13ECO TEST 3 – Assessment Schedule
Task
Evidence
A, M, E
1 (a)
(b)
(c)
 Monopoly
A1 both correct
(d)
(e)
2 (a)
(b)
(c)
(d)
(e)
 Duopoly
A1 2 correct characteristics
 Strong barriers to entry
 Strong control over price
 Differentiated product
Pacific Blue a new firm may aim to establish market share
and to ensure flights have passengers
Accept follow through if 1 (b)
answered incorrectly
A1 Idea of establish market share
due to new entrant
Accept follow through if 1 (b)
answered incorrectly
A1 2 correct
Examples
 Service
 Advertising
 Sponsorship
 Loyalty schemes
Accounting costs examples
Wages, fuel, rent on premises, cost of planes, repairs,
maintenance, advertising
Economic costs examples
Revenue from flying domestic / cargo flights, alternatives
to owner’s time or capital investment (any appropriate
opportunity cost)
Q
TVC ($)
TFC ($)
TC ($)
MC ($)
0
0
100
100
-
1
80
100
180
80
2
120
100
220
40
3
140
100
240
20
4
180
100
280
40
5
260
100
360
80
3
1. As diminishing returns sets in more variable inputs /
factors are required to produce an extra unit.
2. The cost of each extra unit (MC) must increase as
more inputs are being used
At five flights per day the MC=S of $80 is greater than the
min AVC / shutdown point of $45
A2 both correct (must relate to AA
Airlines)
A2 all correct
A2 correct
A2 law of diminishing returns
described
M2 both points
A2 idea of covering AVC
or
M2 explanation refers to Table 2
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3 (a)
A3 all correct
(i)  MC, AR, MR labelled
(ii)  Pm
 Qm
Cost /
Revenues $
MC
AC
Pm
AR
MR
Qm
Output
(iii)  AC correct
A3 all correct
(b)
A3 all correct
 Super-normal profit shaded
(i)  MC, AR labelled
(ii)  Ppc, Qpc
Cost/
Revenues
$
MC
AC
Ppc
AR=MR=P
Qpc
Output
(iii)  AC correct
(c)
 Super-normal profit shaded
Both perfect competitor and monopolist will increase
output due to decrease in marginal cost.
1. Decrease variable cost leads to decrease in marginal
cost
2. At the original profit maximising the extra revenue
gained from producing an extra unit is greater than
the extra cost MR > MC
3. Both the monopolist and perfect competitor should
increase output to gain the extra revenue until MR =
MC to maximise profits
The monopolist will decrease price whereas perfect
competitor’s price remains the same.
1. To increase quantity the monopolist must decrease
price as a monopolist has a downward sloping D / AR
curve.
A3 all correct
A3 description of increase output
or
M3 explanation of increase output
using marginal analysis
A3 description of changes to prices
or
M3 explanation provided for
changes in price
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2. Perfect competitor’s price remains the same as
perfect competitor’s are too small to influence price
(price takers)
OR
E3 if Both M3’s awarded
(d)
In the long run perfect competitor will make normal profits
monopolist will continue to make super-normal profits
1. Perfect competitor’s have perfect knowledge / perfect
mobility / no barriers to entry firms will enter the
market to compete for supernormal profits
2. Increase in market supply will cause market price to
decrease until normal profits
3. Whereas monopolist’s strong barriers to entry prevent
firms from competing for super-normal profit
4. As perfectly competitive firms enter the market AR =
MR decreases
5. At the original equilibrium MC > MR the extra cost of
producing an extra unit is greater than the extra
revenue gained
6. the perfect competitor should decrease output until
MR = MC to maximise profits
Note: students gain E3 only, not E3
and 2 M3’s
A3 types of profits correct
OR
M3 first 3 points
OR
E3 all six points
Note: award A3, M3 or E3, not all 3
Judgement statement
Achievement
1 x A1
1 x A2
1 x A3
4 other As or better
Merit
Achieved plus:
1 x M2
1 x M3
Excellence
Merit plus:
1 x E3
Note:
A1 relates to the first criterion
A2 and M2 relate to the second criterion
A3, M3 and E3 relate to the third criterion
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Task
4 (a)
(b)
(c)
Evidence
A, M, E




1.
A3 both correct
Supply of labour right and labelled
New equilibrium price and quantity labelled
Demand right and labelled
New equilibrium price and quantity labelled
Increase demand creates excess demand at original
equilibrium
2. (some) consumers are willing to pay a higher price
3. price increase causes quantity supplied to increase
and quantity demanded to decrease until QD = QS /
new equilibrium is reached
5 (a)
A3 both correct
A2 2 points described
or
M2 all 3 points
Accept follow through errors if
2(b) incorrect
A3 Pw labelled
(i)
S
Price
S
SNZ
World price + tariff
Pw
DNZ
Quantity
M
(ii) See above
(iii) See above
M3 M labelled
A2 correct shading
(iv) See above
A2 correct shading
(b)
The sum of consumer surplus and producer surplus will
increase thus increasing allocative efficiency.
A2 description of allocative
efficiency increasing
1. Lower prices transfer some producer surplus to
consumer surplus.
2. Consumer surplus gain the deadweight loss and
government revenue caused by the tariff.
3. Overall the sum of consumer surplus and producer
surplus will increase thus increasing allocative
efficiency.
1. Removal of tariffs will lead to increased imports /
lower prices
2. NZ clothing producers less competitive and decrease
production
3. Fewer clothing workers will be needed to produce
the lower output (derived demand idea)
or
M2 all 3 points
(c)
A3 employment decrease (point 3)
or
M3 all 3 points
E3 also awarded if 2 M3’s awarded
in 3
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6(a)





Supply shifted right by vertical distance $100
New supply curve labelled
Pc labelled
Pp labelled
Q1 labelled
(b)
A3 all correct
A2 Deadweight loss correctly
shaded (allow ft)
S
Pp
S1
Pc
D
Q1
(c)
(d)
Government subsidy that is not gained by another party /
producer surplus or consumer surplus
1. Government intervention has intervened / distorted
price signals
2. resources are not allocated efficiently
3. results in a loss of producer surplus / consumer
surplus / welfare to the economy as a whole
1. Consumers pay $175 after the subsidy and increase
consumption by 500. Producers receive $275 after
the subsidy and increase production by 500.
2. Consumers gain ¾ of the incidence / benefit and
producers gain ¼ of the incidence / benefit because
demand for rental properties is inelastic.
1. The total cost to the government of the subsidy is
$350 000
2. The subsidy causes a loss of allocative efficiency /
deadweight loss of $25 000.
Answers must relate to Graph 5. Accept a range in
output Δ from 400 to 600.
A2 description of deadweight loss
or
M2 all 3 points explanation of why
deadweight loss occurred
A3 description of effect of subsidy
on consumers, producers
or
M3 both points
A3 description of effect of subsidy
on govt
or
M3 both points
E3
awarded if 2 M3’s awarded in
4(d)
Judgement statement
Achievement
1 x A2
1 x A3
3 other A or M
Merit
Achieved plus:
1 x M2
1 x M3
Excellence
Merit plus:
1 x E3
1 other M or E
A1 relates to the first criterion
A2 and M2 relate to the second criterion
A3, M3 and E3 relate to the third criterion
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