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Date May 2022 Marks available 15 Reference code 22M.1.HL.TZ0.1
Level Higher level Paper Paper 1 Time zone Time zone 0
Command term Discuss Question number 1 Adapted from N/A

Question

Distinguish between perfect competition and monopolistic competition.

[10]
a.

Using real-world examples, discuss the impact of large firms having significant market power.

[15]
b.

Markscheme

Marks should be allocated according to the paper 1 markbands for May 2022 forward, part A.

Answers may include:

N.B. A maximum of [6] should be awarded for responses that confuse monopoly with monopolistic competition.

a.

Marks should be allocated according to the paper 1 markbands for May 2022 forward, part B.

Answers may include:

Examiners should be aware that candidates may take a different approach which, if appropriate, should be rewarded.

N.B. It should be noted that definitions, theory and examples that have already been given in part (a), and then referred to in part (b), should be rewarded.

b.

Examiners report

This question was generally well attempted, with candidates usually able to offer a well explained account of the key assumptions behind each market structure. Diagrams were usually used effectively to enable distinctions to be made between the two structures.

Although they are not specifically asked for in part (a) questions, many candidates were more comfortable in using examples to explain the differences, particularly to explain monopolistic competition. It was noted that some candidates struggled to provide a clear answer and that was often because they were confused with what monopolistic competition was. A significant number thought that the question was referring to a monopoly.

a.

Good responses acknowledged that the question must allude to monopoly and oligopoly market structures and were able to develop a substantive response in which they were able to utilize real-world examples in order to develop the synthesis appropriate to the discussion. Good candidates also displayed a good level of knowledge and factual data in relation to the examples they offered, enabling greater depth to the synthesis provided.

Some candidates took the question as an opportunity to examine government responses to market power, which misreads the question.

b.

Syllabus sections

First exams 2022 » Unit 2: Microeconomics » 2.11 Market failure—market power (HL only) » 2.11.6 Monopoly
First exams 2022 » Unit 2: Microeconomics » 2.11 Market failure—market power (HL only) » 2.11.7 Oligopoly
First exams 2022 » Unit 2: Microeconomics » 2.11 Market failure—market power (HL only) » 2.11.9 Advantages of large firms having significant market power
First exams 2022 » Unit 2: Microeconomics » 2.11 Market failure—market power (HL only) » 2.11.10 Risks in markets dominated by one or a few very large firms
First exams 2022 » Unit 2: Microeconomics » 2.11 Market failure—market power (HL only)
First exams 2022 » Unit 2: Microeconomics
First exams 2022

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