DP Economics
Question 20N.3.HL.TZ0.1g.i
| Date | November 2020 | Marks available | [Maximum mark: 2] | Reference code | 20N.3.HL.TZ0.1g.i |
| Level | HL | Paper | 3 | Time zone | TZ0 |
| Command term | Outline | Question number | g.i | Adapted from | N/A |
g.i.
[Maximum mark: 2]
20N.3.HL.TZ0.1g.i
The market for shampoo displays the characteristics of monopolistic competition.
(g.i)
A shampoo firm is earning economic profits. Outline, with a reason, what will happen to its demand curve in the long run.
[2]
Markscheme
Examiners report
Most candidates recognized that the existence of economic profits would attract new firms into the industry and consequently shift the shampoo firm's demand curve to the left/make the demand curve more elastic. However, a minority argued that increased competition might reduce prices and increase demand. There was some confusion between the firm and the market/industry.
