Question 22M.1.HL.TZ0.1a
| Date | May 2022 | Marks available | [Maximum mark: 10] | Reference code | 22M.1.HL.TZ0.1a |
| Level | HL | Paper | 1 | Time zone | TZ0 |
| Command term | Distinguish | Question number | a | Adapted from | N/A |
Distinguish between perfect competition and monopolistic competition.
[10]
Marks should be allocated according to the paper 1 markbands for May 2022 forward, part A.
Answers may include:
- Terminology: monopolistic competition, perfect competition
- Explanation: that perfect competition is characterised by many firms, free entry and exit, homogeneous products and perfect knowledge, whereas monopolistic competition is characterised by many firms, free entry and exit and product differentiation; and the impact of these features on the two markets with regard to pricing power, long-term economic profits and allocative efficiency
- Diagram: use of a perfect competition diagram and/or a monopolistic competition diagram.
N.B. A maximum of [6] should be awarded for responses that confuse monopoly with monopolistic competition.
This question was generally well attempted, with candidates usually able to offer a well explained account of the key assumptions behind each market structure. Diagrams were usually used effectively to enable distinctions to be made between the two structures.
Although they are not specifically asked for in part (a) questions, many candidates were more comfortable in using examples to explain the differences, particularly to explain monopolistic competition. It was noted that some candidates struggled to provide a clear answer and that was often because they were confused with what monopolistic competition was. A significant number thought that the question was referring to a monopoly.
