Question 23M.3.HL.TZ0.vi

It is clear that many candidates had not been prepared adequately for this question. With section 2.11 of the subject guide explicitly linking market power to market failure it is to be expected that candidates should be able to explain why the profit-maximizing position for a monopoly is different from the allocatively efficient position, resulting in underallocation of resources and market failure, and to recognise a welfare loss. Many candidates asserted incorrectly that "high" prices would mean that market failure had occurred or that abnormal profit equates to market failure. Furthermore, many referred to productive inefficiency (not in the current syllabus) stating incorrectly that it leads to allocative inefficiency. Some candidates who demonstrated good conceptual understanding neglected to follow the instruction to use "specific reference to the information in Figure 2" and so could not earn full marks.