NCEA Level 3 Economics 91400 (3.2) — page 1 of 7
SAMPLE ASSESSMENT SCHEDULE
Economics 91400 (3.2): Demonstrate understanding of the efficiency of different market
structures using marginal analysis
Assessment Criteria
Achievement
Achievement with Merit
Demonstrate understanding typically
involves providing an explanation of:
Demonstrate in-depth understanding
typically involves providing a
detailed explanation of:
Demonstrate comprehensive
understanding typically involves
comparing and contrasting:
 pricing and output decisions for
perfectly competitive and/or
monopolist firms using marginal
analysis
 the efficiency of market
structures
 pricing and output decisions for
perfectly competitive and/or
monopolist firms using marginal
analysis
 efficiency of a market structure
 impact of a change in a market
on the short and/or long run
pricing and/or output decisions of
a firm
 a government policy to improve
the efficiency of a monopoly
market.
Achievement with Excellence
 the efficiency of a market
structure
 the effectiveness of
government policies to
improve the efficiency of a
monopoly market
 the impact of a change in a
market on the short and/or long
run pricing and/or output
decisions of a firm
 the impact of a change in a
market on the short and long
run pricing and/or output
decisions of a firm.
 a government policy to improve
the efficiency of a monopoly
market.
NCEA Level 3 Economics 91400 (3.2) — page 2 of 7
Evidence Statement
Achievement
Not Achieved
One
Expected Coverage
NØ
No response; no
relevant evidence.
N1
1/6 requirements for
Achievement are met.
N2
2/6 requirements for
Achievement are met.
A3
3/6 requirements for
Achievement are met.
Evidence of understanding includes:
(a) FIVE correct of (i) no barriers; (ii) no control; (iii) large number; (iv)
strong barriers; (v) strong control; (vi) one.
(b) Pe and Qe correctly identified. (See Appendix One)
(c) explains that that allocatively efficient equilibrium is where S = D OR
MC = AR.
(d) Pm and Qm correctly identified. (See Appendix Two).
(e) Qm is where MR = MC and Pm is price consumers will pay for Qm.
(f)
A4
4/6 requirements for
Achievement are met.
For a perfectly competitive firm, profit maximising equilibrium occurs
where MR = MC OR allocatively efficient equilibrium occurs where MC
= AR.
Evidence of in-depth understanding includes:
(c) OR (e).
Merit
M5
M6
(e) AND (c)
OR
(f).
(c) Detailed explanation that the allocatively efficient equilibrium is where
the supply and demand curves intersect. For a monopoly firm the MC
curve is the market supply curve and the AR curve is the market
demand curve. Pe and Qe are where AR and MC intersect.
(e) Detailed explanation that Qm is the quantity where MC intersects with
MR. At that quantity consumers are willing and able to pay price Pm
which is determined by the AR curve. Any quantity less than Qm and
the firm would not be gaining all marginal profits (MR>MC) and any
quantity more than Qm and the firm would make marginal losses
(MC>MR) on extra output produced. At any output less than or more
than Qm, total profits would be less.
(f) Detailed explanation that a perfectly competitive firm is a price taker,
which means that whatever quantity it produces will receive the same
price. Therefore its AR/D is also its MR curve. This means that the
profit maximising equilibrium MR=MC is also where AR=MC (or D =
S), which is also the allocatively efficient equilibrium.
Evidence of comprehensive understanding in (f) includes comparing and
contrasting the efficiency of market structure through demonstrating that:
3/4 requirements for
Excellence met.
Excellence
E7
E8
ALL FOUR
requirements for
Excellence met.

Both a perfect competitor and a monopoly firm will produce the
quantity where MR and MC intersect in order to maximise profits. The
allocatively efficient equilibrium of a firm is where its supply curve
intersects with the demand curve, which is where MC and AR curves
intersect.

A perfectly competitive firm is a price taker, which means that
whatever quantity it produces will receive the same price. Therefore its
AR is also its MR curve. This means that the profit maximising
equilibrium MR=MC is also where AR=MC, which is also the
allocatively efficient equilibrium.

For a monopoly firm where MC=MR, profit is maximised but it is at a
lower quantity and higher price than where AR=MC.

Therefore a profit maximising monopoly firm is not allocatively
efficient.
NCEA Level 3 Economics 91400 (3.2) — page 3 of 7
Not Achieved
Expected Coverage
NØ
No response; no
relevant evidence.
N1
1/5 requirements for
Achievement are met.
N2
2/5 requirements for
Achievement are met.
Achievement
Two
A3
3/5 requirements for
Achievement are met.
A4
4/5 requirements for
Achievement are met.
Evidence of understanding includes:
(a) Idea of Auckland International Airport being able to supply the entire
market at a lower price than two or more airports could due to high
average costs.
(b) Pe and Qe correctly identified and DWL correctly shaded. (See
Appendix Three)
(c) Idea that a DWL is a loss of consumer and producer surpluses.
(d) Idea that average cost pricing will move the price and quantity closer
to the allocatively equilibrium (Qe and Pe).
(e) Idea that marginal cost pricing requires the firm to charge the price
where AR=MC.
Evidence of in-depth understanding includes:
1/3 requirements for
Merit are met.
Merit
M5
M6
2/3 requirements for
Merit are met.
(c) Detailed explanation that a deadweight loss is a loss of total consumer
and producer surplus that is not transferred to any other party. Total
consumer and producer surplus is maximised at the allocatively
efficient equilibrium where AR = MC. If Auckland International Airport
wants to profit maximise it will operate at the quantity where MR = MC.
At that quantity there is a loss of total CS and PS represented by the
DWL in Appendix Three.
(d) Detailed explanation that average cost pricing requires the firm to
charge the price where AR=AC. This is a lower price and at the price
the monopoly will produce more, which is closer to the allocatively
efficient equilibrium. The area of DWL is smaller so represents an
improvement in efficiency.
(e) Explanation that marginal cost pricing requires the firm to charge the
price where AR=MC. This is the allocatively efficient equilibrium for the
market so there is no DWL.
Excellence
E7
E8
Both AC pricing and
MC pricing are
explained
AND
MC pricing is more
efficient than AC
pricing explained with
reference to DWL.
ALL requirements for
Excellence met.
Evidence of comprehensive understanding includes comparing and
contrasting the effectiveness of government policies through:
(d) Average cost pricing is explained as pricing where AC = AR.
(e) Average cost pricing is the less effective price control as the monopoly
is still allocatively inefficient, ie, there is still a DWL.

With average cost pricing, the firm will make a normal profit, which is
sufficient for it to stay in business so may be more desirable than
marginal cost pricing.

Marginal cost pricing requires the firm to price where MC = AR.
Marginal cost pricing is more effective in terms of allocative efficiency
as there is no DWL.

With marginal cost pricing, the firm will make a subnormal profit which
might require the government to subsidise the firm from taxpayer
funds to help the monopoly stay in business, ie, cover the economic
loss that it will make.
NCEA Level 3 Economics 91400 (3.2) — page 4 of 7
Achievement
Not Achieved
Three
Expected Coverage
NØ
No response; no
relevant evidence.
N1
1/5 requirements for
Achievement are met.
N2
2/5 requirements for
Achievement are met.
A3
3/5 requirements for
Achievement are met.
A4
Evidence of understanding includes:
(a)
(c)
(d)
TWO criteria given, eg, kiwifruit varieties are not homogenous,
barriers to entry exist, imperfect knowledge.
MC curve correctly drawn and positioned AND Pm and Qm
identified. (See Appendix Four)
Normal profit identified.
AR/MR/P/D curve moved downwards and correctly labelled.
(d)
Qnew and Pnew correctly identified. (See Appendix Five)
(b)
4/5 requirements for
Achievement are met.
Evidence of in-depth understanding includes:
M6
2/3 requirements for
Merit met.
Merit
M5
1/3 requirements for
Merit met.
2/3 requirements for
Excellence met.
Excellence
E7
(e)(i) The MR curve would decrease following a decrease in demand, at
Qm there is a disequilibrium where MR would now be less than
MC.
(e)(ii) Marginal losses are now being made between Qm and Qnew. To
avoid making marginal losses the firm will reduce output to Qm,
where MRnew = MC and the firm is maximising profit.
(f)
Following a decrease in demand the kiwifruit grower AND/OR
Zespri will be making a subnormal profit.
Evidence of comprehensive understanding in (f) include comparing and
contrasting the impact of a change in market on pricing and output
decisions of firms through:
 Comparison between characteristics of BOTH structures with barriers to
entry important in determining the response made by each. For a
perfectly competitive firm there are no barriers; but the barriers are
strong for a monopoly.
 Both types of firms will make a subnormal profit following a decrease in
demand. In the long run, if a monopoly continues to make subnormal
profits then they will choose to leave the industry.
E8
3/3 requirements for
Excellence met.
 The perfectly competitive firm will make a normal profit in the long run as
some other firms will exit the market causing market supply to decrease
and the market price to increase. Therefore AR/MR/P/D will tend back to
the point where AR/MR/P/D=AC=MC, which will be an increase in
output.
NCEA Level 3 Economics 91400 (3.2) — page 5 of 7
Appendix One: Question One (b)
Appendix Two: Question One (d)
NCEA Level 3 Economics 91400 (3.2) — page 6 of 7
Appendix Three: Question Two (b)
Appendix Four: Question Three (b)
NCEA Level 3 Economics 91400 (3.2) — page 7 of 7
Appendix Five: Question Three (d)