Question 18M.1.HL.TZ2.2
| Date | May 2018 | Marks available | [Maximum mark: 25] | Reference code | 18M.1.HL.TZ2.2 |
| Level | HL | Paper | 1 | Time zone | TZ2 |
| Command term | Discuss, Explain | Question number | 2 | Adapted from | N/A |
Explain why some firms might choose the goal of profit maximization while others might choose to adopt satisficing behaviour.
[10]
Answers may include:
- definitions of profit maximization and satisficing
- diagram(s) to show MC = MR maximizes profit
- explanation of how profits are maximized when MR = MC and that satisficing behaviour can cover a range of objectives and also lead to outcomes that are less profitable
- examples of firms with different goals.
Marks should be allocated according to the Paper 1 markbands for May 2013 forward, part A.
Discuss whether price will always be lower and output will always be higher in perfect competition compared to monopoly.
[15]
Answers may include:
- definitions of perfect competition, monopoly, price and output
- diagrams to compare long-run equilibrium in perfect competition and monopoly
- explanation of how in perfect competition the characteristics of the market lead to normal profit and economic efficiency and consequently lower prices and a higher output than a less efficient market like monopoly
- examples of perfect competition and monopoly
- synthesis or evaluation (discuss).
Discussion may include: the benefits of monopoly like economies of scale, which could lead to lower prices and higher output.
Examiners should be aware that candidates may take a different approach which, if appropriate, should be rewarded.
Opinions or conclusions should be presented clearly and should be supported by appropriate examples.
Marks should be allocated according to the Paper 1 markbands for May 2013 forward, part B.