Unit 4: Evaluating Economic Models and Policies · 1520U40-1
WJEC A-level Unit 4, June 2025
All 12 written questions from WJEC A-level Unit 4 (June 2025), 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 relevant diagrams, the difference between the shape of the average and marginal revenue curves for both perfect competition and monopolistic competition.
Mark splitKnowledge 6Analysis 4
TopicMarket structuresCosts, revenues and profit
Examiner insight
- What to cover
- Keep the answer on AR and MR only. In perfect competition the firm is a price taker, so AR equals MR and both are horizontal. In monopolistic competition the firm has some price setting power, so AR slopes down and MR falls twice as steeply because price must be cut on every unit to sell more.
- Diagram
- Two diagrams, one per structure, with AR and MR only. Do not add cost curves or profit areas, and label the axes.
- Watch out
- Do not turn this into an account of the two market structures, because that material is not credited. Link AR to elasticity and explain why MR falls more sharply. A short numerical revenue table is an effective way to earn the analysis marks.
- How it went in the exam
- Most candidates distinguished AR from MR. Marks were lost through unnecessary additions to the diagram, mislabelled axes, and missing explanations of why the curves differ.
Q1(b)
With the use of an appropriate diagram(s), evaluate the view that perfectly competitive markets are the most desirable market structure.
Mark splitKnowledge 6Analysis 6Evaluation 8
Examiner insight
- What to cover
- Compare perfect competition with at least one other structure across a range of points: allocative and productive efficiency, dynamic efficiency and long run profit potential, choice and product variety, economies of scale. Name the stakeholder affected in each case, whether consumer, worker, firm or government.
- Diagram
- Long run perfect competition against monopoly or monopolistic competition, integrated into the analysis rather than presented alongside it.
- Evaluation
- Give a weighted judgement built on depends on factors for each stakeholder, for example that the lack of abnormal profit limits innovation, which matters more in some industries than others.
- Watch out
- A narrow answer, for example only about prices, and diagrams that are drawn but not used, held responses to low Band 2 across all the assessment objectives.
- How it went in the exam
- Examiners said this essay worked well as a differentiator, with a wide range of expectations across the bands. The stakeholder range was the route to the top.
Q2(a)
Using numerical examples relating to total and marginal product, explain the law of diminishing returns and how the law impacts on marginal costs.
Mark splitKnowledge 6Analysis 4
TopicCosts, revenues and profit
Examiner insight
- What to cover
- Use a small numerical table of total and marginal product as extra labour is added to fixed capital. Show marginal product rising then falling, and link the fall directly to marginal cost rising at that output.
- Diagram
- Total and marginal product curves alongside the marginal cost curve, with the point where diminishing returns sets in marked on both.
- Watch out
- Accurate numbers are what earn the AO1 marks here, and the higher AO3 marks come from tying the change in MC to your own figures. Vague accounts of diminishing returns scored across the lower bands.
- How it went in the exam
- Responses covered the whole range of bands. Examiners said the analysis of marginal cost was accessible even to candidates who struggled with the first half.
Q2(b)
With the use of an appropriate diagram(s), discuss how a large firm in an oligopolistic market structure can increase both its market share and profits.
Mark splitKnowledge 6Analysis 6Evaluation 8
TopicMarket structures
Examiner insight
- What to cover
- Both targets must run through the answer: market share and profit. Take strategies such as advertising and branding, mergers and takeovers, collusion, and price cutting or predatory pricing, and for each show the effect on output or share and on profit.
- Diagram
- A cost and revenue diagram showing both a higher output and a changed profit area, or a payoff matrix for the collusion case. The diagram must show both elements, not one.
- Evaluation
- Evaluate each strategy in terms of whether it actually delivers both: price cuts win share but can cut margins, collusion raises profit but risks fines, advertising costs money before it works.
- Watch out
- The commonest failing was an imbalanced answer that drifted onto profit or onto share alone, and a one way analysis of each strategy with no counter argument, which capped AO4.
- How it went in the exam
- Top band answers were rare here. Examiners said the two part demand of the question was the main obstacle.
Section B
Q3(a)
Explain how both quantitative easing and quantitative tightening are expected to work in an economy.
Mark splitKnowledge 6Analysis 4
TopicMacroeconomic objectives and policy
Examiner insight
- What to cover
- Cover both QE and QT. QE: the central bank buys bonds from financial institutions, raising bond prices and lowering yields, injecting liquidity and lowering interest rates, so lending and AD rise. QT: the reverse, selling bonds or letting them mature, draining liquidity and raising yields.
- Diagram
- The bond market with the price and yield effect, or AD and AS showing the effect on output and the price level.
- Watch out
- Answering on QE alone limits the response, and confusing the two produced Band 0 or 1 marks. Go past the liquidity point to bond prices, yields and interest rates, which is what separates the bands.
- How it went in the exam
- Examiners reported mixed understanding, with a number of candidates showing no grasp of either concept, so this is a high return topic to nail down.
Q3(b)
To what extent is inflation more harmful than deflation for an economy?
Mark splitKnowledge 6Analysis 6Evaluation 8
TopicMeasuring economic performance
Examiner insight
- What to cover
- Set out the costs of inflation (erosion of real income and savings, uncertainty, loss of competitiveness, menu costs) and the costs of deflation (delayed spending, a downward spiral, the rising real value of debt, ineffective monetary policy at the zero bound), each linked to specific stakeholders.
- Diagram
- AD and AS showing both cases, and a debt deflation chain if used.
- Evaluation
- Evaluate within each paragraph, not in a summary at the end, and compare the two directly: how far from target, whether anticipated, and how entrenched expectations are.
- Watch out
- Treating the costs of inflation and then the costs of deflation as two separate blocks blocked top band AO4, because the question is comparative. An imbalanced answer was capped at Band 2.
- How it went in the exam
- Examiners said this question worked well to distinguish candidates, and that the paragraph by paragraph evaluation structure was what reached the top.
Q4(a)
Explain how both discretionary and automatic government fiscal policy can lead to budget (fiscal) deficits.
Mark splitKnowledge 6Analysis 4
TopicMacroeconomic objectives and policy
Examiner insight
- What to cover
- Define both. Discretionary policy is a deliberate change in tax or spending. Automatic stabilisers operate without any decision as the cycle turns. Link each to a budget deficit through specific changes in government revenue and spending.
- Watch out
- Real examples are the most effective way to show the difference, for example rising unemployment in the financial crisis widening the deficit automatically, against the deliberate furlough spending during covid. Link both forms to the deficit, not just one.
- How it went in the exam
- Marks were awarded across the full range. Band 2 required knowledge of both types, and stronger responses linked them to the trade cycle and to structural decision making.
Q4(b)
Discuss the view that it is always appropriate to tighten fiscal policy during periods of economic downturn as a way of reducing a budget (fiscal) deficit.
Mark splitKnowledge 6Analysis 6Evaluation 8
TopicMacroeconomic objectives and policy
Examiner insight
- What to cover
- Keep the downturn in the frame at every step. Tightening fiscal policy in a downturn cuts AD further, deepens the fall in output and employment, and can worsen the cyclical part of the deficit through lower tax revenue and higher benefit spending. The case for it rests on debt sustainability, credibility with lenders and borrowing costs.
- Diagram
- AD and AS with AD shifting left in a downturn, ideally with a Keynesian LRAS.
- Evaluation
- Attack always. Judge by the debt to GDP ratio, the cause and depth of the downturn, the cost of borrowing, and whether the deficit is cyclical or structural. Use specific taxes and specific spending cuts rather than tightening in general.
- Watch out
- Many candidates wrote about the effects of tightening fiscal policy without ever placing the economy in a downturn, which blocked top Band 2 and Band 3 marks.
- How it went in the exam
- Examiners called this the most challenging part of the question because so many candidates lost focus on the full wording.
Section C
Q5(a)
Other than the human development index (HDI), explain measures of economic development and why they might be suitable for indicating living standards.
Mark splitKnowledge 6Analysis 4
TopicGrowth and developmentMeasuring economic performance
Examiner insight
- What to cover
- Exclude HDI. Give precise measures with their units, for example doctors per 1,000 population, infant mortality per 1,000 live births, mean years of schooling, internet access per 1,000 people, and GNI per capita at PPP. Describe how each is measured before judging it.
- Watch out
- Precision is the key differentiator. Access to health is too vague, doctors per 1,000 population is a measure. Do not jump straight from naming a measure to its suitability, and centre the analysis on living standards and quality of life.
- How it went in the exam
- Stronger responses linked suitability to LEDCs and MEDCs specifically, which examiners said was what reached the top band.
Q5(b)
To what extent is poor governance (institutional weakness) the biggest obstacle facing LEDCs aiming to raise their level of economic development?
Mark splitKnowledge 6Analysis 6Evaluation 8
Examiner insight
- What to cover
- Start with poor governance in its many forms, not just corruption: weak institutions, unenforced contracts, poor tax collection, political instability. Then set the other obstacles against it: the savings gap, debt, primary product dependency, poor health and education, conflict.
- Evaluation
- Do not treat the obstacles in isolation. Evaluate each one relative to governance, for example that high debt and weak healthcare may themselves stem from past misallocation of funds. Country case studies raise the level.
- Watch out
- Every obstacle must be linked back to living standards and economic development. A lack of that focus restricted answers to high Band 2 at best.
- How it went in the exam
- Examiners were pleased that most candidates understood poor governance goes beyond corruption. The comparative framing is what separated the bands.
Q6(a)
Using an exchange rate diagram(s), explain how and why a country might manipulate its exchange rate as a form of protectionism.
Mark splitKnowledge 6Analysis 4
TopicInternational trade and exchange rates
Examiner insight
- What to cover
- Describe more than one way to manage the exchange rate: selling domestic currency on the foreign exchange market, cutting interest rates, capital controls, and using reserves. Then explain why a weaker currency acts as protectionism, through dearer imports and cheaper exports.
- Diagram
- Exchange rate diagram, drawn accurately, for each method described.
- Watch out
- To depreciate, a country sells its own currency, it does not buy it. Describing only one method caps AO1 at Band 2. Do not analyse protectionism arising from an appreciating currency, which earns no AO3.
- How it went in the exam
- Examiners said stronger responses added the protection of infant industries and avoiding dumping, and that protectionism was the better understood half of this question.
Q6(b)
Moldova is one of the poorest countries in Europe. If a country such as this were to join the European Union (EU), assess the extent to which this will benefit existing EU members.
Mark splitKnowledge 6Analysis 6Evaluation 8
Examiner insight
- What to cover
- The question is about existing members, so keep them at the centre. Cover the range: a larger single market and more trade, migration and labour supply, investment opportunities and FDI, and the cost of financial assistance and structural funds to a poor new member.
- Evaluation
- Develop counter arguments and depends on factors: the size of the new economy, the budget contribution required, the pressure on public services from migration, and the trade creation against diversion balance.
- Watch out
- A small number of candidates wrote about the benefits to the new member instead. Weaker answers took one or two narrow components and did not tie the argument to a relatively poor new member such as Moldova.
- How it went in the exam
- Examiners found this topic broadly accessible for AO1, so the marks turn on precision to the question and the development of chains of argument.
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.