Economics HL paper 3-2005Answers

Economics HL paper 3-2005Answers - c IB DIPLOMA PROGRAMME...

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c IB DIPLOMA PROGRAMME PROGRAMME DU DIPLÔME DU BI PROGRAMA DEL DIPLOMA DEL BI M05/3/ECONO/HP3/ENG/TZ0/XX/M+ MARKSCHEME May 2005 ECONOMICS Higher Level Paper 3 18 pages
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- 2 - M05/3/ECONO/HP3/ENG/TZ0/XX/M+ This markscheme is confidential and for the exclusive use of examiners in this examination session. It is the property of the International Baccalaureate and must not be reproduced or distributed to any other person without the authorization of IBCA.
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- 3 - M05/3/ECONO/HP3/ENG/TZ0/XX/M+ Paper Specific Markscheme In addition to the assessment criteria use the paper-specific markscheme below. Award up to the maximum marks as indicated. 1. (a) Define the following terms indicated in bold in the text: (i) collusive oligopoly (paragraph n ) level 0 Wrong definition 1 Vague definition The idea that firms in an oligopoly market structure join together to act like a monopoly 2 Precise definition An explanation that collusive oligopoly is where a few firms act together to avoid competition by resorting to agreements to fix prices or output. [2 marks] 0 1 2 (ii) minimum prices (paragraph r ) . level 0 Wrong definition 1 Vague definition The idea that it is a minimum price/floor below which the price cannot fall. 2 Precise definition An explanation that it is the lower limit/floor below which the price charged to consumer may not fall. A minimum price is usually set above the equilibrium. A correct diagram with a brief explanation should certainly gain full marks. [2 marks] 0 1 2
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- 4 - M05/3/ECONO/HP3/ENG/TZ0/XX/M+ (b) Using an appropriate diagram, explain why prices in a collusive oligopoly are not likely to fall. There are two possible approaches to this question. The candidates may either explain that a collusive oligopoly would be acting as a monopoly and would thus face a downward sloping demand curve or they may apply the kinked demand curve theory. First approach level 0 Inappropriate answer 1 Identification of appropriate theory To draw an appropriate monopoly demand curve illustrating that the firm will produce where MR=MC or an explanation that the collusive agreement may lead to the formation of a profit maximizing monopoly structure and so the price will be stable at the level where MR=MC. 2 Correct application of appropriate theory To draw an appropriate monopoly demand curve illustrating that the firm will produce where MR=MC and an explanation that the collusive agreement may lead to the formation of a profit maximizing monopoly structure and so the price will be stable at the level where MR=MC. OR level 0 Inappropriate answer 1 Identification of appropriate theory To draw an appropriate kinked demand curve illustrating inelastic pricing below the kink or an explanation of why inelastic demand below the kink means that a fall in price would result in a fall in total revenue so that prices are relatively stable at the kink.
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Economics HL paper 3-2005Answers - c IB DIPLOMA PROGRAMME...

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