Question 21M.1.HL.TZ2.2a
| Date | May 2021 | Marks available | [Maximum mark: 10] | Reference code | 21M.1.HL.TZ2.2a |
| Level | HL | Paper | 1 | Time zone | TZ2 |
| Command term | Explain | Question number | a | Adapted from | N/A |
Explain the reasons for the shape of the long-run average total cost curve.
[10]
PLEASE NOTE: This question part is not on the syllabus for first teaching 2020/first exams 2022.
Marks should be allocated according to the paper 1 markbands for May 2013 forward, part A.
Answers may include:
- definitions of long run, average total cost
- diagram showing appropriate LRATC curve (U-shaped, L-shaped, downward-sloping)
- explanation of why costs per unit of output fall as the firm realizes economies of scale and/or why costs per unit of output may rise if the firm suffers from diseconomies of scale
- examples of firms/industries which experience economies/diseconomies of scale.
This was not a particularly popular question. For some candidates the nature of long-run costs was not clear and they utilized vocabulary and terms pertinent to the short run. There were a good proportion of clear responses that clearly identified the link with economies and diseconomies of scale, where they were able to identify specific sources of such economies and diseconomies. Better responses were able to identify industries, where such changes in long-run costs as output changes, might be found.
