AQA A LEVEL ECONOMICS 2024 PAPER 3 QP AND
SOURCE PAPER [VERIFIED]
Explain the meaning of allocative efficiency and its implication for social/community
surplus - Correct Answer--- Allocative efficiency means that resources are allocated
in the best possible way and as a result just the right amount of the good is
produced from society's point of view so that social/community surplus (the
sum of consumer and producer surplus) is maximized.
Implications of allocative efficiency - Correct Answer--- This occurs at the output level
at which the cost of producing an additional unit of output (MC)= benefit consumer gain
from consuming that unit (AR).
- That benefit is given by the price consumers are willing to pay for that unit
Explicit costs - Correct Answer--
Profit maximising level of output - Correct Answer--At that level of output, MR = MC
Productive efficiency - Correct Answer--An explanation that it exists if production
takes place at minimum AC or where MC = AC.
Explain why a profit maximising firm with monopoly power will never choose to
operate on the inelastic portion of its average revenue curve. - Correct Answer--- For
explaining that if demand (AR) is inelastic and price rises then TR will rise while, since
less is produced, it follows that TC will fall.
- Hence decreasing output would increase profits. Therefore profits cannot be
maximized while operating on the inelastic portion of the demand curve.
, OR
- Profit maximization requires that MR=MC.
- Since MR is negative in the inelastic region of a demand curve (lies below the
horizontal axis) but MC cannot be negative it follows that MR and MC can be equated
only in the elastic region.
Outline why in addition to a consumer price index, a producer price index may also be
useful to economists. - Correct Answer--It is useful to predict future consumer price
inflation, since if prices of producer goods increase then it is expected that consumer
prices will follow.
State the reason why a country's gross domestic product (GDP) may be greater that its
gross national income (GNI). - Correct Answer--Factor (or, property) income paid
(sent) abroad exceeds factor, (or, property) income earned (or, from) abroad.
Explain how real GDP could decrease while nominal GDP is increasing - Correct
Answer--- For explaining that real GDP is the ratio of nominal GDP to the average
price level
- so that if nominal GDP increases but the average price level increases at a greater
rate, then real GDP decreases.
Difficulties in measuring unemployment - Correct Answer--- Hidden unemployment
(individuals who do not actively seek work because they are discouraged)
- Underemployment (individuals who are working part-time yet wish to work full-time
or who have jobs that underutilize their skills
and/or time)
SOURCE PAPER [VERIFIED]
Explain the meaning of allocative efficiency and its implication for social/community
surplus - Correct Answer--- Allocative efficiency means that resources are allocated
in the best possible way and as a result just the right amount of the good is
produced from society's point of view so that social/community surplus (the
sum of consumer and producer surplus) is maximized.
Implications of allocative efficiency - Correct Answer--- This occurs at the output level
at which the cost of producing an additional unit of output (MC)= benefit consumer gain
from consuming that unit (AR).
- That benefit is given by the price consumers are willing to pay for that unit
Explicit costs - Correct Answer--
Profit maximising level of output - Correct Answer--At that level of output, MR = MC
Productive efficiency - Correct Answer--An explanation that it exists if production
takes place at minimum AC or where MC = AC.
Explain why a profit maximising firm with monopoly power will never choose to
operate on the inelastic portion of its average revenue curve. - Correct Answer--- For
explaining that if demand (AR) is inelastic and price rises then TR will rise while, since
less is produced, it follows that TC will fall.
- Hence decreasing output would increase profits. Therefore profits cannot be
maximized while operating on the inelastic portion of the demand curve.
, OR
- Profit maximization requires that MR=MC.
- Since MR is negative in the inelastic region of a demand curve (lies below the
horizontal axis) but MC cannot be negative it follows that MR and MC can be equated
only in the elastic region.
Outline why in addition to a consumer price index, a producer price index may also be
useful to economists. - Correct Answer--It is useful to predict future consumer price
inflation, since if prices of producer goods increase then it is expected that consumer
prices will follow.
State the reason why a country's gross domestic product (GDP) may be greater that its
gross national income (GNI). - Correct Answer--Factor (or, property) income paid
(sent) abroad exceeds factor, (or, property) income earned (or, from) abroad.
Explain how real GDP could decrease while nominal GDP is increasing - Correct
Answer--- For explaining that real GDP is the ratio of nominal GDP to the average
price level
- so that if nominal GDP increases but the average price level increases at a greater
rate, then real GDP decreases.
Difficulties in measuring unemployment - Correct Answer--- Hidden unemployment
(individuals who do not actively seek work because they are discouraged)
- Underemployment (individuals who are working part-time yet wish to work full-time
or who have jobs that underutilize their skills
and/or time)
