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Question 22N.1.HL.TZ0.1b

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Date November 2022 Marks available [Maximum mark: 15] Reference code 22N.1.HL.TZ0.1b
Level HL Paper 1 Time zone TZ0
Command term Evaluate Question number b Adapted from N/A
b.
[Maximum mark: 15]
22N.1.HL.TZ0.1b
(b)

Using real-world examples, evaluate the policies a government might adopt to respond to a market situation in which significant asymmetric information exists.

[15]

Markscheme

Marks should be allocated according to the paper 1 markbands for May 2022 forward, part B.

Answers may include:

  • Terminology: Asymmetric information, adverse selection, moral hazard.
  • Diagram: Not needed for this question.
  • Theory: Candidates should consider government responses to markets in which asymmetric information is considered problematic such as legislation and regulation, the provision of information. Candidates might also consider private responses such as signalling and screening where a government decides not to intervene.
  • Synthesis (evaluate): An evaluation of the different policies available to the government when there is asymmetric information in the context of the examples offered by the candidate. Candidates might conclude that the best course of government action is to do nothing and allow private responses to the asymmetric information. Or, alternatively, that government action in certain situations may be imperative.
  • Example(s): A relevant real-world example(s) in which asymmetric information exists.
Examiners report

Many candidates struggled to adequately respond to the full demands of this question. The question seemed to be best tackled with a number of well-developed real-world examples. Candidates also needed to be fully aware of relevant terminology and concepts related to the subject matter. Candidate understanding was often superficial with, in some cases, minimal use of suitable terminology, such as adverse selection and moral hazard, and limited application of concepts.

Syllabus sections