Question 21M.1.HL.TZ2.2b
| Date | May 2021 | Marks available | [Maximum mark: 15] | Reference code | 21M.1.HL.TZ2.2b |
| Level | HL | Paper | 1 | Time zone | TZ2 |
| Command term | Discuss | Question number | b | Adapted from | N/A |
Discuss the view that governments should always try to prevent the creation of barriers to entry in a market.
[15]
Marks should be allocated according to the paper 1 markbands for May 2013 forward, part B.
Answers may include:
- definitions of barriers to entry, market
- diagram showing a firm that faces a downward-sloping average revenue (demand) curve and realizes economic profit
- explanation of barriers to entry and how they permit a firm to achieve monopoly power and realize economic profit by restricting competition from other firms
- examples of barriers to entry in practice and/or firms that have acquired monopoly power because of economies of scale, strong brands or legal barriers to entry
- synthesis or evaluation (discuss).
Discussion may include: the possible negative effects of barriers to entry on allocative and productive efficiency; economies of scale may lead to lower prices and higher output, benefitting both producers and consumers; branding reduces problems of asymmetric information and may be beneficial to consumers; legal barriers to entry may protect consumers (e.g. licensing) and stimulate R&D (e.g. patents) or lead to inefficiencies and rent-seeking.
Examiners should be aware that candidates may take a different approach which, if appropriate, should be rewarded.
The key to approaching this question well was to carefully consider the different types of potential barriers to entry. A number of candidates tried to make this about advantages and disadvantages of monopoly, which worked up to a point, provided the focus was on barriers to entry. However the highest-achieving responses were able to consider in some detail what form such barriers might take, and to consider whether they always needed to be prevented. Inevitably the current (at the time of writing) pandemic provided the example of vaccines and whether or not their patents needed to be protected. There was some good use of real-world examples by the highest-achieving candidates.
