Question 19M.1.HL.TZ1.1a
| Date | May 2019 | Marks available | [Maximum mark: 10] | Reference code | 19M.1.HL.TZ1.1a |
| Level | HL | Paper | 1 | Time zone | TZ1 |
| Command term | Explain | Question number | a | Adapted from | N/A |
Explain the relationship between the law of diminishing returns and a firm’s short-run cost curves.
[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 the law of diminishing returns, short run, costs of production, cost curves
- diagrams to show the effect of decreasing and then increasing marginal cost on the average total cost and on the average variable cost; marginal product increasing (total product rising at increasing rate) then decreasing (total product rising at decreasing rate)
- explanation of the relationship between (diminishing) marginal product, (increasing) marginal cost, average variable costs and average total costs
- examples of diminishing returns and their effect on short-run costs.
Many candidates were able to either explain the law of diminishing returns or draw correctly the shortrun cost curves for a firm. Only a few were able to produce a complete answer by explaining the crucial link between diminishing marginal product and increasing marginal cost. The best candidates were able to support their answers with a numerical and/or hypothetical example of diminishing marginal product (increasing marginal cost). Some candidates confused diminishing marginal returns with diminishing marginal utility. Other candidates got off-track by confusing diminishing marginal returns with diseconomies of scale.
