Question 22N.3.HL.TZ0.1a.iii
| Date | November 2022 | Marks available | [Maximum mark: 2] | Reference code | 22N.3.HL.TZ0.1a.iii |
| Level | HL | Paper | 3 | Time zone | TZ0 |
| Command term | Calculate | Question number | a.iii | Adapted from | N/A |
“Best Meals” is one of many small catering companies, each of which prepares a variety of different meals for airlines in Country X. Table 1 shows the costs of production in US dollars (US$) on a per hour basis for “Best Meals”.
Table 1
The catering companies buy tomatoes from the domestic market to prepare their meals. Figure 1 illustrates the domestic market for tomatoes, which is perfectly competitive. S is supply and D is demand.
Figure 1
In order to support the incomes of the tomato farmers, the government of Country X has set a price floor (Pmin) at US$2.80 per kilogram.
Using Figure 1, calculate the change in the consumer surplus resulting from this government intervention.
[2]
Initial CS = (4 2.4) 16 0.5 = 12.8
Final CS = (4 2.8) 12 0.5 = 7.2
Any valid working is sufficient for [1]
Change in CS = 7.2 12.8 = $5600 (or, a decrease) [1]
An alternative approach with valid workings should be fully rewarded.
e.g. Change in CS = 0.5 0.4 (12 + 16) = $5 600 (decrease)
For full marks to be awarded the response must provide valid working, specify the decrease and include correct units.
Although the question was generally well-answered, a range of errors was evident. Some candidates read data incorrectly from the graph or neglected to specify that consumer surplus would decrease. Others calculated a welfare loss rather than the change in consumer surplus. Some neglected to show correct units ($000).
