Economics · 2010 · May · Paper 2 · SL · Question paper

M10/3/ECONO/SP2/ENG/TZ0/XX ECONOMICS STANDARD lE vEl PAPER 2 Thursday 20 May 2010 (morning) INSTRUCTIONS TO CaNdIda TES  d o not open this examination paper until instructed to do so.  a nswer three questions.  Use fully labelled diagrams and references to the text / data where appropriate. 2 hours 2210-5113 11 pages © International Baccalaureate Organization 2010 22105113 M10/3/ECONO/SP2/ENG/TZ0/XX 2210-5113 – 2 – 1. Study the extract below and answer the questions that follow. Texas oil tycoon aims to harness power of wind  One of the biggest problems facing the United States (USA) in the next 50 years is how to satisfy its energy demands. This will require some tough choices involving opportunity cost. Currently the USA imports 70 % of its oil needs. Should US oil drilling be increased or is the answer to expand the use of wind energy?  T Boone Pickens, an American businessman is famous for thinking big. Over the next four years he intends to erect 2700 wind turbines across Texas at a cost of US$54 billion. His scheme is five times bigger than the world’s largest wind farm, and when finished will generate enough electricity for one million homes. His idea is to use wind-generated energy as a substitute for natural gas used to produce electricity. The natural gas will then be used to fuel cars in order to reduce the demand for oil. Pickens aims to make a gross profit of 25 %, aided by a government subsidy for alternative energy creation.  Texas, with its wide open spaces, low population and steady winds, should be perfect for wind-generated energy. Pickens has persuaded neighbouring farmers to join his scheme in return for annual payments of between US$10 000 – US$20 000 for each turbine on their land, which will not interfere with farming. Pickens refuses to have any of the turbines on his own property because “they are ugly’’.  The nearby town of Sweetwater is in the middle of a huge “construction boom” that is increasing investment demand. Two new companies have just opened, one to service the blades of the 2700 turbines, and another renting out cranes to build the new turbines. These new economic opportunities have increased the