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AQA A Level Economics Paper 1 (7136/1) - 18th May 2023 [Exam Chat]

how do you lot structure your 4 markers?

i do
1. definitions if i can
2. data point/s
3. explain why it proves the point I'm trying to make
4. link back to question

Reply 81

memeister27

10

Original post by Half human

Does anyone know how exactly nationalisation leads to economies of scale? What types of economies of scale do nationalised companies benefit from???

I believe it's because privatisation leads to the possibility of competition which of course leads to lower output per firm. A natural monopoly will have the exact same level of economies of scale as a nationalised firm ceteris paribus.
Take for example privatisation of railways. That lead to multiple firms competing which lead to firms not maximising economies of scale. Nationalised firms hypothetically could benefit from all internal economies of scale, it really depends on the market. You also have to take into account franchising which can occur when a large firm is privatised.

Another way to look at it is through a contestability diagram. If you draw one out, the profit maximising position would be the privatised firm without any regulation, while AC = MR or P=MC would be where a nationalised firm operates, which clearly has a higher output and is lower down on the AC curve. This is all under the assumption that information is perfect for either firm and that a state run firm could operate with the same revenue and cost structures as a private firm (unlikely imo)

I'd say it would usually be output based internal economies of scale rather than anything technical because the assumption is state ran firms aren't particularly innovative. One which I would mention is risk bearing, as the government has large amounts of liquidity in reserve that could accommodate for the risk inherent in running any firm. A counterpoint would be the larger the firm, the greater the divorce of ownership, so therefore any (gov or free market run) firm with high output will suffer from managerial diseconomies of scale. Then again, divorce of ownership will likely have its greatest influence on small to medium sized firms, so for any firm particularly large, the principal agent problem won't have much influence on cost given a change in quantity; essentially it's all very subjective and the types of economies of scale and their impact depends massively on what specific firm/industry you're considering.

(edited 11 months ago)

Reply 82

Ranifex

2

Original post by helle318

i do
1. definitions if i can
2. data point/s
3. explain why it proves the point I'm trying to make
4. link back to question

thanks

Reply 83

HELPBISH

11

Original post by helle318

i do
1. definitions if i can
2. data point/s
3. explain why it proves the point I'm trying to make
4. link back to question

can you give a model answer if possible?

Reply 84

Svet0slav

2

what kind of diagram would you draw if a question on inequality came up?

Original post by 16bhatam

Yh i agree with this i think section A context 1 could be like negative externalities and context 2 like monopolistic competition or something. But then section B will likely have inequality and competition policy or something similiar.

Reply 85

zzhh11

8

Original post by Svet0slav

what kind of diagram would you draw if a question on inequality came up?

Lorenz curve maybe

Reply 86

Llawyer123

10

Original post by Svet0slav

what kind of diagram would you draw if a question on inequality came up?

Lol I always skip it if it's 1 context I'll do the other, I'm confused tho, like isn't inequality stuff kinda part of the labour markets bit? Cos you always get a prod market context then also a labour mkts one

Reply 87

Llawyer123

10

How would you guys answer this question?
Evaluate the view that mining activities should be left to market forces with minimum intervention by governments. (25) unit 1 June 2012 q4. I feel like we're gonna get a similar q to that tomorrow as a question regarding market forces vs gov intervention hasn't been asked in a while, fits in with the prediction econplus Dal made for market failure.

Reply 88

16bhatam

10

What do we need to know about income inequality because apparently its a hot topic? ik market failures and structures, competition policy and labour markets well but not sure on inequality. is it likely to come opposed to the other hot topics, anyone know?

Reply 89

LamboZen

4

Original post by 16bhatam

Hey guys what big essay questions do you think could come up this Yr? I'm thinking market structures and market failure is guaranteed but I'm not sure what areas of these topics in particular to look at.

You Will get a big question on monopolies I guarantee. There will be a lot on market failure as it was barely tested last year. Same goes for T4 development

Reply 90

Llawyer123

10

Original post by LamboZen

You Will get a big question on monopolies I guarantee. There will be a lot on market failure as it was barely tested last year. Same goes for T4 development

How do you approach the market forces vs gov intervention qs to solve market failure? I often struggle with the market force part but I'm OK with the gov intervention part

Reply 91

Llawyer123

10

Original post by A66

Market forces is just the free market. So basically talk about the functions of the price mechanism signal incentive and ration which leads to resources perfectly following consumer demand. This leads to firms being allocatively efficient ie no misallocation of resources solving the market failure. No need for Gov intervention provided the functions of price mech are working well. Obvs go into more detail but this is the basics. Hope this helped

Yeah thanks that cleared a lot of it up. But how would it solve neg ext in prod where we wanted to reduce production. Let's say eg rare metals being produced is a neg ext in prod, and there's excess demand for it, the price goes up, contraction of demand but increase in supply?, so how is it solving it. Using diagram s and d with excess demand initially going to equilibrium.

Reply 92

16bhatam

10

Original post by LamboZen

You Will get a big question on monopolies I guarantee. There will be a lot on market failure as it was barely tested last year. Same goes for T4 development

T4? also hasnt monoply come up a lot in the past i was thinking more contestable markets as it never come up before.

Reply 93

Llawyer123

10

Original post by 16bhatam

T4? also hasnt monoply come up a lot in the past i was thinking more contestable markets as it never come up before.

Contestable markets did come up a couple years back, they just don't explicitly say it. It was a section A 9 marker and was like how does an Increwse in comp lead to normal profits. That's contestable mkts isn't it

Reply 94

Bashhhh

1

Original post by Llawyer123

Contestable markets did come up a couple years back, they just don't explicitly say it. It was a section A 9 marker and was like how does an Increwse in comp lead to normal profits. That's contestable mkts isn't it

It's similar but not the same thing I think. Contestable markets are the threat of competition whilst competition is the actual action.
In contestable markets normal profits are achieved as firms will move towards limit pricing to reduce their profit margins which reduces the incentive for firms to enter the market so the market is less contestable.
Competition on the other hand is because firms are competing to gain high market share and to do this they lower prices towards limit pricing and become more allocativelly and productively efficient so that prices are then lower which increases the quantity demanded by consumers I think.

Reply 95

Llawyer123

10

Original post by Bashhhh

It's similar but not the same thing I think. Contestable markets are the threat of competition whilst competition is the actual action.
In contestable markets normal profits are achieved as firms will move towards limit pricing to reduce their profit margins which reduces the incentive for firms to enter the market so the market is less contestable.
Competition on the other hand is because firms are competing to gain high market share and to do this they lower prices towards limit pricing and become more allocativelly and productively efficient so that prices are then lower which increases the quantity demanded by consumers I think.

Oh I worded it wrong, it said how a reduction in the barriers to entry would lead to normal profits. 2018 paper 1.

Reply 96

Bashhhh

1

Original post by Llawyer123

Oh I worded it wrong, it said how a reduction in the barriers to entry would lead to normal profits. 2018 paper 1.

Yeah that seems like contestable markets to me, but that was 5 years ago now could still come up.

Reply 97

spunting

6

what actually is difference between monopolistic competition and contestable markets

Reply 98

alexs2005

3

Original post by Llawyer123

How would you guys answer this question?
Evaluate the view that mining activities should be left to market forces with minimum intervention by governments. (25) unit 1 June 2012 q4. I feel like we're gonna get a similar q to that tomorrow as a question regarding market forces vs gov intervention hasn't been asked in a while, fits in with the prediction econplus Dal made for market failure.

I would use the Kutzets environmental curve. It supports the idea of market forces and how environmental degregation/ pollution is necessary (use of steam power, fossil fuels) when an economy is developing/ pre-industrialised. It says when an economy is post-industrial, it WILL become service sector based = less pollution. Higher incomes (earned through service sector jobs) mean more ppl have the luxury of becoming more aware of the environment, less concerned about maxing their output, etc.

Eval:
- Increased incomes= increase output, increased consumption/production= increased pollution e.g Qatar in 2017 had one of the highest GDP but worse air pollution
- Depends on the country --> some developed countries (Canada, Australia) still mine and export oil/coal = not all become service sector based
- Depends on the policies adopted = developed countries have the potential to limit enviro impact but higher taxes, regulations are unpopular= not implemented