Unit 4: Evaluating Economic Models and Policies · 1520U40-1
WJEC A-level Unit 4, June 2017
All 12 written questions from WJEC A-level Unit 4 (June 2017), Evaluating Economic Models and Policies. Each question shows its marks and topic, with an examiner insight on 12, and opens the question paper and mark scheme at the right page.
Section A
Q1(a)
Explain, using diagrams, the shape of short-run and long-run average cost curves.
Mark splitKnowledge 6Analysis 4
TopicCosts, revenues and profit
Examiner insight
- What to cover
- Separate the two runs. Short run: at least one fixed factor, so diminishing marginal returns set in as more labour is added to fixed capital, which pulls marginal cost up and gives the U shaped SRAC. Long run: all factors variable, so internal economies of scale pull LRAC down and diseconomies pull it back up.
- Diagram
- A U shaped SRAC with MC cutting at the minimum, and the LRAC envelope curve drawn over a family of SRAC curves.
- Watch out
- Do not mix the two explanations. Diminishing returns is short run, economies and diseconomies of scale are long run. Marks for AO3 depend on explaining why the curves take that shape, with marginal and average product, and on naming types of economies of scale.
- How it went in the exam
- A significant number scored high AO1 and very low AO3 here, because they drew the curves but did not explain their shape.
Q1(b)
Using examples to support your answer, evaluate the costs and benefits of business mergers.
Mark splitKnowledge 6Analysis 6Evaluation 8
TopicBusiness growth and objectives
Examiner insight
- What to cover
- Go wider than the firm. Take the costs and benefits for the firm, consumers, employees, suppliers and the government in turn: economies of scale, market power and higher prices, job losses, monopsony power over suppliers, tax revenue. Name real mergers.
- Evaluation
- Do not simply list both sides. Judge how likely each effect is, how much it matters, and how it differs by merger type: horizontal, vertical or conglomerate, and whether the firms were already large.
- Watch out
- Most answers sat in Band 2 because they analysed the costs and benefits rather than evaluating them, and because they considered only the firm when the question was broader.
- How it went in the exam
- Examiners reported excellent knowledge of real merger examples. The separator was weighing likelihood and importance, not adding more points.
Q2(a)
Explain, using an appropriate diagram, the ways in which a firm may be regarded as efficient.
Mark splitKnowledge 6Analysis 4
Examiner insight
- What to cover
- Define and explain each type of efficiency rather than listing them: productive (minimum average cost), allocative (price equals marginal cost), and if used, dynamic and X efficiency. Say what each means for real resource use.
- Diagram
- Cost and revenue diagram with the productively efficient output at the bottom of AC and the allocatively efficient output where AR cuts MC.
- Watch out
- Long accurate lists of definitions gain AO1 but almost no AO3. Move beyond the identity P equals AR equals MC and explain what allocative efficiency means in practice.
- How it went in the exam
- Examiners said most candidates defined the efficiencies accurately, but far fewer could explain them.
Q2(b)
Using examples to support your answer, discuss the view that privatisation always leads to greater efficiency.
Mark splitKnowledge 6Analysis 6Evaluation 8
TopicCompetition policy and regulation
Examiner insight
- What to cover
- Explain the case that private ownership sharpens the profit motive, cuts X inefficiency and improves productive efficiency, and use the efficiency framework from part (a). Then the counter case: a privatised natural monopoly can raise price above marginal cost.
- Evaluation
- Attack always. It depends on whether the market becomes competitive, on the strength of the regulator, and on whether social objectives are lost. Support every claim with a named privatisation.
- Watch out
- Unsupported assertions kept answers in the lower bands, for example that privatisation always brings competition, always involves deregulation, or that all privatised firms are natural monopolies. These are separate things.
- How it went in the exam
- Examiners were pleased by the focus on the precise question here, and marked down the grouping together of competition policy ideas.
Section B
Q3(a)
Explain, using a diagram, how increased factor market flexibility can lead to economic growth.
Mark splitKnowledge 6Analysis 4
TopicEconomic growth and the economic cycle
Examiner insight
- What to cover
- Take factor markets broadly, not just labour: land, capital and enterprise as well. Flexibility means resources move quickly to their most productive use, through mobility, flexible contracts, easier planning rules and access to finance. Show that raising productive capacity.
- Diagram
- LRAS shifting right, or the PPF shifting outwards, with the output and price level effect shown.
- Watch out
- Flexibility does not mean more workers. That was the most common error. Cover factor markets, not the labour market alone.
- How it went in the exam
- Examiners flagged this as poorly answered despite factor market flexibility appearing in several places in the specification.
Q3(b)
"Economic growth is always beneficial for an economy." Discuss.
Mark splitKnowledge 6Analysis 6Evaluation 8
TopicEconomic growth and the economic cycle
Examiner insight
- What to cover
- Set out the benefits of growth (higher incomes, employment, tax revenue and public services) and the costs (inflationary pressure, inequality, environmental damage, resource depletion, current account effects).
- Diagram
- AD and AS showing demand led growth against a rightward shift of LRAS, so the inflation consequence depends on which kind of growth it is.
- Evaluation
- Push beyond AS material: growth at different stages of development, regional effects, effects on market structures and financial stability, and the difference between short run and long run growth.
- Watch out
- Answers that stayed with simple AD and AS, demand pull inflation and falling unemployment could not reach the top bands. Attack the word always.
- How it went in the exam
- Examiners were explicit that more sophisticated and advanced economics is better rewarded under the levels based marking.
Q4(a)
Explain, using diagrams, the shape of the short-run and long-run Phillips curves.
Mark splitKnowledge 6Analysis 4
TopicMacroeconomic objectives and policy
Examiner insight
- What to cover
- Explain, do not just draw. The short run curve slopes down because unexpected inflation cuts real wages and raises labour demand. The long run curve is vertical at the natural rate once expectations adjust, giving the expectations augmented story.
- Diagram
- Short run Phillips curves at different expected inflation rates, with a vertical long run curve at the natural rate of unemployment.
- Watch out
- As with the other part (a) questions, high AO1 and low AO3 was the pattern. The marks are in the explanation of the shapes and the shift between short run curves.
- How it went in the exam
- Examiners noted this topic had clearly been taught well in a number of centres, so it is a beatable question if the explanation is there.
Q4(b)
To what extent are supply side policies effective in reducing unemployment in an economy?
Mark splitKnowledge 6Analysis 6Evaluation 8
TopicMacroeconomic objectives and policyMeasuring economic performance
Examiner insight
- What to cover
- Answer the question asked: how effective are supply side policies at cutting unemployment. Take specific policies, not categories: a named type of training, transport or broadband infrastructure, deregulation, lower benefit replacement rates. Link each to a type of unemployment.
- Diagram
- LRAS shifting right, or a labour market diagram showing structural unemployment falling.
- Evaluation
- Judge which types of unemployment they reach. Supply side policies do little for cyclical unemployment, which needs demand. Consider different economies at different stages and the Keynesian against neo classical view.
- Watch out
- Two traps: turning this into are supply side policies the most effective policy, which brings in too much on alternatives, and the standard time lags and high opportunity cost evaluation. Remember laissez faire supply side policies need no government spending at all.
- How it went in the exam
- Examiners said most wrote copiously about education, training and infrastructure but too generally to reach the highest marks.
Section C
Q5(a)
With reference to the principle of comparative advantage, explain the circumstances under which free international trade will be beneficial.
Mark splitKnowledge 6Analysis 4
TopicInternational trade and exchange rates
Examiner insight
- What to cover
- The question is about the circumstances in which trade is beneficial, not simply the benefits. Show comparative advantage with a numerical example or a PPF, identify the terms of trade range, then set out the conditions: different opportunity cost ratios, low transport costs, no heavy protectionism, mobile and flexible factors.
- Diagram
- Two country PPFs, or a numerical opportunity cost table, with the terms of trade line showing consumption beyond the PPF.
- Watch out
- Most candidates wrote about the benefits of trade instead of the circumstances. A tight answer of under a page scored very high marks.
- How it went in the exam
- Examiners said very few gave a good numerical or graphical explanation of the gains from trade, so the calculation itself is a differentiator.
Q5(b)
Evaluate the likely economic impact of continuous expansion of the European Union for both existing and prospective member states.
Mark splitKnowledge 6Analysis 6Evaluation 8
Examiner insight
- What to cover
- Deal with both existing and prospective members separately. Existing: bigger single market, migration and labour supply, budget contributions, trade creation and diversion. Prospective: access to markets, structural funds, competition for domestic industry, CAP.
- Evaluation
- Respond to the word continuous: each round of expansion may add less and stretch budgets and decision making further. Weigh trade creation against diversion and be specific about which countries gain.
- Watch out
- Do not confuse the EU and the Euro area. New members commit to the Euro but do not join on accession. Be precise about geography and about which group each effect falls on.
- How it went in the exam
- Examiners said knowledge of EU policies such as the CAP and the Single Market was good. Very few responded to the word continuous, which was the route into the top band.
Q6(a)
Explain the possible ways in which a government may implement protectionist policies.
Mark splitKnowledge 6Analysis 4
Examiner insight
- What to cover
- Go beyond tariffs. Cover quotas, subsidies to domestic firms, embargoes, currency manipulation and administrative or regulatory barriers, and for each explain the mechanism by which imports fall or domestic industry is protected.
- Diagram
- Tariff diagram, and if used a quota shown as a restricted import quantity, with the price and welfare effects marked.
- Watch out
- Listing five or six policies with definitions is AO1 only. The AO3 marks come from analysing how each one actually keeps imports out.
- How it went in the exam
- Examiners were pleased candidates thought beyond tariffs, but said very few analysed any policy other than the tariff.
Q6(b)
LEDCs may find it difficult to raise the level of economic development in their country.
Mark splitKnowledge 6Analysis 6Evaluation 8
Examiner insight
- What to cover
- Use development theory, not just description: the savings gap and Harrod Domar, primary product dependency and neo colonialism, the debt burden, human capital and institutional weakness, the poverty trap.
- Evaluation
- Rank and weight the obstacles, show that different countries face different ones with evidence, and give examples of how they have been overcome, such as export diversification or microfinance.
- Watch out
- Three common failures: no examples of specific developing countries, an answer written entirely in examples with no economic analysis, and deep analysis with no evaluation at all.
- How it went in the exam
- Examiners praised the range of examples beyond sub Saharan Africa. Band 3 needed analysis and evaluation together, not one or the other.
Question text is quoted from the question papers, © WJEC CBAC Ltd, for students’ private study. Open the official papers and mark schemes from the links on each question. Examiner insights are written with AI assistance and moderated by Finn.