DP Economics
Question 22N.1.HL.TZ0.1a
| Date | November 2022 | Marks available | [Maximum mark: 10] | Reference code | 22N.1.HL.TZ0.1a |
| Level | HL | Paper | 1 | Time zone | TZ0 |
| Command term | Explain | Question number | a | Adapted from | N/A |
a.
[Maximum mark: 10]
22N.1.HL.TZ0.1a
(a)
Explain why the existence of positive externalities of consumption would lead to allocative inefficiency and thus a welfare loss.
[10]
Markscheme
Marks should be allocated according to the paper 1 markbands for May 2022 forward, part A.
Answers may include:
- Terminology: Positive externalities, consumption externalities, welfare loss, allocative inefficiency.
- Diagrams: A diagram to show positive externalities in consumption and the welfare loss associated with the free market level of output.
- Theory: An explanation that because there are positive externalities of consumption, a welfare loss exists, where the marginal social benefit exceeds the marginal social cost at levels of output up to the point where marginal social benefits are equal to marginal social costs. The socially optimum level of output would be greater than the level of output provided by a free market.
Examiners report
This was a popular question and there were many good responses to part (a) in particular. As already indicated, there was an effective use of appropriate theory to address the question. Candidates were usually able to provide a diagram showing positive externalities of consumption. In some cases, candidates did not correctly indicate the welfare loss whilst others did not address the allocative efficiency aspect of the question.
