a
| Date | November 2021 | Marks available | [Maximum mark: 10] | Reference code | 21N.1.HL.TZ0.1a |
| Level | HL | Paper | 1 | Time zone | TZ0 |
| Command term | Explain | Question number | a | Adapted from | N/A |
Explain why merit goods tend to be under-provided in a free market.
[10]
Marks should be allocated according to the paper 1 markbands for May 2013 forward, part A.
Answers may include:
- definitions of market, merit goods
- diagram showing positive externalities in the consumption of a merit good
- an explanation that consumers do not take external benefits into account when deciding how much to demand, resulting in producers allocating insufficient resources to the production of merit goods in a free market
- examples of merit goods.
The better responses demonstrated clear understanding of merit goods, but some lower-achieving responses showed confusion of merit goods with public goods or with goods that have positive externalities of production. Some candidates correctly pointed out that merit goods are associated with positive externalities of consumption, but their answers could be improved by listing third-party benefits instead of only private benefits such as (in the case of education) higher starting salary or higher material standard of living.
The clarity of many candidates’ answers would be improved if they had fully labelled the diagram (e.g. using the much more informative Quantity of electricity and Price of electricity instead of the generic Q and P labels) and had used this labelling to clearly explain in their answers which market they were analysing with the help of the diagram and what exactly were the negative externalities in that market.
