DP Economics
Question 20N.1.HL.TZ0.2a
| Date | November 2020 | Marks available | [Maximum mark: 10] | Reference code | 20N.1.HL.TZ0.2a |
| Level | HL | Paper | 1 | Time zone | TZ0 |
| Command term | Explain | Question number | a | Adapted from | N/A |
a.
[Maximum mark: 10]
20N.1.HL.TZ0.2a
(a)
Explain how a natural monopoly may arise.
[10]
Markscheme
Marks should be allocated according to the paper 1 markbands for May 2013 forward, part A.
Answers may include:
- definition of natural monopoly
- diagram to show falling long-run average costs at least up to the point where the LRAC curve intersects the market demand curve
- explanation that a natural monopoly is a firm that experiences such significant economies of scale (eg due to investment in fixed capital) that it is able to satisfy the demand for the entire market at a level of output where it still experiences falling average total cost and/or that natural monopoly arises due to a natural barrier to entry such as ownership of vital input for production
- examples of natural monopoly.
Examiners report
Stronger candidates were able to clearly distinguish between monopoly and natural monopoly but quite a few candidates just wrote everything they knew about monopoly, maybe hoping that there would be enough overlap between monopoly and natural monopoly to earn some marks.
