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AQA A-level Economics new 7136 - 06, 13 & 19 Jun 2017 [Exam Discussion]

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How would you go about answering an eassy on sugar tax?

Same going for price mechanism involving the europe freeze? (i think it was fruits and stuff that went up in price not sure).

Thank you

Reply 301

physicsamor

Original post by Soulgeass

So one of the question goes:

Explain why the average and marginal revenue curves of a perfectly competitive firm are horizontal, while those of a monopoly slope downwards.

And the mark scheme mentions (my comments regarding several bits are in bold):

Perfect competition: the firm is small compared to the industry (1 mark) with no entry/exit barriers (1 mark) and is therefore a price taker (1 mark) [I get how this shows your knowledge on perfect competition but I never thought it would be worth 3 marks already since it does not yet answer the question] it can clear its production lines if it sells at the current market price (1 mark). Since it can clear production lines at the current market price it would be irrational (assuming profit maximisation) to sell below that price (1 mark). If the seller tries to sell above the market price, demand will disappear (or price elasticity of demand is infinity) (1 mark), because of perfect knowledge (1 mark) and homogeneous products (or products being perfect substitutes (1 mark). While the market demand curve is downward sloping (1 mark) the seller-perceived demand curve (demand curve for the output of the firm) is horizontal (1 mark) and therefore AR = MR (1 mark).

Monopoly: the firm is the industry and the firm has some control over price; the downward sloping market demand curve is the firm’s average revenue line. Because the firm reduces price to increase quantity demanded or increases price to reduce quantity demanded MR also slopes downwards and MR is less than AR at each level of quantity. [Tbh, I was expecting this last statement to be more of an explanation but it seems like it was just stating a relationship of MR and AR]

I can see how marginal cost can be explained through law of diminishing returns but often my explanation for those topics seem rather short (in my opinion, I felt like I was just being concise in my writing except it ends up being too simplified). Just wondering how you would have elaborated on the answer for the question about marginal cost?

I had only seen questions like explain how a firm can experience diminishing returns in the short run and returns to scale in the long run
So I would define the short run and diminishing returns then I would draw a marginal cost curve may be even a marginal product curve,
All you have to is explain the shape so label the point of diminishing returns and then a point before and after
So let's say A is the point before diminishing returns sets in B is the point of diminishing returns and C is the B
Points A to B shows marginal cost falling this is because initially when you add a variable factor to a fixed production, marginal product increases as MP increases MC falls. However we get to the point B wheneventually if you keep adding variable factor of production, the other fixed factors limit the additional output you get so mp starts to fall, law of dr sets in when mp falls as input increases. As MP falls MC rise as shown from B to C because if you are getting less additional output from each unit of input then the cost per unit of output is greater

Reply 302

physicsamor

Original post by Nirm

How would you go about answering an eassy on sugar tax?

Same going for price mechanism involving the europe freeze? (i think it was fruits and stuff that went up in price not sure).

Thank you

If you have ever answered a question on intervention into negative externalties caused by smoking or unhealthy food is the same sort of question

Define market failure

Explain the negative externalties caused by the excessive consumption of sugar, you could draw a diagram to support this, show how this means we need to get back to the social optimum

How do we do this? with a tax, draw a diagram to show the effect of a tax
Explain the effect to a firm, costs of production, incentives, pass on higher prices to consumers, explain how higher prices alter consumer behaviour - evaluate this why might it not alter behaviour, is it regressive ?
Can it fail? Goverment failure?

Are there alternatives methods?

Is it out responsibility/value judgement should we care about other people's lifestyles?

http://www.economicshelp.org/blog/14884/economics/sugar-tax-debate/

This has pretty much everything you need to know

Reply 303

CJEV18

That sugar tax essay at the end was so good!!!

Reply 304

Nik12

what was the concentration ratio for context 1?

Reply 305

zwatkins66

Original post by Nik12

what was the concentration ratio for context 1?

I got like 50 something per cent? maybe 53.4 or something??? Can't remember exactly

Reply 306

zwatkins66

Original post by CJEV18

That sugar tax essay at the end was so good!!!

I absolutely loved it OMG

Reply 307

Nik12

Original post by zwatkins66

I got like 50 something per cent? maybe 53.4 or something??? Can't remember exactly

i got 53.6 !!

Reply 308

zwatkins66

Original post by Nik12

i got 53.6 !!

Ah yeah that rings a bell :smile:

Reply 309

NotKidding

Concentration ratio for Extract 1 was 53.5

Reply 310

Arran1109

Anyone else think that the 4 and 9 mk Qs for context 1 were a little harsh?

Reply 311

amukaty

Whay did everyone say for that 9 marker in context 1

Reply 312

cathartic

I only had 25 minutes left for the last 15 and 25 marker, I chose the sugar tax one. For the 15 marker I just quickly explained how it's over consumed because of imperfect information, explained what imperfect info is and how it relates to the question and said how they're demerit goods because of negative externalities bla bla and spoke about the inelasticity of the good. How many marks can I get for this ?

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Reply 313

cathartic

Original post by Arran1109

Anyone else think that the 4 and 9 mk Qs for context 1 were a little harsh?

Yes !! I wrote so much waffle for the 4 marker and 9 marker sksksk

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Reply 314

GGHarambe

Was actually pretty good, but context 1 4 marker was bit weird but hopefully got couple marks from bsing it

Reply 315

NotKidding

Pretty good paper aside from the 4 and 9 marker on Context 1 which were worded weirdly.

Reply 316

Arran1109

Original post by amukaty

Whay did everyone say for that 9 marker in context 1

I said that they would like to deliver mail so that they are at the point MC=MR, but due to the regulation they are forced to deliver more regularly, so showed an increase in Q and showed that AC could be more than AR due to the inefficiencies etc etc waffle waffle

Reply 317

GGHarambe

Original post by NotKidding

Pretty good paper aside from the 4 and 9 marker on Context 1 which were worded weirdly.

For the 9 maker did you write about higher costs of production...etc and how it lowers profit?

Reply 318

Gemmamcconville

On context A the first case study, what did everyone get for the 9 marker about the monopoly diagram for Royal Mail and how the obligations affect costs and price.I put how, having to deliver 6 days a week to multiple locations across the UK could increase AC, so showed this on a monopoly diagram shifting the AC upwards, and the abnormal profit being shrunk. Is this wrong?