EcoHL P2 N02 M

EcoHL P2 N02 M - INTERNATIONAL BACCALAURAT BACHILLERATO c...

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MARKSCHEME November 2002 ECONOMICS Higher Level Paper 2 5 pages N02/330/H(2)M+ INTERNATIONAL BACCALAUREATE BACCALAURÉAT INTERNATIONAL BACHILLERATO INTERNACIONAL c
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1. What is a positive externality? Give an example and illustrate your answer with a diagram. Candidates should produce an initial definition. This should include evidence that the candidate understands that social benefit exceeds private benefit, i.e. that a producer or consumer can benefit from the actions of others. A good example is vaccination. A correctly labelled diagram should follow, and while there are several variants to be found, this one would suffice. Marginal costs and benefits Social marginal benefit Private marginal cost Quantity 0 Private marginal benefit q 1 q 2 While the free market would produce 0q1, the socially ideal output would be 0q2. Thus the presence of positive externalities leads to under-consumption. If no diagram the mark should not exceed [5 marks] (depending on the quality of the explanation). An accurate / technical definition plus explained example could go to Band 5. 2. Why do some oligopolistic firms engage in non-price rather than price competition? Candidates should explain that non-price competition is a feature of oligopoly rather than other market structures, and should demonstrate an understanding of what oligopoly means (small number of large firms whose behaviour within the market is rendered interdependent by large market share). A diagram showing the kinked demand curve may be drawn in order to show that competition on price is unhelpful in either direction and the consequences of both price increases and decreases should be explained. As always, candidates who draw clear and
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This note was uploaded on 02/12/2010 for the course ECON 201 taught by Professor Smith during the Spring '10 term at Whittier.

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EcoHL P2 N02 M - INTERNATIONAL BACCALAURAT BACHILLERATO c...

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