NCEA Level 3 Economics (90629) 2012 — page 1 of 8
Assessment Schedule – 2012
Economics: Understand marginal analysis and the behaviour of firms (90629)
Evidence Statement
Question
Evidence
ONE
Achievement
Any TWO of:
• correct response in (a)
(a)
Oligopoly.
(b)
• Strong barriers to entry.
• Differentiated product.
• Strong control over price.
• Kinked demand curve.
(c)
Sales maximisation, increased market share.
• in (b), any TWO
characteristics to match
market structure in (a)
• one of the two suggested
responses for (c).
Achievement
with Merit
Achievement
with Excellence
Code
A1
NCEA Level 3 Economics (90629) 2012 — page 2 of 8
Question
Evidence
TWO
(a)
(i) 35
(ii) 47
(c)
A2
• three out of four
correct in (a)
• in (b), idea of ‘continue
to purchase until P =
MU’ and Robbie will
buy 3, and he will not
buy the fourth because
P > MU. Must include
MU and P figures in
support of the answer
• in (d), ALL three cost
values correct
Therefore, he will buy 3GB.
• in (e), break-even is
where MC = AC (or
also accept P = AC)
See Appendix One.
• in (f), ANY three
quantities correct.
(i) $2.40
(ii) $10.75
(iii) $3.20
Code
OR
Robbie will continue to purchase GBs as long as the P is
less than or equal to his MU.
(d)
Achievement
with Excellence
Any ONE of:
(iv) 8
He will stop buying after the third GB because P of $10 is
less than MU of $12 on the third unit. He will not buy the
fourth because P > MU.
Achievement
with Merit
Any THREE of:
• in (b), idea of ‘continue
to purchase until P =
MU’
(iii) 20
(b)
Achievement
• in (c), graph correctly
drawn with correct title,
each axis has correct
scale and is labelled
either price (or P) with
($), and quantity (or
Q), all points plotted,
no errors and straight
line neatly joining all
points
• in (e), break-even point
is where MC = AC (or
also accept P = AC)
and must state that
after 8 cappuccinos
MC > AC so past
break-even quantity (or
before 8 cappuccinos
AC>MC, so not at
breakeven)
• In (f), ALL quantities
correct.
M2
NCEA Level 3 Economics (90629) 2012 — page 3 of 8
(e)
Break-even output is where MC = AC. Any output where
MC < AC and the firm will make a loss.
Café Tuscany will break even when it makes at least 8
cappuccinos per hour, because after 8 MC > AC. Below 8,
the business will not break even because MC < AC.
(f)
Price ($)
Quantity
1.00
0
1.45
6
1.90
7
2.10
8
NCEA Level 3 Economics (90629) 2012 — page 4 of 8
Question
Evidence
THREE
(a)
(b)
(c)
See Appendix Two.
For any unit before Qe, MR is greater than MC so marginal
profits are made so we will produce these units as our profits
will rise. For any unit after Qe, MC>MR so marginal losses are
made, so we will not be willing to produce these. We
maximise profits at Qe where MC = MR.
In the long run, the firm will continue to make a supernormal
profit, as monopoly markets have strong barriers to entry,
meaning the firm will continue to operate at Qe and Pe.
May be used as alternative evidence for A1.
(d)
See Appendix Three.
Achievement
• MC moved upwards and labelled MC1 (or similar)
• AC moved upwards and labelled AC1 (or similar), with MC
curve intersecting at its minimum.
Explanation
An increase in VC causes an increase in the marginal cost of
producing each unit of output as well as an increase in AC.
Following increase in VC there is disequilibrium at original
quantity.
The firm will be making marginal losses (MC > MR) on every
unit between Qe and new Q1 where MC1 = MR.
Firm will decrease output to Q1.
Achievement
with Excellence
Code
Any THREE of:
In (a), two out of three of:
In (a), ALL of:
A3
• In (a), two out of three
of:
• MR curve appropriately
placed and labelled, so
it would bisect the
output axis at halfway
to AR.
• MR curve appropriately
placed and labelled, so it
would bisect the output
axis at halfway to AR
OR
- MR curve
appropriately placed
and labelled, so it
would bisect the
output axis at
halfway to AR.
- Pe and Qe correctly
placed and labelled
(allow for incorrectly
placed MR).
- Supernormal profit
shaded and labelled.
• In (b), Maximising profit
at Qe where MR = MC.
Graph should include:
• MR curve appropriately placed and labelled, bisecting the
output axis at approximately halfway to AR
Achievement
with Merit
• In (c), firm will continue
to make supernormal
profit.
• In (d), MC and AC
curve moved upwards;
Q1 / P1 identified
correctly.
• In (d), firm will
decrease output in
order to maximise
profits at new MR = MC
equilibrium.
• Pe and Qe correctly
placed and labelled.
• Supernormal profit
shaded and labelled.
• Pe and Qe correctly
placed and labelled.
• Supernormal profit shaded
and labelled.
AND in (d):
PLUS any TWO of:
• In (b), idea of MR = MC
at Qe and detail that at
any other quantity there
is a disequilibrium
meaning less profit. (eg
above Qe, MC>MR so
there will be marginal
losses made)
• In (c), firm will continue
to make supernormal
profit with Qe and Pe
remaining unchanged.
Idea of strong barriers
• On Graph Two, MC
and AC curve moved
upwards, AND new
equilibrium identified
PLUS idea of a
decrease in Qe;
disequilibrium at Qe
• Moves MC and AC curve
upwards accurately in
Graph Two.
AND
• On Graph Two, identifies
new equilibrium.
AND
• Explains the ideas of:
- Marginal losses being
made at Qe and the firm
decreasing output to Q1
to maximise profit.
- Price increasing due to
consumers / able to
consume less output (a
link to law of demand).
- Profit decreasing to
match what has been
shown on Appendix
M3
OR
E3
NCEA Level 3 Economics (90629) 2012 — page 5 of 8
Because of decreased Q, firm will receive increased P from
customers (law of demand), profit will be less, either smaller
supernormal, normal or subnormal (depending on the
magnitude of curve shifts).
and Pe, so decrease
output to MR = MC1
equilibrium.
Three.
NCEA Level 3 Economics (90629) 2012 — page 6 of 8
Question
Evidence
FOUR
(a)
Wheat growers are price takers, they must
accept the market price for wheat.
May be used as alternative evidence for
A1.
(b)
See Appendix Four.
(c)
Because wheat growers are in perfect
competition they are price takers and they
will receive a fixed price for all additional
units of wheat sold. If the AR is $300, any
extra tonnes of wheat sold will also return
$300 / tonne so therefore MR will be $300.
See Appendix Five.
(d)
The wheat grower will increase output to
Q1 to maximise profit. For every tonne of
wheat produced between Qe and Q1 the
farmer will make marginal profits (MR >
MC) so will increase output to gain the
extra profit.
In the long run in the wheat market, there
will be an increase in supply as more firms
will enter the wheat market to gain the
supernormal profits as AC<AR. This will
cause the market price to decrease and
firms will make only normal profits.
Achievement
Achievement
with Merit
Achievement
with Excellence
Code
Any THREE of:
In (b), 2 out of 3 of:
In (b), ALL of:
A3
• In (b), 2 out of 3 of:
• AR / MR curve correctly
drawn as horizontal line
• AR / MR curve correctly
drawn as horizontal line
OR
• Pe and Qe identified at
intersection of MC = AR
• Pe and Qe identified at
intersection of MC = AR
OR
• Subnormal profit correctly
shaded in.
• Subnormal profit correctly
shaded in.
PLUS any TWO of:
AND in (d):
• In (c), MR will be $300 and
wheat grower will receive
the same price for all extra /
additional tonnes sold (idea
of marginal revenue staying
same for additional tonnes
sold)
• AR / MR curve moved to
$450, allowing for small
margin of error and new P1
and Q1 correctly identified
AND idea of wheat grower
increasing Qe to Q1 to take
advantage of marginal
profits (MR1 > MC).
- AR / MR curve correctly
drawn as horizontal line
- Pe and Qe identified at
intersection of MC = AR
- Subnormal profit correctly
shaded in.
• In (c), the idea of MR will be
$300 because they are
price takers (no influence
over market price)
• In (d) the AR / MR curve
moved to $450, allowing for
small margin of error and
new P1 and Q1 correctly
identified
• In (d) the wheat grower will
increase quantity to Q1 to
where new MR (MR1 = MC)
• In (d) wheat growers will
make normal profits in the
long run.
• In (d) the AR / MR curve
moved to $450, allowing for
small margin of error and
new P1 and Q1 correctly
identified AND idea of new
equilibrium being at Q1
because of disequilibrium at
Qe
• In (d) the normal profit in
long-run as supernormal
profits are being made now.
AND
• Normal profit in the long
run, because increase in
market supply as more
firms enter the market, due
to supernormal profits being
made, eventually
decreasing market price (or
AR / MR decreasing).
Note: Correct responses in Question Three (c) or Question Four (a) can act as replacement evidence for A1, if the candidate does not have two correct responses in
Question One.
M3
E3
NCEA Level 3 Economics (90629) 2012 — page 7 of 8
Appendix One – Question Two (c)
Appendix Two – Question Three (a)
Appendix Three – Question Three (d)
Appendix Four – Question Four (b)
NCEA Level 3 Economics (90629) 2012 — page 8 of 8
Appendix Five – Question Four (d)
Judgement Statement
Achievement
Achievement with Merit
Achievement with Excellence
Minimum of:
Minimum of:
Minimum of:
1 A1
1 A1
1 A1
1 A2
1 M2
1 M2
1 A3
1 M3
1 E3
90629 Codes
A1 refers to the first criterion.
A2, and M2 refer to the second criterion.
A3, M3, and E3 refer to the third criterion.