Question 20N.3.HL.TZ0.1c.ii
| Date | November 2020 | Marks available | [Maximum mark: 2] | Reference code | 20N.3.HL.TZ0.1c.ii |
| Level | HL | Paper | 3 | Time zone | TZ0 |
| Command term | Draw, Label | Question number | c.ii | Adapted from | N/A |
Figure 2 illustrates a perfectly competitive market in equilibrium and a perfectly competitive firm operating in this market. S is supply, D is demand, Po is the short-run equilibrium price, Qo is the short-run equilibrium quantity, MC is marginal cost, ATC is average total cost, AR is average revenue, MR is marginal revenue.
On Figure 2, draw and label appropriate additional curves to show how a perfectly competitive market will move from short-run equilibrium to long-run equilibrium.
[2]
[1] for one accurate, labelled diagram OR two diagrams without labels.
[2] for two accurate, labelled diagrams.
D1 or AR1 or MR1 is sufficient for firm’s model. P1 is not required for firm’s model. Titles are not required for the diagrams.
The firm’s new Q need not be specified on the diagram.
The majority of candidates were able to sketch a new, correctly positioned supply curve above/to the left of the original while some sketched a much smaller decrease in supply than that required. While most candidates sketched and labelled the firm's new demand curve correctly, a surprising number did not draw a new curve for the firm. Some students were not able to distinguish between a short-run shutdown (when firms continue to make losses but temporarily halt output and stop paying their VC), and a long-run exit of firms from a market, which will raise the price until normal profits are being earned at minimum ATC.
