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Edexcel Economics: Unit 3 Business Economics and Economic Efficiency (June 2014) EC03 Watch

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    (Original post by aymanalhassan)
    My point:

    A patent would increase the incentive to spend more in investing to produce new innovative products. As innovation creates unique products, this would increase consumer choice compared to a market where there is little differentiation between products.

    Evaluation:

    However, having a unique product protected by a patent would allow the firm to become a price-maker as they are the sole supplier of that product(it's unique). This means that they are able to control prices and therefore consumers may disbenefit from increased prices.

    2nd point:

    Patents would increase the amount of innovation of more efficient, cheaper-to-produce products compared to their former alternatives. Therefore, this lower cost of producing these new innovative products could be carried forward to lower prices for consumers. This would increase consumer welfare as consumer surplus would increase.

    Evaluation:

    This is entirely dependent on the firm's motives. We can assume that the majority of firms are aiming for profit maximisation. Therefore they would produce at MC=MR so consumers wouldn't exactly have optimised consumer surplus as MC=MR is allocatively and productively inefficient.


    So yeah this was my general answer to part b of question 9. I know it's not the best but definitely a 7/8.
    Ohh god I might be wrong. . I just wrote that as they are having high monopoly power they could raise prices and increase profits which then could be reinvested into research and development.. is this point valid??
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    (Original post by Layla Gepghry)
    for those that did question 9, what did you write for the first question on market structures?
    Monopoly because wrigleys market share was 40%. A market share more than 25%
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    (Original post by peter qwert)
    4 was external economies of scale and 7 was mr equals zero.Also 8 was that private comapnies have experience.
    External econ is a good thing so the commision wouldnt be reffered.
    I used mr=0 as a knock out, mr=0 occurred at Z not T
    8 I put that initially but a seemed to make more sense

    (Original post by Starbarian)
    I'd imagine so, which means you can afford to drop 16 marks, what do people think the A* was?
    62 or 63/72 I think.
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    (Original post by aymanalhassan)
    My point:

    A patent would increase the incentive to spend more in investing to produce new innovative products. As innovation creates unique products, this would increase consumer choice compared to a market where there is little differentiation between products.

    Evaluation:

    However, having a unique product protected by a patent would allow the firm to become a price-maker as they are the sole supplier of that product(it's unique). This means that they are able to control prices and therefore consumers may disbenefit from increased prices.

    2nd point:

    Patents would increase the amount of innovation of more efficient, cheaper-to-produce products compared to their former alternatives. Therefore, this lower cost of producing these new innovative products could be carried forward to lower prices for consumers. This would increase consumer welfare as consumer surplus would increase.

    Evaluation:

    This is entirely dependent on the firm's motives. We can assume that the majority of firms are aiming for profit maximisation. Therefore they would produce at MC=MR so consumers wouldn't exactly have optimised consumer surplus as MC=MR is allocatively and productively inefficient.


    So yeah this was my general answer to part b of question 9. I know it's not the best but definitely a 7/8.
    What you wrote is definitely correct but in my opinion you have stated the same point twice just changed the focus a bit .I mentioned that they are important to increase R and D as they assure that profits are earned for the length of patent.For the second reason I said it prevents markets from becoming overcrowded by increasing barriers which can benefit consumers
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    (Original post by rathani278)
    Ohh god I might be wrong. . I just wrote that as they are having high monopoly power they could raise prices and increase profits which then could be reinvested into research and development.. is this point valid??
    did you relate that point to patents whatsoever? You should of said that patents could give a firm monopoly-power in a sense that they act as a barrier to entry and make them price-makers due to being the sole supplier.
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    (Original post by aymanalhassan)
    did you relate that point to patents whatsoever? You should of said that patents could give a firm monopoly-power in a sense that they act as a barrier to entry and make them price-makers due to being the sole supplier.
    Yeah! !
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    (Original post by DH96)
    i put forwards vertical too
    I was certain it was forward. Feel abit stupid now.
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    (Original post by thestudentoffram)
    What you wrote is definitely correct but in my opinion you have stated the same point twice just changed the focus a bit .I mentioned that they are important to increase R and D as they assure that profits are earned for the length of patent.For the second reason I said it prevents markets from becoming overcrowded by increasing barriers which can benefit consumers
    Well my points were: 1.)Increased consumer choice 2.)Increased consumer surplus

    However, I see what you mean, my evaluation was quite similar. 1.)Unique product means they can control prices so increase price 2.)I basically said the same thing in a different way: most firms produce at MC=MR so consumer surplus is not maximised as MC=MR is productively and allocatively inefficient.

    I hope examiners don't scrutinise me for this . Wanna discuss question 9c? I think I answered it well but who knows..
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    Was the market structure monopoly or oligopoly for q 9A.
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    (Original post by mhassan)
    Was the market structure monopoly or oligopoly for q 9A.
    Market structure was an Oligopoly. If you calculated the 4-firm concentration ratio it was at 81% which definitely indicates an oligopoly market structure as few firms control large amounts of the market share.

    You might be able to get away with 1 KAA mark by saying that 2 of the firms were legal monopolies as they were above 25% market share.
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    What do you guys think it will be for an A*? (Raw marks)
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    (Original post by tigerz)
    I got exactly the same as you
    Profit satisficing because they gonna give lower profits to shareholders and concentrate on investment
    Oligopily was that the other supermarkets would be affected in they changed the price so you talk about interdependence
    For 8 that was the only one that worked for me too because the private sector funds it
    :five:
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    (Original post by aymanalhassan)
    Market structure was an Oligopoly. If you calculated the 4-firm concentration ratio it was at 81% which definitely indicates an oligopoly market structure as few firms control large amounts of the market share.

    You might be able to get away with 1 KAA mark by saying that 2 of the firms were legal monopolies as they were above 25% market share.
    Couldn't you make a case for both. In the markscheme they tend to award marks for both if you explain it correctly. Is it not possible to 4?
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    (Original post by Dilzo999)
    :five:


    (Original post by mhassan)
    Couldn't you make a case for both. In the markscheme they tend to award marks for both if you explain it correctly. Is it not possible to 4?
    I think you could get 3/4

    monopoly+ definition + wrigley had more than 25%. I'm not sure how you could get the 4th mark
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    (Original post by aymanalhassan)
    Well my points were: 1.)Increased consumer choice 2.)Increased consumer surplus

    However, I see what you mean, my evaluation was quite similar. 1.)Unique product means they can control prices so increase price 2.)I basically said the same thing in a different way: most firms produce at MC=MR so consumer surplus is not maximised as MC=MR is productively and allocatively inefficient.

    I hope examiners don't scrutinise me for this . Wanna discuss question 9c? I think I answered it well but who knows..
    Sure I showed a shift in AR and MR and then mentioned that the Gum market was shrinking and that the patent was being competed.For the second option I said that Revolymer would no longer have the ability to set price as the other firms are comepting the patent away .However the product they produce may not be as good as the one Revolymer do .What do you think about thta answer?
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    (Original post by tigerz)




    I think you could get 3/4

    monopoly+ definition + wrigley had more than 25%. I'm not sure how you could get the 4th mark
    What about writing about the characteristics such as high barriers to entry?
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    (Original post by mhassan)
    What about writing about the characteristics such as high barriers to entry?
    2 marks are for application so you would need to find evidence in the data that they have high barriers then just saying they have high barriers
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    (Original post by mhassan)
    I was certain it was forward. Feel abit stupid now.
    I put forward too :/ excuses aside I feel that the wording of the question was poor. In previous past papers it was a bit more obvious what they were getting at but here it was :confused:
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    (Original post by mhassan)
    Couldn't you make a case for both. In the markscheme they tend to award marks for both if you explain it correctly. Is it not possible to 4?
    Yes of course, just confidence in your answer and make sure your reasoning is sound and you'll get 4
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    (Original post by peter qwert)
    .Also 8 was that private comapnies have experience.
    Was that even an option?
 
 
 
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